SAP CHEAT SHEET: Order to Cash (OTC) Process for SAP Functional Consultants | Summary Table (2022)

SAP CHEAT SHEET: Order to Cash (OTC) Process for SAP Functional Consultants | Summary Table (1)

In this post, we will discuss the Order to Cash process. The process will consider a basic scenario for beginners. As we go through the tutorial, we will also relate or link the processes to SAP.

Towards the end, a summary table will be provided for the basic OTC process. This will include SAP Transaction Codes, SAP Tables, relevant key words, financial accounting integration points, and more.

Please note that the focus of this tutorial will be the summary table. It is a table that I have created for “guidance” and “quick reference” purposes.

Overview

  1. What is OTC
  2. OTC Simplified Process
  3. OTC and SAP
    • OTC SAP Transaction Codes and Tables
    • OTC SAP Accounting Entries
    • Integration Points
  4. Additional Information
  5. Summary

1. What is OTC

OTC stands for Order to Cash. When I hear this term, I associate it to the following keywords / phrases:

  • Order to Cash / OTC / O2C
  • Customer
  • Shopping
  • Buying stuff or a service
  • Accounts Receivable
  • Perspective of the company / business (it is selling something)

Now, let’s talk about the following scenarios:

  1. You go to a café and buy yourself a cup of coffee.
  2. You call a moving truck service to help move your furniture to a new location.
  3. You place an order online for a new mechanical keyboard.

All the scenarios above show an exchange of product and/or service between you and a business. You get the service or product that you asked for. In turn, you pay the business for the service or product.

Now if we were to put ourselves in the shoes of the business, we can say that we are getting sales and money for our product / services.

SAP CHEAT SHEET: Order to Cash (OTC) Process for SAP Functional Consultants | Summary Table (2)

The whole process of order related tasks until obtaining customer payments make up the Order to Cash cycle.

For now, let us stick with that understanding. As we move through the tutorial, we will add more details.

(Video) Order to Cash (O2C) Process Overview and Accounting Entries

2. OTC Simplified Process

A simple way of looking at OTC is to consider the 4 steps below.

SAP CHEAT SHEET: Order to Cash (OTC) Process for SAP Functional Consultants | Summary Table (3)
  1. Pre-Sales
  2. Order Processing
  3. Order Fulfillment
  4. Billing
StepDescription
Pre-SalesAnything before an actual order is created. This is typically where discussion happens between the customer and the business.
For example, a customer would ask about the price of a product or would need a bulk of that product to be provided monthly.
Order ProcessingCreation of the Sales Order Commitment of the business to provide the requested product or service.
Order FulfillmentThe business will fulfill their commitment to the customer by providing their product or service.
For example, the business will deliver the product to the customer.
BillingAt this point, the customer should pay for the product / service.
The customer is provided with the breakdown of the costs and a payment happens.

3. OTC and SAP

Now that we have an idea of the 4 steps, let consider those 4 steps as “scopes”. This time, we will dive deeper into the OTC process steps in SAP and try to categorize each item into the 4 steps “scopes” we discussed earlier.

If we refer to the table below, you will notice that there are several OTC Process Steps and they are categorized into the 4 steps we discussed earlier. Focus on the 2nd column or “Scope” column.

OTC Process StepsScope
InquiryPre-sales (1)
QuotationPre-sales (1)
ContractPre-sales (1)
Sales OrderOrder processing (2)
DeliveryOrder fulfillment (3)
Post Goods Issue (PGI)Order fulfillment (3)
*ShipmentOrder fulfillment (3)
**BillingBilling (4)
***Customer Payment / Receipt of MoneyBilling (4)

Now let us go through each of the OTC process steps to get a quick overview of what each step is trying to accomplish.

SAP CHEAT SHEET: Order to Cash (OTC) Process for SAP Functional Consultants | Summary Table (4)

1. Inquiry – A potential customer asks about a product or service from the business. “How much would this product or service cost me?”

2. Quotation – After obtaining details from the potential customer, the business would provide an answer in the form of a “quotation”. The quotation would include the product or service requested and a corresponding price. Other necessary details may be included. “The product will cost USD 100 for a pack of 15.”

3. Contract – The potential customer mentions that the product will be ordered each month. The customer needs the product monthly and asks if the business can provide the product monthly for 5 months. The business is okay with that approach. At this point a formal agreement is established between the customer and the business in the form of a contract. “I need the product to be provided monthly for 5 months.”

4. Sales Order – An order will now be created in reference to the quotation or the contract. This means the business is committed to providing the product to the customer. There is no “sale” or accounting entries yet. The sales order will typically have the following details:

  • info about the product / service
  • pricing info
  • delivery info (example: dates and quantities)
  • shipment info (example: route)
  • billing info (example: payment and risk)

5. Delivery – From the sales order, a delivery occurs to trigger and give the product to the customer. It will facilitate activities such as:

  • Picking (selecting / getting the requested product in the agreed quantity)
  • Packing (packing the requested product)
  • Arrangement of Transport / Shipment planning etc.

6. Post Goods Issue (PGI) – When goods are moved as part of the process to bring the product to the customer, a PGI is needed. This signals that an item from the business has been removed from the “stock” or “inventory” and will be given to the customer. In a way, this also “moves” the ownership of the product from the business to the customer.

Because of this, a PGI would then trigger a log of this material movement so that the business is aware of their inventory. In addition, this movement will trigger accounting entries.

7. Shipment – To bring or transport the product to the customer, a shipment occurs.

(Video) Order to Cash (O2C) Overview: SAP S4HANA Full Demo (GUI / FIORI)

8. Billing – When the product reaches the customer, billing occurs. Usually, businesses wait for the customer to receive the product before billing. There are also businesses who bill the customer before the product reaches them. It would depend on the processes followed by the business.

The billing would trigger accounting entries, and this highlights that the customer needs to pay for the product or service.

9. Customer Payment / Receipt of Money – This happens when a customer finally pays for the product / service. A payment would also trigger accounting entries.

The above has been summarized below.

SAP CHEAT SHEET: Order to Cash (OTC) Process for SAP Functional Consultants | Summary Table (5)

One good thing to note from the above is that not all steps are required.

SAP CHEAT SHEET: Order to Cash (OTC) Process for SAP Functional Consultants | Summary Table (6)

Pre-Sales

For example, you can skip the pre-sales (#1,2,3) and go directly to the order processing by form of a Sales Order (#4). This happens when the customer doesn’t need to ask pricing details from the business. Typically, the customer is already aware of the product / service and the pricing.

Shipment

Another example is that Shipment (#7) can be skipped if the product / service is directly provided to the customer. Consider the scenario where you buy yourself a pair of shoes and you have it with you immediately as you walk out the shoe store.

OTC SAP Transaction Codes and Tables

The below shows the corresponding SAP transaction codes of per step.

OTC Process StepsTransaction CodeTable
InquiryVA11VBAK
QuotationVA21VBAK
ContractVA41VBAK
Sales OrderVA01VBAK
DeliveryVL01NLIKP
Post Goods Issue (PGI)VL01NLIKP
*ShipmentVT01NVTTK
**BillingVF01BKPF
***Customer Payment / Receipt of MoneyF-28
FB50
FF_5
BKPF

*not needed if sold directly to customer. I use the “T” as an indicator to denote “transport”

(Video) SAP OTC BASIC PROCESS FOR BEGINNERS | SUMMARY TABLE / MATRIX

**recall concerns whenever a billing document is blocked or if the business user raises the issue of accounting doc not generated.

***View FBL5N for open items

OTC SAP Accounting Entries

The below shows each step and focuses on the SAP accounting entries

OTC Process StepsAccounting Entry?Accounting Document?
InquiryNoNo
QuotationNoNo
ContractNoNo
Sales OrderNoNo
DeliveryNoNo
Post Goods Issue (PGI)Yes
COGS Dr
Inventory Cr
Yes – Consider maintenance in OBYC

“Movement in Material” should trigger auto generation of material document. Material Document generates an accounting document.

*ShipmentYes – most likely will flow to billing / invoice details via pricing
Shipment / Transportation Cost
VI01 Shipment Cost
No
**BillingYes
Customer Dr
Sales Revenue Cr
Taxes Cr
Yes – Consider maintenance in VKOA
Billing Document generates an Accounting Doc
***Customer Payment / Receipt of MoneyYes
Bank Acct Dr
Discount Dr
Customer Cr
Yes – Accounts Receivable Accounting Document
Consider exchange fluctuation
Clearing of Open Item

*not needed if sold directly to customer. I use the “T” as an indicator to denote “transport”

**recall concerns whenever a billing document is blocked or if the business user raises the issue of accounting doc not generated.

***View FBL5N for open items

Integration Points

In some cases, there is a confusion when it comes to integration points. When we talk about the overall Order to Cash process, it can involve several teams. For example: Sales & Distribution, Finance, Logistics, etc.

Overall, the whole process is mainly Sales & Distribution with the support of Finance. There are of course certain areas where Finance would be best suited to check on – for example: payments or accounting entries. Ideally, it is also good to collaborate with both (and even other concerned teams).

The below table shows the integration points for SD and FI.

OTC Process StepsAcctg Entry?Acctg Doc?ScopeSD or FI
InquiryNoNoPre-salesSD
QuotationNoNoPre-salesSD
ContractNoNoPre-salesSD
Sales OrderNoNoOrder processingSD
DeliveryNoNoOrder fulfillmentSD
Post Goods Issue (PGI)YesYesOrder fulfillmentSD + FI
*ShipmentYesNoOrder fulfillmentSD + FI
**BillingYesYesBillingSD + FI
***Customer Payment / Receipt of MoneyYesYesBillingFI

*not needed if sold directly to customer. I use the “T” as an indicator to denote “transport”

**recall concerns whenever a billing document is blocked or if the business user raises the issue of accounting doc not generated.

(Video) Order to Cash Cycle Transactional Flow EBS R12

***View FBL5N for open items

4. Additional Information

SAP CHEAT SHEET: Order to Cash (OTC) Process for SAP Functional Consultants | Summary Table (7)

When it comes to a more in-depth OTC process, you would expect more steps or touchpoints to be involved.

For example: When we talk about “e-commerce” where we have a multitude of payment options and buying channels (mobile app, official brand website, marketplace, in-store ordering, etc.), there could be a step for “Fraud Management”.

Another example would be “Customer Credit Management” where the focus is more on the pending payments / outstanding payments of the customer.

5. Summary

Below is an image summary of the table I have created for OTC.

SAP CHEAT SHEET: Order to Cash (OTC) Process for SAP Functional Consultants | Summary Table (8)

Below is the summary in table format:

OTC Process StepsTCodeTableAccounting Entry?Acctg Document?ScopeSD or FI
InquiryVA11VBAKNoNoPre-salesSD
QuotationVA21VBAKNoNoPre-salesSD
ContractVA41VBAKNoNoPre-salesSD
Sales OrderVA01VBAKNoNoOrder processingSD
DeliveryVL01NLIKPNoNoOrder fulfillmentSD
Post Goods Issue (PGI)VL01NLIKPYes
COGS Dr
Inventory Cr
Yes – Consider maintenance in OBYC

“Movement in Material” should trigger auto generation of material document. Material Document generates an accounting document.

Order fulfillmentSD + FI
*ShipmentVT01NVTTKYes – most likely will flow to billing / invoice details via pricing
Shipment / Transportation Cost
VI01 Shipment Cost
NoOrder fulfillmentSD + FI
**BillingVF01BKPFYes
Customer Dr
Sales Revenue Cr
Taxes Cr

Yes – Consider maintenance in VKOA
Billing Document generates an Accounting Doc
BillingSD + FI
***Customer Payment / Receipt of MoneyF-28
FB50
FF_5
BKPFYes
Bank Acct Dr
Discount Dr
Customer Cr

Yes – Accounts Receivable Accounting Document
Consider exchange fluctuation
Clearing of Open Item
BillingFI

*not needed if sold directly to customer. I use the “T” as an indicator to denote “transport”

**recall concerns whenever a billing document is blocked or if the business user raises the issue of accounting doc not generated.

***View FBL5N for open items

I hope this helps. Good luck! 😊

(Video) SAP SD Pricing Process

FAQs

What is SAP O2C? ›

What Is SAP Order-to-Cash? Order-to-Cash is an integration point between Finance (FI) and Sales (SD). It is also known as OTC or O2C in short form. It is a business process that involves sales order from customers to delivery and invoice. It comprises SO, Delivery, Post Goods Issue (PGI) and billing to customers.

What are the stages of OTC cycle in their functional order? ›

The order to cash cycle, often abbreviated to O2C or OTC, is how your business receives, processes, manages, and completes customer orders. This means handling all aspects of the sale including shipping the items, collecting the payment, creating invoices, and reporting on the end-to-end process.

How can I improve my O2C process? ›

5 Actionable Ways to Improve Your Order to Cash Cycle
  1. Defining The O2C Cycle. To provide a common framework, let's first define the O2C (order to cash) cycle. ...
  2. Automation. ...
  3. Standardized O2C Process. ...
  4. Don't Offshore Or Automate Customer Service. ...
  5. Avoid Tacking On Fees. ...
  6. Accurate Customer Data.

What is OTC and p2p in SAP? ›

OTC : Order to Cash. PTP : Procure to Pay.

What is OTC process? ›

Order to cash (OTC or O2C) is a set of business processes that involve receiving and fulfilling customer requests for goods or services. It is a top-level, or context-level, term used by management to describe the finance-related component of customer sales.

What is O2C cycle in interview? ›

Steps in the O2C Process
  1. Step One: Customer Places an Order. ...
  2. Step Two: Order is Fulfilled. ...
  3. Step Three: Order is Shipped. ...
  4. Step Three: Invoice Created and Sent to Customer. ...
  5. Step Four: Customer Pays Invoice. ...
  6. Step Five: Payment is Recorded in General Ledger.

What is the difference between O2C and P2P? ›

Generally speaking, the process a business undertakes when making purchases from suppliers is often referred to as “Procure to Pay,” or P2P. The flip side of the coin, the process of receiving payment for goods or services rendered, is called “Order to Cash,” or O2C.

Which elements are mandatory for the order to cash process? ›

Listed below are the eight major steps that make up the order-to-cash process.
  • Order Management. ...
  • Credit Management. ...
  • Order Fulfillment. ...
  • Order Shipping. ...
  • Customer Invoicing. ...
  • Accounts Receivable. ...
  • Payment Collections. ...
  • Reporting and Data Management.

What is order to cash example? ›

Order to cash in ERP software

Examples are Microsoft Dynamics 365, Oracle Cloud ERP, Oracle NetSuite, SAP ERP SD, SAP Business ByDesign or Workday. Typical sub-processes and variants in those ERP systems are: Customer master data entry. Lead management, opportunity management and quotation management.

Why is O2C important? ›

Why is the order to cash cycle important? Implementing a comprehensive order to cash process is crucial to completing customer orders within established deadline time frames. A well-established order to cash cycle can help reduce production costs while simultaneously increasing productivity.

Who are the stakeholders in O2C? ›

An individual or organization who has any form of interest(usually financial) invested in the company.

Which of the following makes up O2C? ›

O2C processes include order taking, reconciliation of order and inventory, assembling the goods and verifying that this has been done correctly, dispatch and delivery of goods, invoicing, payment and finally, reporting.

What is P2P O2C R2R? ›

The Finance & Accounting (F&A) function comprises three end-to-end processes – Procure-to-Pay (P2P), Order-to-Cash (O2C), and Record-to-Report (R2R).

What is OTC PTP? ›

This means procure raw materials from Vendors (based on purchase order raised) , Goods receipt, Invoice Verification and make payment to Vendor. This sequence of activity is called Procure to Pay.

What is a 3 way check? ›

A three-way match is the process of comparing the purchase order; the goods receipt note and the supplier's invoice before approving a supplier's invoice for payment. A 3-way match helps in determining whether the invoice should be paid partly or in its entirety.

What is the typical order of process flow in O2C? ›

The order-to-cash process encompasses all steps from when a customer order is placed up until the business is paid (the cash). Those steps include order management and order fulfillment, through to credit management, then invoicing and ultimately payment collection.

What is quote to cash process? ›

The quote-to-cash (QTC) process encompasses many sales, account management, order fulfillment, billing, and accounts receivables functions. It considers the steps taken as your sales team configures a quote and drafts a proposal for a client, through to when payment is received for services rendered.

What does O2C stand for? ›

Step by Step: What you Should Know About the Order-to-Cash Process. By Danny Wong. The order-to-cash (O2C) process is a defining part of a company's success, and it also plays a big role in driving an organization's relationship with the customer.

What is the difference between R2R and P2P? ›

Knowing the difference between procure-to-pay (P2P), record-to-report (R2R) and quote-to-cash (Q2C) is essential to your procurement process. Not only do these processes help you understand how to make your procurement more streamlined, but they also improve efficiency.

What are the 3 layers of quote to cash? ›

Quote-to-cash automates three core applications: configure price quote, contract management, and revenue management. Each application flows naturally into the next, creating a seamless quote-to-cash process. Configure price quote (CPQ) empowers salespeople by providing up-to-date product and pricing information.

What is purchase order in O2C? ›

Order to Cash also known as O2C or OTC is the business process that covers the entirety of the order processing system right from receiving the order to up until the point the payment is made and an entry is logged in your accounting books.

Is order to cash accounts receivable? ›

In finance, accounts receivable or order to cash is a necessary process that influences the company's revenue growth and customer relationships—improving an organization's order to cash process steadily affects the company's business growth and revenue.

Which is the first stage of the OTC cycle? ›

Orders are documented and the company starts the task of filling the order. This is one of the most important steps in the process and it's also a critical one so it's noteworthy. After the product is shipped/delivered or the service provided a key stage in the cycle starts in terms of cash management.

What are SAP processes? ›

What is SAP Process Orchestration? SAP Process Orchestration software supports custom process applications and integration scenarios. As the process orchestration layer of SAP's Business Technology Platform, it can help you improve process efficiencies and respond to changing demands.

What is account receivable process? ›

A traditional accounts receivable process begins when a customer makes a purchase for a product and/or service (think of accounts receivable as an “IOU”) and ends once the outstanding payment has been collected. An accounts receivable workflow is the step-by-step process taken to record and collect the debt.

What is PtP OtC? ›

The course aims to present financial and accounting processes occurring in a company such as: Purchase to Pay (PtP), Order to Cash (OtC) and Record to Report (RtR). The aim of the workshop is to give young accountants a comprehensive knowledge covering the process in question and to understand the links between them.

How many types of work processes are there? ›

There are usually only one or two other types of work process. A work process consists of a screen processor, the ABAP interpreter, the database interface and the task handler that calls these programs. The dispatcher is the central process of the application server.

How do you automate a process in SAP? ›

What is SAP Process Automation? - YouTube

What is an AR invoice? ›

Accounts Receivable (AR) refers to the outstanding invoices a company has, or the money it is owed from its clients. In your personal life, an example of Accounts Receivable would be buying a ticket to a concert or sporting event for a friend with the understanding that they will pay you back later.

What are AP invoices? ›

Accounts payable (AP) invoicing is the process of receiving, recording and routing invoices, and executing payments. The process is complex, requiring multiple levels of approvals, at times, depending on what stage an invoice may be in and how the payer enterprise operates.

Compare the most common configurations of git reset, git checkout, and git revert. Walk away with confidence to navigate your repo using these commands.

It helps to think about each command in terms of their effect on the three state management mechanisms of a Git repository: the working directory, the staged snapshot, and the commit history.. A reset is an operation that takes a specified commit and resets the "three trees" to match the state of the repository at that specified commit.. CommandScopeCommon use cases git reset Commit-levelDiscard commits in a private branch or throw away uncommited changes git reset File-levelUnstage a file git checkout Commit-levelSwitch between branches or inspect old snapshots git checkout File-levelDiscard changes in the working directory git revert Commit-levelUndo commits in a public branch git revert File-level(N/A) The parameters that you pass to git reset and git checkout determine their scope.. Like git checkout , git revert has the potential to overwrite files in the working directory, so it will ask you to commit or stash changes that would be lost during the revert operation.. Checking out a file is similar to using git reset with a file path, except it updates the working directory instead of the stage.. The git reset , git checkout , and git revert commands can be confusing, but when you think about their effects on the working directory, staged snapshot, and commit history, it should be easier to discern which command fits the development task at hand.

The purpose of this document is to provide a brief summary of recommendations for the minimum toxicity tests to be performed for safety evaluation of direct food additives and color additives used in food based on their levels of concern.

Information in this document can be used as general guidance for the determination of concern levels, as well as the extent and types of toxicity testing for direct food additives and color additives used in food.. Safety evaluation for a direct food additive or color additive used in food involves assigning the additive to a Concern Level (i.e., low (I), intermediate (II) or high (III)) based on information on the additive's toxicological potential predicted from its chemical structure (i.e., low (A), intermediate (B), or high (C)) and an estimation of cumulative human exposure.. This diagram depicts the minimum Concern Level that would be assigned to a direct food additive or color additive to be used in food based on the substance's estimated human exposure from the proposed use and potential toxicity based on structural similarity to known toxicants in the absence of toxicological information of an additive.. The Concern Level translates to the minimum set of recommended toxicity tests needed to evaluate the toxicological safety of the new or expanded use of the additive.. This guidance has been prepared by the Division of Petition Review in the Office of Food Additive Safety, Center for Food Safety and Applied Nutrition (CFSAN) at the U.S. Food and Drug Administration.. Minimum toxicological testing recommended to support the safety of a novel additive might include studies generally recommended for a Concern Level III additive, irrespective of its chemical structure and exposure.. This document supersedes Toxicological Testing of Food Additives (1983; updated 1997). All written comments should be identified with this document's docket number: FDA-2020-D-1936 .

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ISO 14001 is an international standard in designing and implementing environmental management systems (EMS) that organizations can voluntarily certify for.. An ISO 14001 checklist is used to audit your Environmental Management System (EMS) for compliance with ISO 14001:2015.. This article briefly discusses: ISO 14001 is not merely a certificate of adherence to environmental management standards, but it is a long-term commitment to keep improving environmental performance.. Being ISO 14001-certified entails specific compliance obligations as explained in Annex A of the ISO 14001:2015 standard—mandatory legal requirements related to an organization’s environmental aspects can include, if applicable:. The guidance on the use of ISO 14001:2015 standard further states that compliance obligations also include other interested party requirements related to its environmental management system which the organization has to or chooses to adopt which can include, if applicable:. Take note that you don’t need to have a separate internal audit for Environmental Management Systems; there is no reason why you can’t use one process for your internal audits that combines both QMS and EMS.. iAuditor by SafetyCulture can help you perform better internal ISO audits, monitor EMS activities, and track your organization’s environmental performance.. Significant Aspect : operation equipment or activities that can have significant environmental impact Risk Level : the risk severity level an environmental aspect poses Monitoring & Measurement : type of monitoring activity/planned inspection process Corrective Measures : Controls or corrective actions to implement Supporting Photos : ability to attach supporting photos to template. An EMS audit checklist is an evaluation tool to help determine the performance of an organization’s Environmental Management System (EMS) and follow through on areas of improvement.. An ISO 14001 requirements checklist is used by environmental, health, and safety (EHS) compliance managers to ensure that their company’s EMS fulfills legal requirements.

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