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

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

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.

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
  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.
Process Steps Simplified – Order to Cash – Techlorean.com

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)
Process Steps – Order to Cash – Techlorean.com

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

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.

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

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

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
TCodes and Tables – Order to Cash – Techlorean.com

*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

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
Accounting Entries – Order to Cash – Techlorean.com

*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
Integration Points – Order to Cash – Techlorean.com

*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

4. Additional Information

SAP Cheat Sheet: Order to Cash (OTC) Process for SAP Functional Consultants

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

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
Summary Table – Order to Cash – Techlorean.com

*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! 😊

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