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
- What is OTC
- OTC Simplified Process
- OTC and SAP
- OTC SAP Transaction Codes and Tables
- OTC SAP Accounting Entries
- Integration Points
- Additional Information
- 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:
- You go to a café and buy yourself a cup of coffee.
- You call a moving truck service to help move your furniture to a new location.
- 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.
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.
- Pre-Sales
- Order Processing
- Order Fulfillment
- Billing
| Step | Description |
| Pre-Sales | Anything 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 Processing | Creation of the Sales Order Commitment of the business to provide the requested product or service. |
| Order Fulfillment | The 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. |
| Billing | At 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 Steps | Scope |
| Inquiry | Pre-sales (1) |
| Quotation | Pre-sales (1) |
| Contract | Pre-sales (1) |
| Sales Order | Order processing (2) |
| Delivery | Order fulfillment (3) |
| Post Goods Issue (PGI) | Order fulfillment (3) |
| *Shipment | Order fulfillment (3) |
| **Billing | Billing (4) |
| ***Customer Payment / Receipt of Money | Billing (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.
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.
One good thing to note from the above is that not all steps are required.
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 Steps | Transaction Code | Table |
| Inquiry | VA11 | VBAK |
| Quotation | VA21 | VBAK |
| Contract | VA41 | VBAK |
| Sales Order | VA01 | VBAK |
| Delivery | VL01N | LIKP |
| Post Goods Issue (PGI) | VL01N | LIKP |
| *Shipment | VT01N | VTTK |
| **Billing | VF01 | BKPF |
| ***Customer Payment / Receipt of Money | F-28 FB50 FF_5 | BKPF |
*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 Steps | Accounting Entry? | Accounting Document? |
| Inquiry | No | No |
| Quotation | No | No |
| Contract | No | No |
| Sales Order | No | No |
| Delivery | No | No |
| 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. |
| *Shipment | Yes – most likely will flow to billing / invoice details via pricing Shipment / Transportation Cost VI01 Shipment Cost | No |
| **Billing | Yes Customer Dr Sales Revenue Cr Taxes Cr | Yes – Consider maintenance in VKOA Billing Document generates an Accounting Doc |
| ***Customer Payment / Receipt of Money | Yes 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 Steps | Acctg Entry? | Acctg Doc? | Scope | SD or FI |
| Inquiry | No | No | Pre-sales | SD |
| Quotation | No | No | Pre-sales | SD |
| Contract | No | No | Pre-sales | SD |
| Sales Order | No | No | Order processing | SD |
| Delivery | No | No | Order fulfillment | SD |
| Post Goods Issue (PGI) | Yes | Yes | Order fulfillment | SD + FI |
| *Shipment | Yes | No | Order fulfillment | SD + FI |
| **Billing | Yes | Yes | Billing | SD + FI |
| ***Customer Payment / Receipt of Money | Yes | Yes | Billing | FI |
*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
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.
Below is the summary in table format:
| OTC Process Steps | TCode | Table | Accounting Entry? | Acctg Document? | Scope | SD or FI |
| Inquiry | VA11 | VBAK | No | No | Pre-sales | SD |
| Quotation | VA21 | VBAK | No | No | Pre-sales | SD |
| Contract | VA41 | VBAK | No | No | Pre-sales | SD |
| Sales Order | VA01 | VBAK | No | No | Order processing | SD |
| Delivery | VL01N | LIKP | No | No | Order fulfillment | SD |
| Post Goods Issue (PGI) | VL01N | LIKP | 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. | Order fulfillment | SD + FI |
| *Shipment | VT01N | VTTK | Yes – most likely will flow to billing / invoice details via pricing Shipment / Transportation Cost VI01 Shipment Cost | No | Order fulfillment | SD + FI |
| **Billing | VF01 | BKPF | Yes Customer Dr Sales Revenue Cr Taxes Cr | Yes – Consider maintenance in VKOA Billing Document generates an Accounting Doc | Billing | SD + FI |
| ***Customer Payment / Receipt of Money | F-28 FB50 FF_5 | BKPF | Yes Bank Acct Dr Discount Dr Customer Cr | Yes – Accounts Receivable Accounting Document Consider exchange fluctuation Clearing of Open Item | Billing | FI |
*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! 😊
Techlorean. 