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What Is SAP Order-to-Cash?

Order-to-Cashis an integration point between Finance (FI) and Sales (SD). It is also knownas OTC or O2C in short form. It is a business process that involves sales orderfrom customers to delivery and invoice. It comprises SO, Delivery, Post GoodsIssue (PGI) and billing to customers. OTC process is a very important processin Enterprise Resource Planning software(ERP Software). Both major ERP softwareSAP and Oracle include this process.

Its configurationtouches both Finance and Sales & Distribution modules. This is an end toend process from customer Inquiry to goods delivery, billing and payment of money.The process starts when a customer inquires for an inventory item (finishedgoods for a company). The customer gets quote for the item and place an orderfor the quantity needed. A user from company place the order and pass it forprocessing. Inventory gets picked up from warehouse and shipped to customer.Billing process also starts with delivery and it can be sent with the item orlater. This is an overall OTC scenario in general.

This processgives integration between customer master record, sales organization,salesoffices, distribution channels, divisions and plants. We are going to discussthe steps in details.

SAP OTC Process Flow.

SAP OTC isa process involved customer sales order creation and satisfying.

Customer requirementsvia delivery.

Pre-requisitesare customer master record is set up, sales area (sales organization, divisionsand distribution channels) was set up already.

Generally steps are as follows:

Customer Inquiry

Quotation forcustomer inquiry

Sales Ordercreation

Post Goodsissue (PGI)

Delivery

Billing-Billsent to customer

Receipt ofmoney- Customer Payment

The Firsttwo steps that are inquiry and quotation may or may not happen. A new customermay inquire and ask for quotation but an old customer may not inquire. Moreover,if you have contracted agreement to sell products at a certain price thancustomer will directly order without quotation.

Now, let'ssee what is the impact on the accounting entries for this cycle steps. Eachstep has it's own different configuration these steps used in business workflow.As I mentioned earlier, this process involves many different organizationallevels. Most important organizational levels in this process is Company code,sales organizations, distribution channels, divisions and plants.