Order to Cash in SAP S/4 HANA

The Order to Cash Process in SAP refers to the end-to-end cycle that starts with receiving a customer order and ends with receiving payment for goods or services. Below is the O2C process postings of Finished Good in SAP S/4 HANA :

Sales Order

The O2C process kicks off when a customer places an order. The sales order captures the customer's requirements, including product details, quantities, prices, and delivery terms. For example - Standard Order (OR), Consignment Order (KE).

• SAP Transaction Code: VA01 (Create Sales Order)

• Financial Posting: At this stage, there is no financial impact.

How to create Sales Order in SAP ?

STEP 1 : Go to T. code VA01 > Enter Order Type and below Organizational units and click on continue

• Order Type : It refers to a classification that defines the characteristics and behavior of a sales order. It controls various functions such as pricing, delivery scheduling, billing, and more

STEP 2 : Provide the Sold-to-Party, Ship-to-Party number (Partner Functions), Material, Order Quantity and other fields.

Availability Check

STEP 3 : Click on "Check Item Availability" to ensure that the requested items are in stock / Once the sales order is created, SAP automatically checks the availability of the products using the Available-to-Promise (ATP) functionality.

It is purely logistical check to confirm stock availability for "confirmed Quantity" under schedule lines Tab

STEP 4 : then click on Shipping to ensure/change the -

• Goods Issue Date : The date on which the goods must physically leave the shipping point to reach the customer on time.

• Loading Date : The date by which picking and packing must be completed so that the goods are ready for loading and for the delivery to reach the customer on time.

• Material Available Date : The date by which sufficient quantities of the item must be available for picking to begin.

• Transportation Planning Date : The date by which you must arrange transportation so that the delivery can reach the customer on time.

STEP 5 : Ensure the Sales order have Plant, Shipping Point, Storage Location and other fields under "Shipping Tab"

STEP 6 : Check for the Price and other amount based on Condition Types of Pricing Procedure where amount is retrieved by maintained Condition record or entered manually.

Sales Document 3000000499 Posted

Outbound Delivery

This involves creating a delivery document, which signifies that the items in the sales order are ready for shipment. The system reserves the inventory for delivery at this stage.

• SAP Transaction Code: VL01N (Create Delivery)

• Financial Posting: No financial impact at this stage, but the system updates logistics information, signaling that the goods are ready to be delivered.

How to create Delivery in SAP?

STEP 1 : Enter the Shipping Point, Selection Date and Sales Order number

STEP 2 : Information related to Picked Quantity, packaging and transportation to be entered and Saved.

Document Flow Status

Post Goods Issue

Once the goods are physically shipped to the customer, SAP posts a goods issue. This step is critical as it marks the transfer of ownership of the goods from the seller to the buyer.

• SAP Transaction Code: VL02N (Post Goods Issue)

• Financial Posting:

  • Debit: Cost of Goods Sold

  • Credit: Inventory 

STEP : Go to Transaction Code VL02N and Click on Post Goods Issue

Material Document Posted 4900000705

Document Flow Status

Billing (Invoice Creation)

After the goods are delivered, the next step is to bill the customer. The system creates an invoice, which records the amount due from the customer for the delivered goods or services.

• SAP Transaction Code: VF01 (Create Billing Document)

• Financial Posting:

  • Debit: Customer Receivables 

  • Credit: Revenue 

STEP : Go to Transaction Code VF01 > Enter Document Number with Billing Type F2 and Save.

Display Document

Document Flow Status

Incoming Payment

Once the customer makes the payment for the invoice, it is recorded in SAP through the incoming payments process. After receiving the payment it reduces the customer’s outstanding balance.

• SAP Transaction Code: F-28 (Incoming Payments)

• Financial Posting:

  • Debit: Bank Account 

  • Credit: Customer Receivables 

STEP 1 : Enter the below fields for receiving payment like Company code, bank data, Customer data and click on Process Open Items

STEP 2 : Select the Invoice Document and click on Post.

Display Document

Document Flow Status

The Order-to-Cash (O2C) process in SAP is essential for managing the sales cycle, from order creation to receiving payment. Each step, from sales order to billing and payment, involves specific financial postings that impact inventory, revenue, and customer accounts.

Thank you for taking time to read my blog, stay tuned for insightful blogs.

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