Lecture 6 Order to Cash (OTC)
FIN419
Learning Objectives
Understand the elements involved on the Order to Cash (OTC) process
Understand the goal of Sales and Distribution (SD) and Inventory Management (IM)
Understand the SD elements involved on the OTC process
Understand the IM elements involved on the OTC process
Understand the FI elements involved on the OTC process
Understand the integration points between SD, IMWM and FICO
2
Order to Cash (OTC) Process
Customer order
Receive order from the customer (demand)
Order fulfillment (financial impact)
Manufacturing of goods or
Shipping (financial impact)
Delivery of finished goods
Billing (financial impact)
Billing to customer
Cash collection (financial impact)
3
Shipping
Billing
Cash collection
Customer order
Order Fulfillment
Order to Cash (OTC) Organizational Structure
Client
An independent environment in the system
Company Code
Represents an independent legal accounting unit
Balanced set of books, as required by law, are prepared at this level
A client may have more than one company code
Credit Control Area
An organizational entity which grants and monitors a credit limit for customers
Credit limits
Monitors credit
Extend credit
It can include one or more company codes
It can managed credit
Centralized
Decentralized
Represents the legal and/or organizational views of an enterprise and it forms a framework that supports the activities of a business in the manner desired by management
Procurement to Pay (PTP) Organizational Structure (Cont)
Plant
The plant represents a production unit and is the central organizational unit in Materials Management and Production Planning.
Under the OTC represents the place where goods will be deliver to customer.
Shipping point
Is a location in a plant from which outbound deliveries are shipped
They associated to one or more plants and a plant may have more than one.
Sales Area
A unique combination of sales organization, distribution channel and division
Sales organization is the organization unit responsible for the sale and distribution of goods and services in a geographical area
Distribution channel is the means by which a company code delivers goods and services (e.g. wholesale, retail, online, etc)
Division is a way to consolidate goods and services with similar characteristics
Procurement to Pay (PTP) Organizational Structure (Cont)
Sales Office
A physical location that has the responsibility to sales goods or services within a geographical area
Order to Cash (OTC) Global Bike Material Management Structure
Two company codes
Four sales organization
2 under GBI
2 under Global Bike Germany
3 Distribution channels
1 for GBI
2 for Global Bike Germany
Sales office
3 under GBI
2 under Global Bike Germany
Procurement to Pay (PTP) Reflection
What similitude do you find between plant and sales office?
How would you describe the concept of sales area?
Order to Cash (OTC) Master Data Summary
The order to cash (OTC) involved elements of the sales and distribution (SD), materials management (IMWM) and finance. This includes the following master data
Material Master controls the material (Raw, WIP, finished goods)
Customer master. Customer sales area data and AR ledger
Pricing conditions. Use to determine the selling prices of products
Inventory Management (IM) Introduction
Inventory and Warehouse management deals with placing and handling stock that will be shipped to customers in the correct place within the company’s premises and plays a relevant element in the order to cash (OTC) process.
Inventory control
Stock
Demand
GL
Inventory Management (IM) Inventory Management
Part of Logistics/Production/ Repetitive Manufacturing/Data entry
Backflush
Material document
Inventory Management (IM) Backflush
Backflush is a goods movement in which we accept the manufactured finished goods after the transformation from components.
Material is placed on stock (finished goods) ready for shipment
Sales order
Customer notification
Customer Demand
Manufacturing finished goods
Procure raw material
Inventory Management (IM) Material Movements Types
It is a three digit key that represents a movement of goods
Examples of movement types
101, goods receipt into warehouse
103, good receipt into blocked stock
122, return goods to vendor
231, consumption for a sales order
Inventory Management (IM) Backflush
Event series during a backflush
Material document
Stock quantities and values are updated
Accounting document
Raw material inventory updates from price on material master from components
Finished foods inventory updates from price on material from finished foods and BOM
Any variance goes Backflush variance
Material document
Raw material Inventory valuation
Accounting document
Finished goods Inventory valuation
Controlling document
Inventory Management (IM) Backflush (MFBF)
Repetitive Manufacturing
Confirmation type
Confirmation qty
Posting date
Material
Plant
Production strategy
Make to stock
Make to order
Batch
Inventory Management (IM) Display Material Document (MB03)
Material document or
Material document list
Material
Plant
Movement type
Order to Cash (OTC) Reflection
Where do you connect the PTP with the OTC processes?
What do you think is the financial impact of backflush?
What could the reason of any backflush variance?
Would you say GBI has a repetitive manufacturing process, why?
What production strategy do you think GBI might use and why?
Sales and Distribution (SD) Sub-modules
Part of Logistics/Material Management/Sales and Distributions
Master Data
Sales
Shipping and Transportation
Billing
Credit Management
Sales and Distribution (SD) Introduction
Sales and Distribution contains the most relevant elements of the order to cash process gathering the data from the customer order to the delivery of goods.
Sales
Demand
Fulfillment
Quote
Sales and Distribution (SD) Transactions
XD01 Create Customer Master (Master Data)
VK31 Create conditions (Master Data)
VA21 Create customer quote (Sales)
VA01 Create sales order (Sales)
Shipping
Sales and Distribution (SD) Customer master (XD01)
Customer Master Account is data needed to conduct business with customers and execute transactions related with fulfillment process.
General (Client)
Sales area
Account
Name
Address
Bank information
Currency
Delivering plant
Delivery priorities
Shipping conditions
Partner functions
Sales and Distribution(SD) Material Master Views
Basic
Sales (SD)
Purchasing
Plant
Forecast
Storage
Quality
Accounting
Controlling
Sales and Distribution (SD) Material Master
Contains all of the key information a company needs to manage a material within its organization.
The material master defines, among other things, how a product is sold, manufactured, purchased, inventoried and costed.
Information is grouped into views that are organized by business function.
The majority of views of master data are stored at the plant level.
Basic Data
Material
Sales
Unit of measure
Material group
Description
Sales org data 1
Sales org data 2
Delivery plant
Tax data
Conditions
Sales general
Availability
Transportation
Sales and Distribution (SD) Conditions (VK31)
Contains the selling prices of finished goods.
You can define the condition master to be dependent on various data:
Material specific
Customer specific
Conditions can be dependent on any document field
Pricing elements
Gross price
Freight cost
Sales taxes
Surcharges and discounts
Sales and Distribution (SD) Quote
The quotation presents the customer with a legally binding offer to deliver specific products or a selection of a certain amount of products in a specified timeframe at a pre-defined price.
Sales and Distribution (SD) Quote(VK21)
Quote data and sales org
Header
Sold to and Ship to
Line items
Validity
Required date
Material
Quantity
Price
Sales and Distribution (SD) Sales Order
Sales order processing can originate from a variety of documents and activities
Customer contacts us for order: phone, internet, email
Existing Contract
Quotations
Elements of a sales order
Customer Information
Material/service and quantity
Pricing (conditions)
Specific delivery dates and quantities
Shipping and billing information
The sales order contains all of the information needed to process your customers request, the following information is determined for each sales order:
Delivering Schedule
Shipping point and route determination
Availability Check
Transfer of requirements to MRP
Pricing
Credit limit check
Sales and Distribution (SD) Sales Order Delivery Scheduling
When an order is created you must enter a requested delivery date for the order or each line item.
The system will then determine a delivery timeline, this will be used when determining our material availability, or ATP (Availability to Promise) date.
The system will determine this date using forward and backward scheduling rules you have defined.
Types of scheduling
Backward
Forward
Sales and Distribution (SD) Backward Delivery
The time needed to complete all the necessary steps from order to delivery beginning with the required delivery and then works in reverse order.
Sales and Distribution (SD) Forward Delivery
The time needed to complete all the necessary steps from order to delivery from the customer beginning with order, make sure material will be available and the delivery date
Sales and Distribution (SD) Create Sales Order (VA01)
Header data
Sold To
Ship To
Item details
Delivery date
Picking date
Payment terms
Incoterms
Material
Delivery plant
Net price
Sales and Distribution (SD) Introduction to Shipping
The shipping process begins when you create the delivery document for the sales order. This document controls, supports, and monitors numerous sub-processes for shipping processing:
Picking
Packing
Loading
Posting Goods Issue
Integrated with the Material Management (MM) and Finance (FI) modules
Delivery
Picking
Packaging
Post Goods issue
Sales and Distribution (SD) Shipping (Transactions)
VL01N Outbound Delivery
Delivery
Picking
Packaging
VL35 Picking
VL02N Packaging
VL02N Post goods issue
Sales and Distribution (SD) Delivery
Checks order and materials to determine if a delivery is possible — delivery block (hold), completeness
Confirms availability
Confirms export/foreign trade requirements
Determines total weight & volume
Generates packing proposal
Calculates weight and volume
Checks scheduling
Considers partial deliveries
Updates route assignment
Assigns picking location
Updates sales order
Determines batches
Quality check (if needed)
Updates sales order
Sales and Distribution (SD) Create Delivery (VL01N)
Header
Shipping point
Date
Order number
Ship to party
Item
Planned goods issue
Total weight
Material
Quantity
Sales and Distribution (SD) Delivery: Picking
Quantities based on delivery note
Assigned date when picking should begin
Automated storage location assignment
Supports serial number/lot number tracking and batch management
Integrated with Warehouse Management (WM)
Sales and Distribution (SD) Delivery: Loading and Packaging
Identifies which packaging is to be used for specified products
Identifies and updates accounts associated with returnable packaging
Tracks the packed product by container
Insures weight/volume restrictions are enforced
All packed items are assigned to the required means of transportation
Sales and Distribution (SD) Post Goods Issue
Post Goods Issue triggers the official change of ownership of finished goods
Stock overview
Post Goods issue
Finish goods
Delivery
Sales and Distribution (SD) Post Goods Issue
Event series during a goods issue
Material document
Stock quantities and values are updated
Accounting and Controlling document
Inventory updates from price on material master (finished goods)
COGS updates from price on material master (finished goods)
Billing due list is updated
Output generated
Material document
COGS
Accounting document
Billing due list
Transaction output
Controlling document
Sales and Distribution (SD) Post Goods Issue (VL02N)
Outbound delivery
Document date
Post Goods Issue
Sales and Distribution (SD) Billing
VF04 Billing Due List
Sales and Distribution (SD) Billing
The billing document is created by coping data from the sales order and/or delivery document.
Order-based billing
Delivery-based billing
The billing process is used to generate the customer invoice.
It will update the customer’s credit status.
Sales and Distribution (SD) Billing
Event series during a Billing
Material document
Sales order is updated
Accounting and Controlling document
Sales updates from billing document
AR updates from billing document
Material document
Sales Order History
Accounting document
Controlling document
Sales and Distribution (SD) Billing (VF04)
Date
Sales organization
Sold to party
Sales and Distribution, Billing (SD) Reflection
What is the purpose of the delivery document on SAP?
What do you think is the financial impact of the post goods issue?
What do you think is the financial impact of processing the billing due list?
Accounts Receivable (FI-AR) Incoming Payment
Can be done automatically or manually
Post outgoing (F-53)
Payment program (F110)
Payments elements
Payment method
Bank from which we pay
Invoices to be paid
Payments amounts
Payment medium
Checks, wires, etc
Event series during a goods receipt
Accounting document
Vendor references invoice
Bank reference payment
PO is updated
Output generated
Accounts Receivable Incoming Payments (F-28)
Company code
Posting & document date
Document type
Currency
Bank Data (debit)
Value Data (collection date)
Customer Data (credit)
Additional selections for line items identification
47
Sales and Distribution Document Flow
The document flow and order status feature allows you to find the status of an order at any point in time. The SAP updates the order status every time a change is made to any document created in the customer order management cycle (Order-to-Cash).
Order to Cash(OTC) Integration IM, SD and FI
Backflush
Dr Finished goods inventory current standard and BOM
Cr Raw material inventory current standard
Post goods issue
Dr COGS current standard finished goods
Cr Finished goods inventory current standard cost
Billing
Dr AR based on billing (invoice)
Cr Sales based on billing
Cash Collection
Dr Bank based on cash
Cr AR based on invoice
Order to Cash (OTC) SAP Practice
Create customer
Cerate sales order from quote
Delivery
Create an inquiry
Billing
Cash collection
Create a quotation
Post goods issue
