SAP Order to Cash
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Order to Cash: An Overview and Key Considerations
What is Order to Cash?
The order-to-cash cycle is the order management workflow that organizations use to govern the transaction of selling services or products. It is sometimes referred to as the OTC or O2C cycle and includes a variety of steps to move the transaction from order entry to order fulfillment to payment.
No matter their size or industry, all businesses go through a generic order-to-cash process. The order-to-cash cycle typically aligns with the manufacturing order process of a particular industry or sector, but not always. This process aims to ensure that the correct goods and services are delivered to customers in a timely and cost-effective manner. The order-to-cash cycle comprises all the steps required to bring a service or product to market, starting with order management and ending with order fulfillment, order to cash.
Order to Cash: An Overview and Key Considerations
What is Order to Cash?
The order-to-cash cycle is the order management workflow that organizations use to govern the transaction of selling services or products. It is sometimes referred to as the OTC or O2C cycle and includes a variety of steps to move the transaction from order entry to order fulfillment to payment.
No matter their size or industry, all businesses go through a generic order-to-cash process. The order-to-cash cycle typically aligns with the manufacturing order process of a particular industry or sector, but not always. This process aims to ensure that the correct goods and services are delivered to customers in a timely and cost-effective manner. The order-to-cash cycle comprises all the steps required to bring a service or product to market, starting with order management and ending with order fulfillment, order to cash.
For many organizations, order to cash typically involves these steps:
- Order entry
- Order processing
- Order fulfillment
- Invoicing
- Payment
The order-to-cash process begins with order entry, during which an order for a service or product is entered into the system. Following order entry, order processing takes place and includes the order creation and order confirmation tasks. After order processing comes order fulfillment, orders are filled and delivered to the customer. Finally, the cycle ends with invoicing and payment when payment from the customer settles.
Many organizations look to standardize their order-to-cash processes to eliminate information siloes and improve communication and collaboration between divisions and personnel. For an organization to normalize the finance function successfully, the order-to-cash process must be efficient and accurate. Most ERP solutions are designed to support every aspect of the order-to-cash process, from when an order is entered to when the payment settles. ERP software, such as SAP ECC 6.0 or SAP S/4HANA, can be essential for this process, providing both standardization opportunities and customization functionality to meet the specific needs of a particular organization. Some level of customization is necessary because no two businesses are exactly alike. The ERP software must handle the different sales channels, pricing methods, and currencies used by an organization. It also needs to accommodate the various types of invoicing and shipping procedures required. If these aspects are not considered when configuring the ERP system, it will not work effectively and could cause more problems than it solves.
Key Considerations for SAPinsiders
Streamline your order-to-cash process with an ERP configuration that incorporates industry best practices.Configuring the ERP system properly takes time and effort, but organizations must implement the appropriate components and modules to support core business processes, such as order to cash. SAP ERP offers the SAP order-to-cash process, streamlining the functionality of the O2C process with the technical innovation of SAP ERP with a modern architecture built for real-time data access. SAP’s order-to-cash process can be designed for specific industries, such as transportation and logistics while allowing customizations to align with a company’s needs more closely. Here is an example highlighting the O2C customizations for a retail organization.
Leverage order-to-cash automation to reduce costs. For organizations to streamline and optimize operations, accurate and up-to-date data is required. Unfortunately, manual and inefficient centralized processes that are error-prone make it challenging to collect accurate data within organizations managing high-volume transactions. ERP software solutions, such as SAP ERP, can help organizations track everything from inventory levels to customer orders all in one place. JBS USA provides an example of how automating order-to-cash processes can result in significant cash savings.
Ensure compliance requirements are considered across order-to-cash process automation. Many organizations rely on documentation to support compliance requirements during the order-to-cash process. Global trade compliance is a critical function where document access and validation can enhance compliance management. In addition, the order-to-cash process should align with global trade policies and regulations to keep the organization compliant amid a rapidly changing global macro environment that can see customs, tariffs, and supply chain requirements evolve overnight.
821 results
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Revamp Your Exchange Process with SAP Order to Cash
Published: 18/July/2014
Reading time: 12 mins
Learn how to exchange or replace a product and have both on the same sales order, enabling a quicker response to the customer that results in lower costs and enhanced customer satisfaction. Key Concept The consolidated exchange process is an exchange process that combines many steps of a typical SAP functionality. It consolidates these typical…...… -
How Implementing SAP Cash Management Helps in Monitoring Your Working Capital
Published: 11/December/2014
Reading time: 35 mins
Learn how to connect the basic SAP order-to-cash and purchase-to-pay cycles in SAP Cash Management to manage your organization’s working capital. This working capital is further efficiently used by connecting SAP Treasury and Risk Management and SAP In-House Cash to SAP Cash Management. Key Concept SAP Cash Management is a sub-component of SAP Financial Supply…...… -
Lessons Learned from the First Customer Implementation of SAP Cash Management Powered by SAP HANA
Published: 20/July/2016
Reading time: 32 mins
With the numerous changes involved in an SAP HANA implementation, a detailed explanation is required to have a good understanding of what has changed from doing an implementation strictly in SAP ERP Central Component (ECC). Learn the different components and various deployment options for running SAP Cash Management on SAP HANA. This article includes details…...… -
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Repetitive Cost Accounting in a Production and Process Order Environment
Published: 27/February/2015
Reading time: 21 mins
Learn how to configure and use product cost collectors (repetitive) to capture and control production and process order costs. Key Concept A hybrid order type for production moves the cost object from the production or process order to a product cost collector. This enables the use of orders for control of production and the aggregate…...… -
Accelerated Order Processing with EDQA in Global ATP
Published: 13/January/2017
Reading time: 26 mins
Learn when and how to use Event-Driven Quantity Assignment (EDQA) in SAP Advanced Planning and Optimization (SAP APO) Global Available-to-Promise (Global ATP). Key Concept Available-to-Promise (ATP) is an order management business process that attempts to commit and fulfill customer orders on required dates and quantities considering business rules and availability of finished products, components, and…...… -
Set Up a Cash Journal to Enhance Your Internal Controls
Published: 15/November/2006
Reading time: 44 mins
See how to set up a cash journal and how to use it to record cash transactions and monitor your cash position. Key Concept Many companies have a petty cash account for small cash payments and receipts. To integrate petty cash with the SAP R/3 system, SAP developed the cash journal. The cash journal enables…...… -
Streamline Your Company’s Production Rates with ATP Using SAP PP
Published: 29/December/2017
Reading time: 19 mins
Learn about the processes involved in production using Available-to-Promise (ATP) functionality. Read about the master data to be maintained in the system along with the main customizing settings available for this solution. Key Concept In SAP Production Planning (PP) the Available-to-Promise (ATP) check is carried out for the components of the main material. SAP Production…...… -
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Project System Achieves Faster Closes When Using the Engineer-to-Order Process
Published: 15/November/2004
Reading time: 12 mins
The Project System (PS) module has a functionality called project-related incoming orders that allows you to report on incoming order values for an engineer-to-order process. The PS module can calculate order book and backlog values throughout the project life cycle. It allows you to avoid negative backlog and remaining backlog on closed projects. Three examples…...… -
Master APO Requirements Strategies
Published: 01/January/2006
Reading time: 24 mins
Does your manufacturing requirement strategy in APO match your business plan? Find out how to determine if it does and adjust it if it doesn’t. Key Concept Advanced Planner and Optimizer (APO) requirements strategies determine not only whether a product is manufactured based on a make-to-stock or make-to-order principle. They also determine how existing product…...… -
Configure Capable-to-Promise for Both External and Internal Demands
Published: 15/February/2016
Reading time: 26 mins
Learn how to configure Capable-to-Promise in SAP Global Available-to-Promise (GATP) in a manufacturing environment for both external as well as internal demands. Understand the various configuration aspects of both GATP and Production Planning (PP) /Detailed Scheduling (DS). Key Concept Production can be directly triggered through a Capable-to-Promise check within the SAP Global Available-to-Promise (GATP) module…...…
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