SAP 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.

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:

  1. Order entry
  2. Order processing
  3. Order fulfillment
  4. Invoicing
  5. 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.

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