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Vasyl Onokhin

SAP SD Consultant

The Order-to-Cash Process as the “Heart” of the SAP Sales and Distribution Module

The Sales and Distribution (SD) module is one of the key components of the SAP ERP system, and the Order-to-Cash (O2C) process is its integral part. If a company implements SAP and conducts sales operations, this process is indispensable.

The goal of the O2C process is to ensure a full sales and logistics cycle, starting from order placement and ending with payment collection from customers.

Let’s review the full chain of the process:

The chain of the Order to Cash process.

The O2C (Order-to-Cash) process in SAP includes the following documents:

  • 1

    Inquiry – an optional document representing a customer’s request for products or services offered by the company. It indicates what the customer is interested in purchasing. However, the listed items are not guaranteed to be available or delivered. The inquiry helps in demand forecasting: understanding what the customer wanted and when, and identifying any gaps in stock that could not meet the demand.

  • 2

    Quotation – a document containing a commercial offer from the company to the customer, including product details, pricing, and other conditions. It confirms the list of products the company can supply and often serves as the basis for future sales orders. While only one customer can be specified, multiple delivery points are possible.

  • 3

    Contract – a long-term agreement with the customer covering supply volumes or pricing. Like the inquiry and quotation, this document is optional in the O2C chain. It usually contains a list of items for sale and often refers to a legally binding contract.

  • 4

    Sales Order – the core and mandatory document that confirms the offer and initiates the sales process. It can be created based on a contract, quotation, inquiry, or independently. Additionally, the system can perform an availability check and credit check when needed. Think of it as adding products to the cart in an online store.

  • 5

    Delivery – the key document for organizing product picking and shipping. It includes processes such as picking and packing, and contains all necessary shipment information like delivery date, quantity, consignee, and vehicle. The next step is the Goods Issue, confirming that the goods are removed from stock and, depending on Incoterms, transferred to the customer’s ownership.

  • 6

    Shipment – a document representing the actual transportation of goods. It can include several deliveries. While optional, it can simplify the shipping process and includes transport data, freight costs, and carrier information. The shipment document is particularly useful when creating delivery notes for multiple deliveries in one vehicle.

  • 7

    Invoice – a financial document issued to the customer for the goods or services provided. It is generated after delivery (or shipment), or in the case of services, after the sales order. SAP allows copying data from previous documents, making invoice creation quick and efficient.

What are the advantages of the O2C process in SAP?

  • icon

    A flexible configuration process. As shown in the diagram, not all documents are mandatory. That means you can skip any preliminary proposals and directly create a sales order, pack the goods, and ship them. It’s also possible to build a minimal process chain for services (order–invoice), where even delivery is not required.

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    Transparency, control, and clear sequencing. The system always allows you to view the full chain of created documents, navigate to each one, and review it. As a result, sales analytics becomes easier—supported by existing reports, easy integration with analytical services (such as SAP SAC), or by developing custom reports.

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    Easy integration with other modules and processes. These can include planning, production, quality control, finance, or warehouse stock movement. Integration is also possible with dedicated modules like Transportation Management (SAP TM), Extended Warehouse Management (SAP EWM), and others. Additionally, SAP provides a set of tools for integrating with external systems. Orders can be received from web applications or CRM systems, and it’s also possible to integrate with SAP BTP services and configure AI to automate order creation.

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    Fast document creation and minimized error risks. A properly configured process supports automatic document generation by copying data from master records or previously created documents. This means that data such as customers, materials (products), organizational structures (plants, warehouses), or pricing is pulled into the order automatically. Built-in validation checks reduce the risk of errors.

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    SAP Best Practices are standardized, tested, and preconfigured business process scenarios that SAP offers as out-of-the-box solutions, based on the extensive experience of large corporations. This means the O2C process can be deployed quickly without needing to be configured from scratch.

In conclusion, Order-to-Cash (O2C) is more than just a sequence of steps from order to payment. It is a strategically important end-to-end process that unites sales, logistics, finance, and customer service into one efficient model.

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Sapiens Tech is a Ukrainian consulting company that helps businesses transform and automate their processes through SAP and other IT solutions.

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36D Yevhena Konovaltsia St, Kyiv, 01133+380 (99) 036 48 04

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Sapiens Tech is a Ukrainian consulting company that helps businesses transform and automate their processes through SAP and other IT solutions.

Services

Contact us

36D Yevhena Konovaltsia St, Kyiv, 01133+380 (99) 036 48 04

Privacy Policy