2.1 The Order-to-Cash Process: Sales Order, Shipping, Billing, and Finance Integration

The Order-to-Cash Process: Sales Order, Shipping, Billing, and Finance Integration

Every configuration setting in this guide serves one end-to-end process. The S46000 course introduces it with three people: Sally from sales creates the sales order, Mark from shipping creates the outbound delivery and posts goods issue, and Felix from billing creates the invoice. Accounting then posts the customer's payment. Each step creates a document that refers to the previous one, which is why SAP calls the chain the document flow.

Presales          Sales order        Shipping                 Billing              Finance
Inquiry   ---->   Sales order  --->  Outbound delivery  --->  Invoice       --->  Incoming payment
Quotation         (sourcing)         Picking, packing, GI     Posting to FI        Clearing

Two Ways to Set Up the Process

The official course names two basic process variants for a standard sales order:

• Delivery-related process: a physical, usually inventory-managed product (the course uses a bike) goes through shipping. It is billed after shipping is complete and goods issue has been posted.
• Order-related process: a service product, such as consulting or a repair, does not go through shipping. The billing process is triggered directly from the sales order.

Both can be combined: a mixed order contains materials and services, and each product is scheduled for its own follow-on processing. Technically, the item category of each item decides which variant applies (section 4.1).

Creating the Sales Order

When creating a sales document, such as an order or a quotation, you first assign it to a sales area (sales organization, distribution channel, division). Every sales document must contain a customer number and at least one item with a material number. As a sales representative, you enter only the sold-to party, the material, and the order quantity; the system does the rest:

• Entering the sold-to party fills the header data, such as terms of payment and Incoterms.
• Entering material and quantity fills the item data, such as pricing.
• The schedule line data, such as delivery dates and quantities, follows automatically.
• The system checks availability for the requested delivery date and, if necessary, transfers requirements to materials planning.
• The system completes the billing information.

All of this works only if the system is set up properly and the master data exists.

Document Structure

A sales document has three levels:

Some header data, such as the ship-to party, can also be maintained at item level; the item entry then drives the follow-on processes.

Sourcing the Ordered Material

Before the material can be delivered, it must be sourced. The process is organized in Materials Management, and the course names three ways:

• Directly from stock, if stock exists.
• External procurement from a vendor, through a purchase requisition or purchase order.
• In-house production, through a planned order or production order.

Shipping: Outbound Delivery and Goods Issue

The outbound delivery is the first step of shipping and the basis for all shipping activities. It controls, supports, and monitors picking (optional), packing (optional), transportation planning with freight orders in SAP S/4HANA Transportation Management (optional), and posting goods issue. It is created with reference to at least one sales order, so material and quantity are copied.

A delivery has two levels, header (ship-to party, deadlines) and item (material, quantities, weights, stock data). Unlike the sales order, it has no schedule lines: each schedule line in the sales document can become an item in the delivery.

The goods issue document is created from the delivery and cannot be changed manually; changes must be made in the delivery. Posting goods issue triggers these updates automatically:

• Inventory management and requirements: stock quantity reduced, delivery requirement in planning removed.
• Material ledger / balance sheet: the inventory value change is posted, based on the material's cost.
• Accounting and controlling documents are created.
• Billing due list: the delivery becomes due for billing.
• Document flow: the status of all related documents is updated.

In the course exercise, the stock of the material drops from 1,000 to 995 pieces after goods issue for 5 pieces, which you can check in the Stock - Single Material app.

Billing and the Integration with Finance

Billing can be done manually, automatically, or in a background job. It supports creating invoices for goods and services, cancelling posted billing documents, and transferring billing data to accounting automatically. For physical products, the billing document refers to one or more outbound deliveries; for services, to sales orders. The system can combine several documents in one billing document if relevant characteristics are the same, for example the payer, the billing date, and the destination country. The main billing document type is the invoice (F1 or F2).

When the billing document is saved, the system creates:

• Postings on general ledger accounts (receivable, revenue, output tax).
• Controlling documents, such as for profitability analysis (CO-PA).
• An update of sales statistics in SAP S/4HANA embedded analytics or SAP BW/4HANA.
• An update of the customer's credit data, if credit management is used.
• A status update of all related sales, delivery, and billing documents.

Posting the incoming payment is done in Financial Accounting: it posts payments against invoices and reconciles differences, with a debit to the cash (bank) account and a credit to the customer's receivables account. Strictly speaking, this is not part of the core sales process, but unpaid invoices can affect it if the credit line is checked during order entry.

Linking the Documents: Document Flow and Process Flow

Each business step is represented by a specifically designed document type: sales document types (inquiry, quotation, standard order), delivery types (outbound delivery, returns delivery), and billing types (invoice, credit memo, debit memo). Each document has a unique number and an overall status derived from the status values of its processing steps. SAP S/4HANA displays the chain of documents as a process flow in SAP Fiori apps such as Manage Sales Orders, and as the document flow in classic transactions such as VA02 or VA03. From either view, you can check the history and the current status of every document in the chain.