Order-to-Cash (OTC) Process – Detailed Explanation with Real-Time Example
OTC Process Steps:
Order Creation (Sales Order Entry)
A customer submits a purchase order (PO) or requests a quote.
The sales representative creates a Sales Order (SO) in SAP.
Customer credit checks are performed.
Order Processing (Sales Order Confirmation & Approval)
The system verifies the order details (pricing, quantity, discounts, taxes).
Sales Order is confirmed and approved for further processing.
Inventory Check & Fulfillment (Material Availability & Delivery Processing)
The system checks stock availability or initiates procurement (if out of stock).
A delivery document is created for the warehouse team to process.
Shipping & Delivery (Goods Issue & Tracking)
Goods are picked, packed, and shipped (for physical products).
For software licenses, digital keys or login credentials are generated and shared.
The system updates delivery status and tracking details are sent to the customer.
Invoicing (Billing Document Generation)
A billing document (invoice) is generated in SAP and sent to the customer.
Tax calculations and compliance checks are done automatically.
Payment Collection (Accounts Receivable Management)
The customer makes the payment via bank transfer, credit card, or online payment gateway.
The payment is recorded in the system, and accounts receivable is updated.
Accounting & Reporting (Revenue Recognition & Financial Reporting)
The finance team reconciles payments and records revenue in SAP.
Reports are generated for revenue forecasting and audits.
Real-Time Example: Venkatesh Golla Software Solutions – SAP License Sales
Scenario: Selling 50 SAP BODS Licenses to AB Corp
Order Creation
AB Corp requests 50 SAP BODS licenses.
The sales team enters the order in SAP with price, quantity, and terms.
Customer credit check is performed.
Order Processing
The order is reviewed and approved.
System validates pricing and discounts.
Inventory Check & Fulfillment
SAP system verifies available license stock.
If needed, new licenses are procured from SAP.
Shipping & Delivery
The system generates license keys and activation instructions.
The digital licenses are sent via email with tracking confirmation.
Invoicing
An invoice is generated in SAP.
The invoice is emailed to AB Corp’s finance department.
Payment Collection
AB Corp makes an NEFT transfer of ₹50,00,000 (example).
The finance team records the transaction.
Accounting & Reporting
Revenue is recorded, and financial reports are updated.
A report is generated for management to track sales performance.
Why This Process Matters?
✅ Ensures smooth sales operations.
✅ Helps track payments and revenue.
✅ Reduces errors with automated workflows.
✅ Enhances customer experience with seamless order processing.
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