Order to Cash Lifecycle

Wasssuup folks,

I recently made a transition from being a student to an IT professional and my first stop here is in the world of Oracle ERP (aka Oracle Apps). I come from a Business Analysis background and my immediate role is going to be that of an Oracle Apps Functional Consultant, specializing in the Order to Cash domain.

In my quest to conquer the world of Oracle Apps (predominantly the Order to Cash domain), I have been reading up quite a bit on the subject. Though there are several articles related to the topic, due to the vast and complex nature of the subject, the sources are many and non-exhaustive. I intend to create a series of posts which walks the reader through the entire Order to Cash lifecycle, trying to be as comprehensive and detailed as possible. Due to the nature of my role, the posts will be non-technical (though I will try to include the technical details where necessary).



ORDER TO CASH LIFECYCLE

All the steps within the Order to Cash lifecycle can be broadly classified under the following 3 categories:

1. ORDERING (Order Management + Shipping)
2. ACCOUNTING (Invoicing)
3. COLLECTING (Receipt of Cash)

The steps within each of these categories are listed below, in their order of sequence:

1. ORDERING
a. Order Management
- Enter Order
- Price Order
- Book Order
- Credit Check
- Schedule

b. Shipping Execution
- Pick Release
- Pick Confirm
- Ship Confirm

2. ACCOUNTING
- AutoInvoice
- Payment Collection Efforts
- Receipt of Payments

3. COLLECTING
- Reconcile with Bank Statements
- Transf Account Information to General Ledger


Now that we are clear with the categorization, lets walk through the entire lifecycle.

Note: The following are just the primary steps in the lifecycle. There are several other steps that can/need to be executed in parallel or separately e.g. setting up customers, items, price lists etc. etc.

Step 1. Create a sales order (SO)*. There are three ways to create a SO - create a new SO by entering the requisite details, copy an exisiting SO or import an SO from other sources such as EDI, CRM and other interfaces.
* The SO basically contains details regarding the customer and some billing information at the 'header level' and specific details regarding the various items the customer wants at a 'line level'

Step 2. Price the SO. Each item in the SO needs to have a sales price, which comes from the associated price lists*.
* The price list is nothing but a list of the various items that can be purchased, with their associated sales price.

Step 3. Book Order. Once the SO has been created and the pricing information have been included, the order is confirmed by booking it in the system.

Step 4. Perform Credit Check. Immediately after booking the order, several checks can be performed on the order before it is pushed further into the process. One such check is the credit check, wherein the customer's ability to pay for the order placed is evaluated and based on the evaluation the order is either placed on 'hold' or released further in the workflow. Other similar checks could be the export compliance check wherein it is verified if the items in the order are allowed to be shipped to the shipping country as per that country's export compliance laws.

Step 5. Schedule the shipment for the items on the SO. In order to schedule the shipment, the availability of the items in the SO needs to be confirmed by checking 'Available to Promise(ATP)*' and then based on the availability, place the demand and provide shipment dates.
*Aavailable to Promise (ATP) is a business function that checks the inventory of items and reports their availability to fulfill the order

Step 6. Run Pick Release. This step is basically going to create a move order for the folks in the shipping department, indicating what items (along with their quantity) need to be picked from where in the iventory.

Step 7. Pick Confirm. Once the move order is received, the shipping folks will 'transact the move order' by moving the items from their indicted source location (sub-inventory) to the staging area (from where they will be loaded into the transportation mode) thereby confirming the pick.

Step 8. Ship Confirm. After the items are loaded onto the transportation mode from the staging area, the items are said to be ship confirmed. On running the ship confirm, the inventory is reduced by the quantity of items shipped and the sales order is updated accordingly.

Step 9. Run AutoInvoice. Once the order has been shipped an auto-invoice is generated to the Accounts Receivable (AR) department providing them with information regarding the shipment.

Step 10. Generate Invoice for customer (and Collect Payments). The AR personnel collate the invoices for a customer, print them and send it across to the customer who are now expected to pay for the ordered items.

Step 11. Generate Receipt on Payment. As soon as the customer pays, a receipt of payement is generated.

Step 12. Reconcile with Bank Statement and Update General Ledger (GL). On receiving payment in the bank account from the customer, the bank statements are reconciled to indicate the payment received and the necessary updates are sent to the General Ledger.

Thus completing the Order to Cash lifecycle.


I hope this post was useful.......please feel free to post your comments / suggestions. I will be back with my next post as soon as I learn something new. :-)

Disclaimer - My posts are purely based on my understanding of the subject area based on whatever literature I have read thus far. In case you find something to be incorrect, please let me know and I will be more than happy to make the correction (and learn from it).

Best,
S