1. What is the Order to Cash (O2C) process?
Order to Cash is the
end-to-end business process of receiving and processing customer sales orders,
delivering goods/services, invoicing the customer, and collecting payment. It
includes the following steps:
Customer order management
Credit management
Order Fulfilment Shipping
Billing/invoicing
Revenue recognition, Accounts Receivable Cash application
Collections
Dispute resolution
2. What are the key steps in the
O2C cycle?
1.
Customer Master Data creation
2.
Sales Order Creation
3.
Credit Check
4.
Order Fulfilment
5.
Shipping and Delivery
6.
Billing/Invoicing
7.
Accounts Receivable
8.
Payment Receipt (Cash Application)
9. Dedications/Dispute Management
10. Collections and
Follow-up
11. Reporting &
Reconciliation
3. What is credit management in O2C?
Credit management ensures
that customers have the ability to pay for goods/services before the order is
processed. It involves setting credit limits and performing credit checks to
minimize financial risk.
4. What
is the purpose of a sales order?
A sales order is a confirmation
document sent to the customer after receiving a purchase order. It outlines the
products/services, prices, quantities, and delivery details.
5. What documents are generated in
the O2C cycle?
Sales Order
Delivery Note
Goods Issue/Shipping
Document Sales Invoice
Payment Receipt Credit/Debit
Note
6. What
is cash application in O2C?
Cash application is the
process of applying incoming customer payments to the correct invoices. It
includes matching payment receipts with open invoices in the accounts
receivable ledger.
7. What
is DSO, and why is it important?
DSO (Days Sales
Outstanding) measures the average number of days it takes to collect payment after a sale. Formula: (Accounts Receivable / Total Credit Sales) × Number of Days
Lower DSO indicates faster cash collection and better cash flow.
8. What
is dispute management in O2C?
Dispute management involves investigating and resolving customer
complaints or discrepancies related to invoices, pricing, deliveries, etc. It
ensures mely resolu on and payment.
9. What are the common reasons for
invoice disputes?
Incorrect quan ty or
price, Missing PO number
Damaged or missing goods, Early/late delivery
Duplicate invoicing
10. How is O2C related to Accounts
Receivable?
Accounts Receivable is a key component of the O2C process, dealing with
recording, managing, and collecting outstanding invoices from customers.
11. How
do you handle unapplied or unidentified payments?
Unapplied payments are
temporarily posted to a suspense account. The AR team investigates the source
using remi ance advice, customer contacts, or historical records, and applies
the payment to the correct invoice once identified.
12. What KPIs do you track in O2C?
Days Sales Outstanding
(DSO) Invoice Accuracy Rate
Collection Effectiveness Index (CEI) Percentage of Current AR
Dispute Resolution Time, Cash Application Accuracy Ag,ing of Receivables
13. Explain the journal entry for a customer invoice and payment.
At the me of invoicing:
Dr. Accounts Receivable
Cr. Sales Revenue
Cr. Output Tax (if applicable)
At the me of payment receipt:
Dr. Bank
Cr. Accounts Receivable
14. What are the risks in the O2C
process, and how do you mitigate them?
Credit risk: Perform regular credit checks and set credit limits.
Payment delays: Follow up regularly, maintain strong customer relationships.
Invoice errors: Automate invoicing and implement validation checks.
Disputes: Use structured dispute management systems and root cause
analysis.
15. Which SAP T-Codes are used in
the O2C cycle?
VA01 – Create Sales Order
VF01 – Create Billing
Document F-28 – Incoming Payments
FD32 – Customer Credit
Management FBL5N – Customer Line-Item Display
XD01/XD02 – Customer Master Creation/Change
16. How would you reduce DSO in
your company?
Conduct regular aging analysis
Strengthen credit control policies
Prioritize collections on
large/overdue invoices. Offer early payment
discounts
Implement automated reminders and an escalation matrix
17. Ati
customer overpays. What would you do?
Investigate the overpayment reason. Offer the customer the
op on to:
Apply it against future
invoices. Refund the overpaid amount
Adjust against any outstanding debit balance
18. What if ati customer disputes
an invoice, citing goods not received?
Check delivery/shipping records
Coordinate with logistics/warehouse. Revalidate the invoice and delivery
Issue credit notes if
necessary or resend goods. Resolve the dispute and re-initiate the collection
19. What would you do if ati customer’s
payment is not matching any open invoice?
Place the payment in suspense
Contact the customer for remittance advice
Use pattern matching with past payments
Reconcile and apply to correct invoice once identified
20. What is the impact of automation
in O2C?
Reduces manual errors
Speeds up invoice
processing and cash application. Improves visibility into receivables
Enhances customer experience with faster dispute resolution
21.
Explain how the O2C process works in SAP.
In SAP, O2C is handled primarily in the SD (Sales and Distribution) and FI
(Financial Accounting) modules. Key steps include:
VA01 – Create Sales Order
VL01N – Create Outbound
Delivery VL02N – Post Goods Issue
VF01 – Create Billing
Document F-28 – Post Incoming Payment
FBL5N – Customer Line-Item Display
XD01/XD02 – Customer
Master Maintenance FD32 – Credit Limit Management
Integration happens between SD (order, delivery, billing) and FI (posting
revenue, AR, taxes).
22. What are the main tables
involved in the O2C process in SAP?
Table Description
VBAK Sales Document: Header
Data
VBAP Sales Document: Item Data
LIKP Delivery Header Data
LIPS Delivery Item Data
VBRK Billing Document Header
VBRP Billing Document Item
BSID/BSAD Open/Cleared Customer Line Items
KNVV/KNA1 Customer Master Data
23. How
does SAP handle credit management in O2C?
Credit checks are configured in OVAK and OVA8 transactions. The system
checks the customer’s credit exposure against their credit limit at sales order
creation, delivery, and billing. Credit exposure includes:
Open orders
Deliveries not billed
Open invoices, Overdue
items
SAP can block sales orders or deliveries if limits are exceeded.
24. Explain the integration of SD and FI
in O2C.
Integration points include:
Billing Document (VF01) → Generates an Accounting Document automatically.
Posting includes:
Incoming payments are posted in FI and clear open items in AR.
25. What is user exits or BADI used
in the O2C process?
User Exits:
o
USEREXIT_MOVE_FIELD_TO_VBAK – Custom logic
during order creation
o
USEREXIT_SAVE_DOCUMENT – Save enhancements in
sales documents
BADI Examples:
o
SD_SALES_DOCUMENT – Custom logic in sales
orders
o
BADI_SD_BILLING – Enhancements during billing
o
FI_CUSTOMER_CLEARING – Customizations during
clearing customer payments
26. How does automation affect O2C, and what tools are
commonly used?
RPA (UiPath, Automation Anywhere): For auto-posting payments, generating
invoices.
OCR (ABBYY, Kofax): To extract data from remittances/invoices.
Workflow tools (SAP Workflow, Oracle BPM): For dispute resolution or
approval processes.
EDI Integration: For auto order receipt and invoice exchange.
27. How are payment terms
configured in SAP, and how do they impact due dates?
Payment terms are
configured in OBB8 and assigned to the customer master (XD02). They define due date
rules, cash discount conditions.
Impact: The system calculates the baseline date + terms to determine the due
date.
28.
How do you handle disputes in O2C systems technically?
Disputes are managed
using Dispute Management (FSCM). Case creation is triggered from customer line
items (FBL5N).
Custom workflows can be used to assign and escalate disputes.
Integration with collection management and notes can be added.
29.
Explain how electronic payments are processed in O2C.
Payments received via
ACH, SEPA, and SWIFT are imported using a bank statement (MT940). SAP T-codes:
o
FF_5 – Post bank statement
o
FEBAN – Manual post-processing
o
F-28 – Manual incoming payment
Automatic matching of payments to open invoices based on reference
number, amount, or remittance.
30.
How would you extract AR aging reports from SAP?
Use T-Code FBL5N or S_ALR_87012178 (Customer Aging Report).
Aging buckets are configured in OBV2.
Reports can be customized using Report Painter, ABAP Query, or Fiori
apps.
Scenario-Based Technical Questions
31. A payment was received with no
reference. How would the system handle it?
It is posted as Unapplied Cash to a suspense GL.
AR team uses remittance advice or customer contact to apply it.
Tools like AI/ML-based matchers or RPA bots can assist in auto-matching.
32. How do you handle duplicate invoices
in a system like SAP or Oracle?
Duplicate checks can be
set up based on invoice number, date, and amount. In SAP: Configuration in OBA5
for duplicate invoice check.
Workflow can trigger alerts to AP/AR teams for manual review.
33. How is revenue recognition
handled in SAP S/4HANA?
Using SAP Revenue Accounting and Reporting (RAR):
Based on IFRS 15 / ASC 606 rules.
Revenue contracts and performance obligations are tracked.
Revenue is recognized
over me or at point-in-time as per the rule configuration.
34. What controls can be
implemented in O2C to prevent revenue leakage?
Block sales orders with
invalid POs. Set up tolerance limits for discounts.
Prevent billing without
delivery (in configuration). Regular reconciliation of open items.
Exception handling for zero-value invoices.
35. How do you automate dunning in
SAP?
Configure Dunning levels in FBMP.
Assign dunning procedures
to customers. Run Dunning using F150.
The system automatically sends reminders/emails based on overdue periods and
escalation rules.
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