Running the Sales Process in SAP Business One

• Your company has set customer satisfaction as the top priority
• You review the basic steps in the sales process and decide to use a streamlined process for rush orders to ensure customer demands can be met as quickly as possible.

• The Sales-A/R process moves from selling the goods (and services) to delivering those goods to invoicing the customer for their purchases, to the last step in accounting of receiving the incoming payment.
• Each step in the sales process involves a document, such as a sales order, delivery, or A/R invoice. SAP Business One efficiently moves all relevant information from one document to the next in the document flow. According to the business needs, you can choose which documents to include as your process steps. The only mandatory document in sales is the A/R invoice.
• Sales documents carry much of the same information throughout the sales process. This topic helps you recognize what is the same in each document so that you can quickly focus on just the information you need.
• Note that you also have the option to use a sales quotation to start the sales process. The sales quotation is not covered in this e-learning.

The sales order is a commitment from a customer or lead to buy (at agreed-to quantities and price) a product or service from you.

The delivery indicates that the shipment of goods has occurred.

The A/R invoice is the only mandatory document in the sales process.

It is the request for payment and records revenue in the profit-and-loss statement.

• The incoming payment receives the payment from the customer and clears the customer account. Internal reconciliation takes place automatically.
• Incoming payments are done in the Banking module.
• As part of a streamlined sales process, it is possible to post a payment while creating the invoice. To do this, you choose the payment means icon when you create an invoice and enter the payment amount. This will create an incoming payment due amount that is applied to the invoice you just created.

Every document in the sales process must have a business partner assigned. The business partners used in the sales process are leads and customers. A lead can easily convert to a customer.

A sales order can have either a lead or a customer assigned. Once you move to a delivery, you must have a customer.

Customer master data describes people and organizations to whom your company sells products and services. Customer master data records are used as the foundation for documents related to processing and fulfilling orders for customers and for the wizard for dunning customers.

Besides the business partner, another key piece of data entered in the sales order is item data.

Items represent products to be sold: either goods or services.

Like customer master data, item information is stored in master data records.

Services you sell can also be set up as item master data records. If the services are defined as items, they can be entered into a sales order along with physical items. Alternatively, you can use the Item/Service type field to switch to a service type document where descriptions of services can be entered along with prices.

• When you enter an item into a sales document, a price is automatically found. How does this work?
• SAP Business One provides 10 default price lists. You then set up prices for each price list for your items. Of course, you do not have to use all ten price lists, but they are provided to you so that you can offer different prices to different groups of customers.
• You assign a price list to each customer via default payment terms. Of course, the price list can be changed in the customer master.
• When you enter the customer in a sales document, the assigned price list defaults to the sales document automatically.
• The system will then use that price list to price the items in the order.
• Of course, more complex pricing can be used such as special prices, discount groups, and pricing hierarchies. These are discussed in the e-learning topics for pricing.
• Prices can also be changed in the sales order by authorized users. For example, a salesperson might give a 5% discount to a particular item or to a whole sales order.

For our streamlined process, we will use just one document: the A/R invoice.

The A/R invoice is the only mandatory document in the sales process. The A/R invoice is designed to be an extremely efficient document for small businesses with just a few employees.

The A/R invoice can do the job of recording the customer's order, kicking off the delivery, posting the goods issue and recording what the customer owes.

Saving an A/R invoice always triggers two postings: a debit to the customer account to show what is owed and a credit for sales revenue.

When an inventory item is sold on an A/R invoice that has no preceding documents, two additional postings are made. These are the postings for issuing the item from inventory that are usually handled by a delivery document in a perpetual inventory system: a debit to the cost of goods sold account and a credit to the stock account.

Of course, this graphic covers only the basic accounting transactions. There may be additional postings for tax or additional revenues and expenses.

• The main documents of the sales process are the sales order, delivery and A/R invoice. The incoming payment at the end of the sales process is performed in the Banking module.
• Every sales document must have a business partner assigned.
• A sales document can sell goods or services. Goods are represented by item master records. If services are represented as items, they can be sold with physical items on sales documents, otherwise they are sold on service-type sales documents.
• SAP Business One calculates pricing automatically in the sales order. Prices can be changed in sales documents by authorized users.
• The only mandatory sales document is the A/R invoice. When an A/R invoice is used alone without any preceding documents, the A/R invoice can perform the functions of the sales order, delivery and the invoice.
• This is why the A/R invoice is often used in a streamlined sales process.

Your company has set customer satisfaction as the top priority and wants to use efficient processes in sales to ensure that customer demands can be met as quickly as possible.

We will review the sales process from order to cash with an eye on understanding the impact of each step to see how we might improve the process

The sales order is an important document-it tells everyone to get busy filling that order. As such, this document is important for planning production, creating purchase orders, and scheduling resources.

• You can change a sales order (changing quantities, updating prices or discounts, and so on) after you have posted it. This is possible as long as you have made the appropriate setting in Document Settings and the sales order is still open.
• A sales order can be based on one or more sales quotations.
• One unique feature of SAP Business One is that you can create purchase orders directly from sales orders, thereby streamlining your supply chain as well as material requirements planning processes.

In SAP Business One, a sales order affects the available stock level. This means that the stock available to sell is reduced by the quantity in the order. When you enter sales orders, no inventory transactions or value-based changes are posted to the general ledger, but the items are added to the committed quantity in the inventory module.

• Let us imagine that our customer orders 5 printers.
• We enter customer, items, and quantities in the sales order
• The system determines the price automatically, based on the customer's assigned price list.
• The sales person offers a discount to the customer, so a manual discount for 1% is entered in the sales order
• Based on the payment terms, the customer is also eligible for an early payment discount of 2%

A delivery records that goods have been shipped. This document is also sometimes referred to as a packing slip or delivery note.

You can create a delivery from a sales order or sales quotation. To do so, simply display the sales order or quotation and select Delivery from the Copy To button's drop-down list.

If you have multiple sales orders to be delivered to one customer, you can open a blank delivery, add the customer name, then use Copy from to select from a list of sales orders and quotations for that customer.

Adding a delivery reduces the actual inventory levels. When you post a delivery, the corresponding goods issue is also posted. The goods leave the warehouse, inventory quantities are reduced, and, if you are running perpetual inventory, the relevant inventory changes are posted to accounting.

If the delivery is based on a sales order, the committed quantity from that sales order will also be reduced.

• In our business example, our customer has ordered 5 printers.
• When it is time, we ship 5 printers to the customer.
• The quantity of 5 printers is removed from inventory.
• The inventory account is credited for item cost.
• The cost of goods sold account is debited.

If you are using perpetual inventory, the system creates a journal entry automatically.

The journal entry posts the value of the current item cost to the debit side of a cost account (such as cost of goods sold) and to the credit side of the stock account.

The stock account and the cost account are retrieved from the Stock Account field and the Cost Account field on the Inventory tab of the item master record.

The stock quantity is affected whether or not you are using perpetual inventory.

An A/R invoice is a request for payment. Posting an A/R invoice records the revenue in the profit and loss statement.

Once added, the A/R invoice automatically creates a journal entry posting to the corresponding customer and revenue accounts.

• In our business example, we have delivered 5 printers to our customer.
• Now we bill our customer for the printers.
• The total amount was reduced by a 1% discount that the salesperson entered manually.
• The due date is based on the customer's payment terms. These payment terms also include a 2% discount for early payment.
• When the A/R invoice is added, a journal entry is automatically created to record a credit to revenue and a debit to the customer account.

Here we see the journal entries made in a perpetual inventory system for inventory items.

We saw previously that the delivery creates a journal entry associated with the sale of goods and the reduction in inventory value.

The A/R invoice records the debt owed by the customer and the revenue made from the sale.

There may be additional postings for tax or additional revenues and expenses.

Once a journal entry is made, it cannot be changed, only reversed.

Journal Entry Preview enables you to simulate journal entries before they actually happen in the database.

This can be useful if you are creating an A/R Invoice with special circumstances, and you would like to check the journal entry before posting the invoice. It is also useful for training new employees or for testing settings during an implementation. This function is available for all documents that create journal entry postings.

You choose the Journal Entry Preview icon to instantly view what would happen when you are posting the document.

Simulation includes G/L-Accounts and the Cost Center distribution.

Incoming payments are the last step in the basic sales process, even though they are a function in the Banking module. Posting an incoming payment receives the payment from the customer. Customer payments can be processed for bank transfers, checks, credit cards and cash, and in some localizations, bill of exchange.

When the incoming payment is added, a journal entry is made crediting the customer account for the payment. Depending on the payment means, an appropriate G/L account (such as one of our bank accounts) is debited. If there is a early payment discount, a debit is applied to a discount account.

When you create an incoming payment to clear (fully or partially) a document or transaction, internal reconciliation takes place automatically, meaning that the customer's invoice and the payment are matched in the system.

Additionally, the Payment Wizard can be used to process incoming payments as well as process outgoing payments. Payments can also be received automatically from a bank transfer using bank transfer processing in many localizations.

• Let us consider the business example.
• Our customer pays the invoice on time for the 5 printers
• The total includes the 1% manual discount and the early payment discount of 2%. The early payment discount defaults in from the payment terms associated with the customer master record.
• A journal entry is created to record:
  • debits to our house bank account, or a clearing account depending on the selected payment terms, and to cash discount accounts
  • And a credit to the customer account

• Sales orders contain the basic information needed for placing the order, delivering the goods and invoicing the customer. A sales order has no effect on accounting.
• Sales orders can be changed after posting as long as appropriate settings are made and the order is still open.
• A delivery indicates that goods have been shipped and reduces inventory levels.
• If you are running perpetual inventory, posting a delivery debits current item cost and credits the inventory stock account.
• An A/R invoice is a request for payment. When an A/R invoice is posted, a journal entry posts a debit to the customer account and a credit to sales revenue and any tax accounts.
• You can preview journal entries before they are posted.
• Incoming payments are the last step in the basic sales process, even though they are a function in banking.