Describe the order-to-cash process


The Sales and marketing module in Dynamics 365 Supply Chain Management manages the order-to-cash process. This process involves converting prospect to customer, maintaining sales orders, and confirming product delivery. The process ends after processing the sales invoice. The following diagram describes the order-to-cash process.

Diagram depicts the order-to-cash process. Sales quotation, sales order, packing slip, customer invoice, and return order are some of the major transactions of this process.

The major transactions in this process are as follows:

  1. Sales quotation

  2. Sales order

  3. Packing slip

  4. Sales invoice

  5. Return order

Sales quotation

A sales quotation is a formal business document that allows a potential customer to view the cost involved in purchasing a specific service or product. It initiates a business transaction cycle providing an itemized list of products and services along with the price per item/service, terms of sale, and acceptable payment methods.

A quotation can be prepared for an existing customer or for a prospective customer. If the quotation is confirmed, the prospect can be converted to a customer.

Sales order

A sales order is a commercial document generated by an organization. The sales order specifies the details of the products and services ordered by a customer and confirms the delivery within the given terms and conditions. A sales order can be created directly from a sales quotation when it's confirmed. You can also create a new sales order from the sales order page.

A sales order contains two main sections: Sales header and Sales lines.

A sales header holds the sales order number, date, customer information, and other details applicable to the entire sales order. Each sales order can have one or more sales lines. Sales lines consist of item, unit of measurement, sold quantity, price, and other information related to each line. There's information like discount, tax, changes, and delivery address, which is available in both header and line.

Sales packing slip

After the sales order is confirmed, the delivery process gets triggered. First, the goods to deliver should be picked in the warehouse through a process called picking list. The items are blocked in the inventory following the picking list process and prepared for the shipment. The shipment process may contain a transportation delivery document providing information such as the shipping contractor, owner of the goods, and shipment loader. After the order is shipped, the packing slip is posted, which changes the sales order status to Delivered.

Sales invoice

When a sales order is delivered, the sales order lines can be processed for invoicing. Invoicing a sales order increases the accounts receivable balance by posting the transaction to the appropriate ledger book. In addition to the product price, sales order invoice also considers tax, charges, commissions, and other fees involved in the sales order process. When posted, the sales order status is changed to Invoiced.

Return order

Customers can return items for various reasons. For example, an item might be defective, or it might not meet the customer's expectations. The return process starts when a customer issues a request to return an item. After the customer's request is received, a return order is created.

There are two types of return orders, as follows:

Physical return: This return order authorizes the physical return of the item, impacting the inventory on-hand.

Credit only: In the credit only return order, only customer credit is authorized, without any physical return of the product.

When an RMA is registered, it's possible to create another associated sales order called replacement order. The replacement order has the same functionality that is associated with a sales order.

In the following video, you learn how to create a sales order and incorporate tax and charges on the sales order.

Create a sales order

After the sales order creation, the subsequent processes are inventory picking, registration, and packing. These processes are discussed in the video about inventory transactions in this learning path.