What order-to-cash cycle controls in SAP ensure compliance?

To this end, the Sales and Distribution component of SAP ERP Central Component offers several business controls in the order-to-cash cycle.

A typical order-to-cash cycle in SAP starts when a user creates a customer inquiry in SAP ECC followed by a sales quote. Once a customer's order is received, the user converts the quote into a sales order. Goods are delivered to the customer with reference to the sales order followed by invoicing the customer for the delivered goods. Finally, the customer's payment is processed according to the agreed-upon payment terms.

How can you ensure that this process is as streamlined as possible? While the list below is not exhaustive, here are 10 tips to build better business controls in the order-to-cash cycle in SAP ECC Sales and Distribution (SD).

1. Define segregation of duties rules. Segregation of duties -- that is, important transactions are split so one person cannot commit fraud -- is a critical aspect of risk management. For example, the person creating a sales order shouldn't be allowed to make changes to a customer master record, such as making changes to a customer's payment terms.

2. Limit access to mass processing transactions. Mass processing transactions are enormously powerful in their ability to make changes to a large number of records. Limiting this ability to only a few relevant persons can ensure better business control. An even better approach is to temporarily grant authorization to such transactions and then remove them as soon as the necessary changes to the data are performed.
3. Restrict changes to the customer credit master record. Maintaining stricter controls on credit management for customers prevents unauthorized changes to a customer's payment terms.

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4. Restrict the ability to maintain pricing procedures. Just like credit management controls, maintaining controls on whether prices can change in a sales order and by how much prevents chances of fraud.

5. Make the entry of important fields mandatory. To help lower audit risk and streamline the order-to-cash cycle in SAP, configure customer master records so that users are required to enter important fields, such as payment terms and bank information.

6. Define and assign an incompleteness procedure. To ensure that no data is missed along the path of a sales order, it is critical to define and assign an incompleteness procedure to sales documents. This will help ensure that the entire order-to-cash cycle in SAP is followed and, in turn, provoke fewer auditor concerns.

7. Put an effective dunning process in place. Dunning is an automatic process of reminding customers about impending or overdue payments. Having an effective dunning process in place ensures a company is able to create a smoother cash flow.

8. Configure customer payment tolerances. Allowing some under- or overpayment tolerances to customers' payments ensures your company isn't spending too much time, effort and resources in reconciling orders. Being beyond those tolerances should trigger the necessary blocks to delivery.

9. Periodically check transaction records for compliance. SAP ECC offers a plethora of reports and analytics to help companies ensure audit compliance. One such report is to check that a customer isn't allocated the same invoice number twice. Use Transaction S_ALR_87012341 in SAP ECC to check for this error (see Figure 1).

10. Periodically check customers exceeding credit limits. It's a prudent approach to periodically check for customers that have exceeded their credit limits and ensure steps are put in place for payment recovery. Use Transaction SE38, and run the program RFDKLI40.

Figure 2 shows a list of customers whose credit limit goes far beyond 100%, with some exceeding over 300% (the last column denotes the exceeded customer credit limit in percentage).

While the above steps and others that ensure effective business controls in the order-to-cash cycle require effort, they are critical in enabling organizations to focus on meeting customer needs, while ensuring better audit compliance.