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5. Sales Orders and Accounts Receivable

In This Chapter

Today the sales process is rarely as simple as selling widgets over the counter for cash to one customer at a time. Rather, it has evolved into a complex collection of interrelated processes that may involve some, if not all, of the following: production planning, inventory and logistics management, ordering, billing and dunning, and maintaining customer relationships as well as seeking out new sales opportunities. The sales process starts with nurturing sales opportunities (see Chapter 8 for details), creating sales quotations, entering sales orders, and invoicing customers. This chapter covers the important steps once you've closed the deal, including how to convert a quotation into a sales order, how to make sure that an order is delivered properly, and how to ensure that a timely invoice is generated to enhance positive cash flow.

Overview of Sales-A/R Process

The sales-A/R process moves from issuing a sales quotation for goods to selling the goods (and services) to delivering those goods to invoicing the customer for the goods.

Figure 5-1 illustrates this process, and we describe each step in the "Taking It Step by Step" section. Each of the steps involves a document, such as a sales order or A/R invoice. SAP® Business One efficiently moves all relevant information from one document to the next in the document flow. (Note that you can adapt the steps for your needs and business processes.)

Figure 5-1: Sales and A/R document flow in SAP Business One



Getting Started

Many of the sales and A/R documents carry much of the same information throughout the sales process. This section helps you recognize what is the same in each document so that you can quickly focus on just the information you need.


The term item is used in a very specific way in SAP Business One. It refers only to goods and materials bought, produced, sold, and warehoused.

The sales quotation is an offer or proposal containing a price commitment for specific goods or services that you would provide to a customer or a lead if accepted.

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 note indicates that the shipment of goods has occurred.

The return document reverses - either partially or fully - the postings of a delivery note. It is used when customers send goods back or to correct errors made in the base document(s) before the A/R invoice is posted.

The A/R invoice is the only document that must be created in the sales process. It is the request for payment and records the revenue in the profit-and-loss statement.

The A/R invoice plus payment is the A/R invoice document you use for cash sales to one-time customers.

The A/R credit memo reverses - either partially or fully - the postings of an A/R invoice. It is used when customers send back goods for which an A/R invoice has already been created or to correct errors made in the A/R invoice.

Common Document Structure

Each sales and A/R document in SAP Business One has similar header and footer fields and three tabs for Contents, Logistics, and Accounting, as shown in Figure 5-2.

Header fields appear in every window of a sales document. You enter customer data and delivery dates here, unless you are building one document from another (as described near the end of this chapter).

Footer fields appear in every window of a sales document and contain the calculated totals for the sale, including discounts (if any), freight costs, and tax.

Figure 5-2: Anatomy of a sales document in SAP Business One

The Contents tab includes all the specific information about the ordered items or services.

The Logistics tab describes where items are to be sent and by what shipping method. It also includes a billing address for sending the A/R invoice. Most of the data here is pulled from item and business partner master data you've already entered in SAP Business One. See Chapter 4 for information on master data entry and management.

The Accounting tab contains relevant general ledger (G/L) account information for the order pulled from financial accounting master data. See Chapter 3 for more information about G/L account determination and automatic journal entries that come from the sales and inventory modules.

Key Data

Ensuring that key data is correct from the outset helps avoid problems later on, especially since SAP Business One allows you to build one document from another, as described later in this chapter. Even if the information is filled in for you, it's a good idea to check and make sure it's correct.

Data entry alert. Only those with proper authorization may enter or update business partners, items, or other master data. See Chapter 10 for more information.

Key Data: Customer

Customer data provides information about those buying your goods or services. Before you create a sales document, make sure all relevant data has been entered correctly into the customer's business partner master record. Especially take a look at the bill-to and ship-to addresses to make sure they are correct.

To locate existing customer information, click on the button to the right of the Customer field in the document header or press the Tab key in the Customer field. The List of Business Partners window appears (see Figure 5-3).

Figure 5-3: Specifying a customer in a sales document

If you are authorized, you can enter new customer information while creating a sales document. To do so, click on the New button on the bottom of the List of Business Partners window to open the Business Partner Master Data window.

Key Data: Item

Item data identifies goods or services being sold. To view a list of items, press the Tab key from the Item No. field in the document's Contents tab. You either select from the list or click the New button to enter a new item.

Figure 5-4: Specifying an item in a sales document

Usability tip. What if the customer wants to order multiple items? You can select multiple items from the List of Items by holding down the Ctrl key and clicking on as many items as desired.

You can enter new or updated customer or item information directly into the relevant fields in the sales document. However, you should note that this information does not update the master data record and is relevant only to the specific sales document where you entered it. If you do change a customer's name or an item's description directly in the sales document, press Ctrl + Tab to proceed when you are finished. Note, however, that if you want to make a permanent change or create a new item or customer, we recommend that you change the relevant master data record or create a new one. That way, the data you update or the new item or customer is available from now on.

Using the form settings feature in SAP Business One, you can change the format of any row in the Contents tab of any sales document. You may want to insert subtotals for groups of items ordered. Or you may want to communicate special information about the manufacturing, handling, or shipping of specific items. As long as you have made the appropriate changes using the form settings feature (see Chapter 6, Figure 6-5), all you need to do is click on the drop-down list in the Type field and select T (for text) or ? (for subtotal).

Key data: ship-to and bill-to addresses. Because SAP Business One automates so much of the processes related to the sales-A/R process, it is essential that you select or enter the correct customer and item data when you initiate a sales order. For example, things as simple as a customer's ship-to and bill-to addresses, if entered inaccurately or incompletely, can have a huge impact on your company's bottom line when goods ordered show up where they are not supposed to or invoices are sent to the wrong office. See Chapter 4 for more information on entering and managing master data.

Key Calculations: Gross Profit and Weight and Volume

The SAP Business One toolbar provides icons for easy access to two useful calculations: gross profit and the weight and volume of all of the items in a sales document.

Calculating Gross Profit

You can immediately find out the impact of a sales document in terms of the bottom line using the gross profit calculation. Simply click on the gross profit icon on the SAP Business One toolbar to display a window like the one shown in Figure 5-5.

Figure 5-5: The gross profit calculation in action

Gross Profit is calculated by finding the extended sales prices (sales price multiplied by the quantity) minus the extended base price (base price multiplied by the quantity). The Profit % is calculated depending on settings on the AdministrationDocument SettingsGeneral tab, where you (and your implementation partner) specified whether gross profit percentage is the ratio of gross profit to sales price or gross profit to cost price. On the Document Settings window's General tab you can set the default for how the base price is calculated: the item cost (the default shown in Figure 5-5), a specific price list, the cost of the item the last time it was purchased, and so forth.

Calculating Volume and Weight

Determining the volume and weight of an order is critical to the logistics of sending and receiving orders. To calculate the volume and weight of all the items in a given sales document, click on the volume and weight icon on the SAP Business One toolbar. Volume and weight information is pulled from master data for each item and totaled automatically. Note, however, that if some items do not have this information in their master data records, the total will not be accurate.

Key Reminders: Adding an Activity to a Sales Document

You may want to record information about your work with customers. For example, you might want make notes about a phone call or a meeting with customers. You might also want to set a reminder so that you can follow up to make sure the customer received the merchandise and is satisfied. You can add an activity to any sales document. Display the sales document as the active window and select GotoNew Activity from the menu bar to display the Activity window. In the Activity window, you can specify activity types and make notes about the activity. For more information, see Chapter 8.



Taking It Step by Step

Now we look at the sales-A/R process in more detail, one step at a time, starting with the sales quotation.

Step 1: Sales Quotation

Before customers commit to ordering, they frequently want a sales quotation that they can review and circulate within their company. You can enter and work with sales quotations either in this module or through the Microsoft Outlook integration add-on for SAP Business One, as described in Chapter 8. Sales quotations can be created for leads or customers.

To create a sales quotation, select Main MenuSales - A/RSales Quotation. A blank sales quotation appears. You specify a customer (or lead) and the desired items as described in Figures 5-3 and 5-4. Once you are satisfied with the quotation details, click Add. SAP Business One adds the sales quotation. You can make changes later as needed.

As described in the previous section, you can calculate the gross profit and the weight and volume of an item. Simply click on the relevant icons in the SAP Business One toolbar.

How does SAP Business One manage price information? In SAP Business One, prices are defined for items in price lists. A price list is assigned to a business partner (customer or vendor). When you post a transaction for a customer, the price of an item is determined on the basis of the assigned price list. When you first set up SAP Business One, you enter the data for your business partners, including payment terms and price lists. Over time, this information is revised and modified. Since SAP Business One is a real-time business management application, when you check pricing for a customer, it is always up to date. This gives you flexibility to offer special pricing to your customers. See Chapter 4 for more information on entering and managing master data records.

Step 2: Sales Order

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. 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 (see Chapter 7 for details).

Creating and Adding a Sales Order

You can create a sales order either from a sales quotation or from scratch. Figure 5-6 shows how to create a sales order from a sales quotation using the Copy To button.

Figure 5-6: Copying a sales quotation to a sales order

The Copy To button provides an almost instantaneous way to create the next document in your process. See "Building One Document from Another" later in this chapter for more information.

You can create a new sales order by selecting Sales - A/RSales Order. When master data is set up properly, you enter information in just a couple of fields:

  • Customer field: See Figure 5-3
  • Items: Enter items as shown in Figure 5-4 and specify quantities

If you are not ready to add the sales order (by clicking on the Add button), you can save it as a draft (by choosing FileSave as Draft). See Chapter 10 for more information about document drafts.

How do I create a standing order? To create a standing order for items or services to be delivered periodically (for example, leases for office space and equipment or service contracts or recurring deliveries of supplies needed by your customer), create a sales order with as many line items as needed (for example, 12 items to cover monthly deliveries for a year). You can then close one line at a time as the items or services are delivered.

You can change a sales order (changing quantities, updating prices or discounts, and so on) after you've posted it, if you have done the following:

  • Selected the option to allow changes under AdministrationSystem InitializationDocument SettingsPer Document tab → Sales Orders
  • Not created documents such as a delivery note or A/R invoice from the sales order

If a sales process is stopped, and the sales order has not been copied to a higher level A/R document, such as a delivery note or an A/R invoice, it is possible to cancel it (as shown in Figure 5-7). However, when a sales order has been copied, either entirely or partially, to a higher-level A/R document, the sales order cannot be cancelled; it can only be closed.

Figure 5-7: Cancelling or closing a sales order

Document handling alert. Like all documents in SAP Business One, a sales order is not deleted when cancelled or closed. It can still be displayed and printed but it cannot be changed or copied to a higher-level sales document. In addition, a cancelled or closed document in SAP Business One is no longer displayed in the open items list.

Accounting and Inventory Impact of the Sales Order

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 value-based changes are posted to the G/L, but the items are added to the committed quantity in the inventory module.

When an order for items is cancelled or closed, the committed quantity in the inventory module is decreased. You can view the ordered quantities in various reports, such as the inventory status report. This information is important for optimizing sales processes and stock levels.

Step 3: Delivery

A delivery note indicates that goods have been shipped. A delivery note is sometimes referred to as a packing slip.

Creating and Posting a Delivery Note

To create a delivery note, select Sales - A/RDelivery. A blank delivery note appears; you select a customer and fill in the items being delivered. To post the delivery note, click Add.
Often you may want to create a delivery note 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. Alternatively, you can create a delivery note from multiple orders or quotations; see "Building One Document from Another" later in this chapter for more details.

How does SAP Business One facilitate the pick and pack process? Once you have created a new sales order with an approved status, you may use the pick and pack manager, accessed through the inventory module, to handle your picking activities. The process starts with the creation of a pick list, moves to the reporting of picked quantities, and terminates with packaging and delivery. The pick and pack manager allows you to release some or all items to a pick list, perform a partial pick for the items, or pick all items. You can also create a delivery note at any stage of the picking process. For more information on this feature, go to HelpContents tab → InventoryPick and PackPick and Pack Manager.

You can close a delivery note by choosing Data ? Close, provided that it has not yet been copied to an A/R invoice or to a return document. Inventory is increased only when you create a return document based on the delivery note. You cannot create an A/R invoice from a delivery note that has been closed nor can you create another sales document with reference to the delivery note. You can no longer make changes to the closed delivery note either.

Figure 5-8: Creating a delivery note

Optional Step: Return

For various reasons, customers sometimes return goods. In this case, you create a return document. If the returned goods have already been invoiced, you should create an A/R credit memo instead, as described later in this chapter.

When you enter a return document, you reverse - either partially or fully - the posting of a delivery note. Once a return document is posted, the inventory quantities are updated. Posting a return document also automatically updates the inventory value.

Accounting and Inventory Impact of Delivery

Creating a delivery note in SAP Business One reduces the actual inventory levels. When you post a delivery note, the corresponding goods issue is also posted. The goods leave the warehouse and the relevant inventory changes are posted. When the inventory is changed, values in the G/L also change.

Step 4: A/R Invoice

Once you deliver goods or provide services, you bill the customer using an A/R invoice. An A/R invoice is a request for payment. Posting an A/R invoice records the revenue in the profit and loss statement.

Creating and Posting an A/R Invoice

You can create an A/R invoice from single or multiple sales quotations, sales orders, or delivery notes (see "Building One Document from Another" later in this chapter). You can also create an invoice from scratch by selecting Sales - A/RA/R Invoice.

Once an A/R invoice has been posted, it cannot be changed or deleted because it is a legal accounting document that creates entries in the G/L.

Note that you cannot copy from a sales order to create an A/R invoice if the business partner is still classified as a lead. See the following text box for details about changing a lead to a customer.

How does a lead become a customer? You change a lead to a customer in the business partner master data. Go to the business partner master record and select Customer from the drop-down list to the right of the business partner code.

Figure 5-9: Creating an A/R invoice

Optional Step: A/R Invoice Plus Payment

You use this document for cash sales to one-time customers. However, before you can do so, you need to create a separate master record for one-time customers. This master record is usually defined during the configuration of SAP Business One when you determine the G/L account for incoming payments. If you haven't already specified a default one-time customer, you can do so by going to AdministrationSetupFinancialsG/L Account Determination. Choose the Sales tab. On the General subtab, press Tab in the Default Customer for A/R Invoice + Payment field to display a list of customers. Select a customer or enter a new customer for this purpose.

To enter a one-time sale, select Sales - A/RA/R Invoice + Payment. SAP Business One fills in the one-time customer's information for you; you can fill in details about this customer if desired. Enter the items, quantities, tax code, and any discounts, then click the payment means icon to display the Payment Means window. Enter a payment for the full amount of the invoice and click OK. (Partial payments cannot be accepted.) Click the Add button to complete the sale.

SAP Business One manages the A/R invoice plus payment in the same way as a standard A/R invoice. The corresponding journal entries in the SAP Business One accounting and inventory modules are processed automatically once the document is posted.

Optional Step: A/R Credit Memo

When a customer returns goods, you issue a return document, as described earlier. But if you have already posted the A/R invoice, you issue an A/R credit memo. When you create an A/R credit memo, you reverse - either partially or fully - the posting of an A/R invoice. Once the A/R credit memo is posted, inventory quantities are increased, the customer account is credited, and the revenue account is amended by the same amount. The sales tax is also corrected automatically.

There is a restriction about copying return documents to A/R credit memos based on how you created the return document. If you created the return document based on a delivery note, you cannot copy the return document to an A/R credit memo. However, you did not base the return document on a delivery note, you can copy the return document to an A/R credit memo.

In SAP Business One, an A/R credit memo can be created from existing A/R invoices and return documents. It is also possible to create A/R credit memos for services (noninventory items). The posting of a credit memo for services has no effect on inventory quantities.

Accounting and Inventory Impact of the A/R Invoice

Once posted, the A/R invoice posts journal entries to the corresponding customer and revenue accounts. If it is posted without reference to a delivery note, it also decreases inventory values and quantities.



Building One Document from Another

Sales documents build on each other. Often, a quotation becomes a sales order that forms the basis for a delivery note and finally an A/R invoice. Figure 5-6, earlier in this chapter, shows how to quickly copy a document to the next document in the sequence using the Copy To button. The original document is called a base document; the document you create from it is called a target document. Building one document from another saves time and effort.

Document type alert. When you copy one sales document to another, make sure that the base document and the target document are of the same type, whether items or services. Sales documents cannot mix items and services, and an item sales document cannot be copied to or from a services sales document.

SAP Business One makes it easy to follow the trail from document to document as well. If you display a sales order created from a sales quotation and click the base document icon , SAP Business One displays the sales quotation the document was based on. If you display the sales quotation and click the target document icon , SAP Business One displays the sales order.

The Copy From button allows you to select a base document or documents from which to create a new document. Clicking Copy From starts the draw document wizard, explained in Chapter 10.

Often the first step in building one document from another is locating the base document you want to use. For example, a salesperson may call from the field and say that she has closed a sale, asking you to enter the sales order. How do you find the relevant sales quotation? One tool for locating such documents quickly is the Open Items List. Figure 5-10 shows this report, which you create by selecting Sales - A/RSales ReportsOpen Items List. The report shows all open documents of the type you select in the drop-down list in the upper right. You can then select the relevant sales quotation, for example, and create a sales order with a single click on the Copy To button. This is just one of many ways that SAP Business One saves you time in your day-to-day work. When one document is built from another in this fashion, all the relevant information is copied from the base document to the new document, reducing both data entry time and errors.

Figure 5-10: The Open Items List displays various types of open documents



Processing Groups of Documents

Sometimes it's convenient to create many sales documents at once. Perhaps you want to create a batch of A/R invoices or delivery notes. In that case, you would use the document generation wizard. If you have a number of customers who are late with payments, you may want to use the dunning wizard to create late notices. This section describes these wizards.

The Document Generation Wizard

The document generation wizard allows you to perform mass processing of target sales documents. Many companies prefer to do an invoice run rather than generating individual invoices. This can also streamline invoicing for your customers. When you use this wizard, you can combine open sales orders in one invoice, making it convenient for customers to pay all they owe you from a single invoice instead of receiving multiple invoices from you.

Document generation wizard alert. Because creating sales documents creates automatic entries in the G/L, the document generation wizard must be used with care and preferably with help from your implementation partner. See Chapter 10 for details.

The Dunning Wizard

The dunning wizard automates the process of sending late notices to customers. In addition, the wizard keeps track of a customer's "payment behavior", which allows you to make decisions about payment terms for future orders. This information is also useful when reporting to credit agencies and other financial institutions about customers.

You start the wizard by selecting Sales - A/RDunning Wizard. The first screen explains what the wizard does. Click Next to reach step 1, where you specify whether to load a saved wizard, with its parameters, or start a new one. Click Next to move to step 2, where you can specify general parameters, such as the name of this dunning run and its date. Click Next to reach step 3, where you select business partners. Click Add to display the BP Properties window and click OK if you want to include all business partners (you can be more selective if desired). Click Next to reach step 4, which allows you to specify a posting date range to include. By default, all dates through today's date are included. Click Next to reach step 5, the Recommendation Report, shown in Figure 5-11.

Figure 5-11: The Recommendation Report in the Dunning Wizard

This screen lists overdue A/R invoices for which dunning letters will be created. You can collapse the list to include only business partners without invoice detail by clicking the Collapse All button. Click Next again to reach step 6, where you can save the parameter set and exit, save the recommendation report as a draft and exit, or print dunning letters and exit. For more information on the dunning wizard, go to HelpSales - A/RDunning Wizard.

Report reminder. The customer receivables aging report is the work horse of the sales-A/R module. This report shows all the money owed a company and how long it has been owed. This is a key report for managing the company's cash flow as well as evaluating the credit quality of customers. To generate this report, select Sales - A/RSales ReportsCustomer Receivables Aging.



Accounting and Inventory Impact

Summarized below are the most important accounting and inventory implications of the SAP Business One sales documents discussed in this chapter.

Sales document

Accounting impact

Inventory impact

Sales quotation

No postings

No postings

Sales order

No postings

Increases committed quantity

Delivery note

Debits cost-of-goods-sold account and credits inventory account

Decreases available inventory


Debits inventory returns account and credits cost-of-goods-sold account

Increases available inventory

A/R invoice

If the A/R invoice is based on a delivery note, debits business partner's A/R control account and credits sales revenue account
If the A/R invoice is not based on a delivery note, debits business partner's A/R control account and credits sales revenue account; also debits cost-of-goods-sold account and credits inventory account

Decreases available inventory if A/R invoice is created without reference to a delivery note

A/R invoice plus payment

Debits business partner's A/R control account and credits sales revenue account; debits cost-of-goods-sold account and credits inventory account; debits checks-received account and credits business partner's A/R control account

Decreases available inventory

A/R credit memo

Debits business partner's A/R control account and credits revenue account

Increases available inventory



Sales Checklist

Getting Started

Customer master data contains accurate shipping and billing addresses

Payment terms and dunning parameters are set

Item master data contains goods and/or services previously sold

Step 1: Sales quotation

Open sales quotation document

Select a customer or lead or enter a new one

Enter items, quantities, and prices

Step 2: Sales order

Copy a sales quotation or open a new sales order document

Select a customer or enter a new one

Enter items, quantities, and prices

Step 3: Delivery

Pick, pack, and send items to customer

Confirm delivery using delivery note

If customer returns some or all items, or if errors were made in base documents, use return document

Step 4: A/R invoice

Request payment from customer using A/R invoice

If conducting a cash sale with a one-time customer, use A/R invoice plus payment

If customer returns some or all items, or if errors were found in base documents after A/R invoice is posted, use A/R credit memo


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