1. Accounts receivable is amounts a company is owed by customers for goods or services purchased on credit. 2. The SAP FI Accounts Receivable component records and manages accounting data for all customers. It is integrated with sales management and directly updates general ledger accounts. 3. Configuring organizational units such as company code, sales organization, and plant is required to execute the basic accounts receivable cycle in SAP, which includes processes like customer master data, material master data, sales order, delivery, invoice, and payment.

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ACCOUNTS RECEIVABLE
Accounts receivable is a legally enforceable claim for payment held by a business for goods
supplied and/or services rendered that customers/clients have ordered but not paid for. These
are generally in the form of invoices raised by a business and delivered to the customer for
payment within an agreed time frame.
Accounts receivable are amounts a company has a right to collect because it has sold goods or
services on credit to a customer.

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ACCOUNTS RECEIVABLE PROCESS IN SAP
• SAP FI Accounts Receivable component records and manages accounting data of all
customers. It is also an integral part of sales management.
• All postings in Accounts Receivable are also recorded directly in the General Ledger. Different
G/L accounts are updated depending on the transaction involved (for example, receivables,
down payments, and bills of exchange). The system contains a range of tools that you can use
to monitor open items such as account analyses, alarm reports, due date lists, and a flexible
dunning program.
FOR BASIC AR CYCLE WE NEED TO CREATE 9 ORGANIZATIONAL UNIT’S IN ENTERPRISE
STRUCTURE IN THE SAP SYSTEM:
Sr No Organization Unit T. CODE
1 Company OX15
2 Company Code OX02
3 Sale Org OVX5
4 Distribution Channel OVXI
5 Division OVXB
6 Plant OX10
7 Storage Location OX09
8 Warehouse Number -
9 Shipping Point OVXD

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Based on the above configuration, below shown AR cycle will be executed:
END USER STEPS/ACTIVITY IN BASIC AR OR OTC CYCLE
STEP
NO.
STAGES T-CODE
Click on the below links to go to the
respective steps.
(Ctrl +Click to follow the link)
1 Customer Master Data VD01/FD01
2 Material Master Data MM01
3 Stock Posting MB1C
4 Condition Master Data (Pricing) VK11
5 Sales Order Creation VA01
6 Outbound Delivery Creation VL01N
7 Creation of Transfer Order (Picking / Packing) LT03
8 Post Goods Issue (PGI) VL02N
9 Stock Checking MMBE
10 Invoice Creation VF01
11 Customer Incoming Payment F-28
We will process this cycle on 1000 Enterprise Structure. Configuration for all the above stages
will be shown and discussed further.

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Go back to Main 1. Customer Master Data
Data that represents the customer information to conduct business relations and transactions
in SAP system. For example: Name, Address, Terms of Payment etc.
It also controls how business transactions are posted to a customer account and how the
posted data is processed.
Customer Master Data can be created at three levels:
1. Sales executive creates the Customer Master Data (General and Sales Area Data) - VD01
2. Accounts executive creates the Customer Master Data (Company Code Data) - FD01
3. Above all data can be maintained at one screen as well: - XD01 (Complete)
• Sales Area Data: Customer at first get in contact with the Sales Department, where the Sales
executives enquires various information from customers based on their requirements.
• Company Code Data: Here the Accounts executives initiates further information of the
customers related to financial transactions.
• General Data: information of the customer which is common to both Sales and Accounts
departments, E.g. Name, Address of the customer etc.

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1. Customer Master Data – Sales Area (VD01)
PATH: SAP EASY ACCESS -> SAP MENU -> LOGISTICS -> SALES AND DISTRIBUTION -> MASTER
DATA -> BUSINESS PARTNER -> CUSTOMER -> CREATE -> VD01 - SALES AND DISTRIBUTION
Initial Screen: Customer Create. Below showed numbered fields to be entered.

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1. Account Group: After clicking on the search button for Customer Account Group, Select
Sold-to party – 0001 (Standard account group for 1000 IDE) from the list of account groups.
2. Then, enter Sales Area which is the combination of: Sales Organization (1000) + Distribution
Channel (10) + Division (00):
Press Enter.

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Next Screen, General Data: Here we have to enter general information of the customer in the
Following Tabs:
• Address
• Control Data
1. Address: Enter the data as shown below:
Press Enter and go to Control Data tab.

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2. Control Data: Enter VAT Registration No. as shown below:
Press Enter. With these information, we are done with the General Data for customer.
Now, click on Sales Area Data in the top:

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Next Screen, Sales Area Data: Here we have to enter sales information of the customer in the
Following Tabs:
• Sales
• Shipping
• Billing Documents
1. Sales: Enter the data as shown in the below figure:
Press Enter, and click on Shipping Tab.

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2. Shipping: Enter the Following showed details:
Press Enter and come to next tab…. Billing Documents.
3. Billing Documents: Enter the following fields, as shown below:

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Press Enter and Save the document. We will receive the document number for created customer at the
bottom.
Now, Create the customer in Company Code Data:
2. Customer Master Data – Company Code Data (FD01)
PATH: SAP EASY ACCESS -> SAP MENU -> LOGISTICS -> SALES AND DISTRIBUTION -> MASTER
DATA -> BUSINESS PARTNER -> CUSTOMER -> CREATE -> VD01 - SALES AND DISTRIBUTION

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Initial Screen: Below shown numbered fields to be entered
1. Account Group: After clicking on the search button for Customer Account Group, Select
Sold-to party – 0001 (Standard account group for 1000 IDE) from the list of account groups.

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2. Customer: Enter Customer ID - 100570 created in VD01 (Sales Area Data):
3. Company Code: Enter Company Code – 1000.
Press Enter.

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Next Screen, Company Code Data: Here we have to enter general information of the customer in the
Following Tabs:
• Account Management
• Payment Transaction
1. Account Management: Enter the data as shown below:
Press Enter and click on next tab…Payment Transaction.

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2. Payment Transaction: Enter the field as shown below.
Enter and Save. Customer document will be created at company code level:
CUSTOMER ID: 100570.
Customer Master Data is maintained now.
Next: MATERIAL MASTER DATA

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Go back to Main 2. Material Master Data (MM01)
When we want to use a new material in SAP, we have to define its characteristics, in order to
control its behaviour in all of the transactions.
Transaction that is used for the creation of material master record, as is MM01. The execution
of the transaction brings us to the initial screen, which consists of few fields that contain the
basic information on our material.
PATH: SAP EASY ACCESS -> SAP MENU -> LOGISTICS -> MATERIALS MANAGEMENT -> MATERIAL
MASTER -> MATERIAL -> CREATE (GENERAL) -> MM01 - IMMEDIATELY

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Initial Screen: Create Material. Select the data as show below.
Press Enter or Click on Select Views:
In Select Views screen, select the following 7 tabs, under which we have to enter data:
1. Basic Data 1
2. Sales Org. Data 1
3. Sales Org. Data 2
4. Sales General/Plant Data
5. MRP 1
6. MRP 2
7. Accounting 1
Press Enter, to proceed to the next screen.

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In the next screen, enter the Organizational level, as shown:
Press Enter. New screen will open:
1. Basic Data 1: Enter the data as shown below:
Press Enter and go to next tab…Sales Org. Data 1.

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2. Sales Org. data 1: Enter the fields as shown below.
Enter and go to next tab…Sales Org. data 2.
3. Sales Org. data 2: Enter the fields as shown below.
Enter and go to next tab…. Sales: General/Plant Data.

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4. Sales: General/Plant Data: Enter the data as shown below.
Enter and go to next tab…. MRP 1.
5. MRP 1: Enter the data as shown in below screen.
Enter and go to next tab… MRP 2.

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6. MRP 2: Enter the data as shown below.
Enter and go to next tab… Accounting 1.
7. Accounting 1: Enter the data as shown below.

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Press Enter, and you will get the below message:
Click on “Yes” to save the material data. We will get the Material Document number.
Material ID: 4565
Material Master Data is Maintained now.
Next: STOCK POSTING STAGE

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Go back to Main 3. STOCK POSTING (MB1C)
In SAP, to maintain a stock for a particular material, we use transaction MB1C. It is used to post
the stock (material) from one location to the another. In SAP we can maintain different stock
for a particular material in a different storage location.
So, once the Finished Goods are maintained in the Material Master Data (MM01), it will be
posted to the Storage Location (0001). In this step, we will see to post the Stock from Plant to
Storage Location.
PATH: SAP EASY ACCESS -> SAP MENU -> LOGISTICS -> MATERIALS MANAGEMENT ->
INVENTORY MANAGEMENT -> GOODS MOVEMENT -> GOODS RECEIPT -> MB1C – OTHER

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Initial screen: Enter Other Goods Receipts. Enter the data as shown below:
Note: Movement Type: 561 above, represents the Goods Movement from Plant to Storage Location.
Press Enter.
In the next screen, enter the following details, as shown:
Enter and Save. Stock posted, we will get the Document number of stock posting:
Output:

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Observation: Stock Posting also posts an Accounting Entry in the back end, which is controlled
by an FI Document Type (WA).
To verify the Accounting entry and Document Type, go to transaction MB03.
PATH: SAP EASY ACCESS -> SAP MENU -> LOGISTICS -> MATERIALS MANAGEMENT ->
INVENTORY MANAGEMENT -> MATERIAL DOCUMENT -> MB03 – DISPLAY.
Next Screen, enter the shown details:
Press Enter.

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Display Material Document Screen will appear:
Click on Accounting Details Button in top:
Resulting Screen:
Accounting Entries: Two GL Accounts appear.
1. Inventory – Raw Material (Finished Goods)
2. Initial Stock Inventory

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Below is the Document Header screen, representing the FI Document Type: WA (Goods Issue)
Summary - From the above observation in Stock Posting, we got the following result:
▪ Accounting Document Number.
▪ Accounting Entries after the stock posting.
▪ General Ledger Accounts.
▪ FI Document Type.
This observation shows the role of FI in Accounts Receivable cycle, FI-MM integration and other
FI configuration requirements before going to perform Order To Cash cycle.
Next: CONDITION MASTER DATA

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Go back to Main 4. CONDITION MASTER DATA (VK11)
A condition record is stored in the system for each pricing element you use, for example price,
discount, and surcharge. The conditions are the master data used for pricing. All decisions on
the pricing technique (condition technique) are recorded in Customizing.
▪ We are going to define the selling price (Condition Type: PR00) for the material which
we have maintained in MM01 and posted in MB1C.
▪ Define discount percentage (Condition Type: K007).
▪ Define Freight charges (Condition Type: KF00)
PATH: SAP EASY ACCESS -> SAP MENU -> LOGISTICS -> SALES AND DISTRIBUTION -> MASTER
DATA -> CONDITIONS -> SELECT USING CONDITION TYPE -> VK11 – CREATE.

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Initial Screen: Create Condition Records. Enter Condition Type:
Press Enter.
In the next screen, enter the details as shown below:
Press Enter and Save.
A notification message will appear at the bottom:
Condition Record saved for Pricing.

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Next Condition Type: Discount (K007)
Exit screen, and open VK11 screen again using the command field or via path shown above.
Enter Condition Type as shown below:
Press Enter.
In the next screen, enter the details as shown below:
Press Enter and Save.
A notification message will appear at the bottom:
Condition Record saved for Discount.

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Next Condition Type: Freight Charges (KF00)
Exit screen, and open VK11 screen again using the command field or via path.
Enter Condition Type as shown below:
Press Enter.
In the next screen, enter the details as shown below:
Press Enter and Save.
A notification message will appear at the bottom:
Condition Record saved for Freight.
Next: SALES ORDER

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Go back to Main 5. SALES ORDER (VA01)
A sales order is an electronic document that captures and records the customer´s request for
goods or services. The sales order contains all pertinent information to process the customer´s
request throughout the whole process cycle.
PATH: SAP EASY ACCESS -> SAP MENU -> LOGISTICS -> SALES AND DISTRIBUTION -> SALES ->
ORDER -> VA01 - CREATE.

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Initial Screen: Create Sales Order. Enter the details as shown below:
Press Enter.
Next screen, Create Sales Order: Overview. Enter the detail as shown below:
Press Enter and Save. Sales Order Document number will be generated:

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Observation: In Sales Order we will observe two things:
1. Total price of the material processed in Sales Order. As according to the defined Condition
types in VK11. All the conditions that we have applied will be included in the total Price.
2. Goods delivery date to the customer.
Double click on the Material ID entered in VA01 - order overview screen, to see the observations:

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Next Screen:

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1. Click on Condition Tab, to check the Conditions included in sales price of the material:
Verify, if the Conditions set for pricing, discount and others are correctly configured or not.
2. Click on Schedule Lines tab, to see the delivery date:
Sales Order is created now.
Next: Outbound Delivery Creation.

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Go back to Main 6. OUTBOUND DELIVERY (VL01N)
With the availability of material or transport scheduling date, outbound delivery is required for
due shipping lines. It involves shipping activities like picking of goods, transportation
scheduling, etc. An outbound delivery is done with the shipping points and is determined at the
time of placing the order.
PATH: SAP EASY ACCESS -> SAP MENU -> LOGISTICS -> SALES AND DISTRIBUTION -> SHIPPING
AND TRANSPORTATION -> OUTBOUND DELIVERY -> CREATE -> SINGLE DOCUMENT ->
VL01N – WITH REFERENCE TO SALES ORDER.

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Initial Screen: Create Outbound Delivery with Order Reference. Enter the following details:
Press Enter.
Press Enter and Save. We will get the Outbound Delivery number.
Next: Transfer Order Creation

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Go back to Main 7. Transfer Order (LT03)
Picking of goods is done in SAP via a transfer order, which is used for picking list and to
withdraw the goods from the stock.
PATH: SAP EASY ACCESS -> SAP MENU -> LOGISTICS -> SALES AND DISTRIBUTION -> SHIPPING
AND TRANSPORTATION -> PICKING -> CREATE TRANSFER ORDER -> LT03 – SINGLE DOCUMENT.

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Initial Screen: Create Transfer Order for Delivery Note, Enter the details:
Press Enter.

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Next Screen, Create TO for Delivery:
Once Active, Save the document.
Output:
Next: Post Goods Issue.

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Go back to Main 8. POST GOODS ISSUE (VL02N)
Goods that are going to be shipped to the customer now, has to be posted in the SAP system as
well. This will indicate that finally the order has been finalized and posted.
PATH: SAP EASY ACCESS -> SAP MENU -> LOGISTICS -> SALES AND DISTRIBUTION -> SHIPPING
AND TRANSPORTATION -> OUTBOUND DELIVERY -> CHANGE -> VL02N – SINGLE DOCUMENT.

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Initial Screen: Change Outbound Delivery. Enter in the following field:
Press Enter.
Enter and Save.
Output:

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Observation: Posting of goods creates the following documents:
Go to VL02N screen, and follow the instructions:
1. MM Document observation:
Next screen:

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MM Document Number: 4900011942.
2. FI Document Observation:

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Next screen:
Next screen:
Accounting Entries: Two GL Accounts appear.
1. Inventory – Raw Material (Finished Goods)
2. Cost of goods sold

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Document Type: WA (Goods issue/delivery)
Summary - From the above observation in Post Goods issue, we got the following result:
▪ MM Document Number: 4900011942
▪ Accounting Document Number: 4900000490
▪ Accounting Entries after the stock posting.
▪ FI Document Type: WA – Goods issue/delivery
Exit.
Next: Stock Checking.

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Go back to Main 9. STOCK CHECKING (MMBE)
All the movements in stock can be checked in this Report, to verify that the transactions or
posting of goods in the stock was done correctly or not. This is controlled by the Store keeper
whose responsibility is to maintain the inventory at storage location.
PATH: SAP EASY ACCESS -> SAP MENU -> LOGISTICS -> MATERIAL MANAGEMENT -> PHYSICAL
INVENTORY -> ENVIRONMENT -> MMBE – STOCK OVERVIEW.

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Initial Screen: Stock Overview. Enter the details as shown:
Execute the report by clicking on or press F8 key.
Output Screen:
Stock that we have maintained in MM01 and posted to Storage location from Plant was: 100
Goods Sold and posted: 80, so 100-80 = 20 available in stock(balance).
Next: CUSTOMER INVOICE.

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Go back to Main 10. CUSTOMER INVOICE (VF01)
As we have issued the goods to the customer, now we will prepare and send the invoice to the
customer. This document has all the information of the goods, quantity, Customer details,
delivery number etc. and it is prepared by the sales team.
PATH: SAP EASY ACCESS -> SAP MENU -> LOGISTICS -> SALES AND DISTRIBUTION -> BILLING ->
BILLING DOCUMENT -> VF01 - CREATE.

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Initial Screen: Create Billing Document. Enter the field as shown below:
Press Enter.
In the next screen, verify the details and Save the Document:
Save. Invoice is created now.
Output:

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Observation: Invoice creation results in the following output with the Accounts department:
1. Generates the Accounting document number.
2. Post the Accounting entries.
3. Generates the FI document.
Go to VF02 screen and follow the instructions as shown in the below figure:
Next screen:

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Press Enter. Next screen:
Next:

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Summary - From the above observation in Invoice, we got the following result:
▪ Accounting Document Number: 1400000142
▪ Accounting Entries after the Invoice.
▪ FI Document Type: RV – Billing Doc. Transfer
Exit.
Next: Customer Incoming Payment.

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Go back to Main 11. CUSTOMER INCOMING PAYMENT (F-28)
Customer payment processing in the system, is done in this step. And is done by the
Accountant based on the invoice sent to customer.
PATH: SAP EASY ACCESS -> SAP MENU -> ACCOUNTING -> FINANCIAL ACCOUNTING ->
ACCOUNTS RECEIVABLE -> DOCUMENT ENTRY -> F-28 – INCOMING PAYMENTS.

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Initial Screen: Post Incoming Payments. Enter the details as shown:

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Press Enter. Verify the complete document as of invoice and Save.
Save. Customer payment processed.
Output:

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Observation: Customer incoming payment transaction, creates the following documents:
1. Accounting Document Number.
2. Accounting Entries.
3. FI Document Type.
Go to FB03 screen, to check the above things.
Next Screen: Display Document. Enter the details as shown below:

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Press Enter.
Next Screen:
Summary - From the above observation in Customer payment, we got the following result:
▪ Accounting Document Number: 1400000143
▪ Accounting Entries after the Invoice.
▪ FI Document Type: DZ – Customer payment.
Exit.
Accounts Receivable End User Cycle is Done here.