Lesson 2 of 5
The four end-to-end processes
7 min
Companies do not think in terms of software modules. They think in terms of work that starts with a trigger and ends with a result: a customer wants something and eventually pays for it; the plant needs material and eventually the supplier is paid. These chains of work are called end-to-end processes. Almost every course in this Academy belongs to one of four of them.
| Process | Starts with | Ends with | Main owners at Contoso |
|---|---|---|---|
| Order-to-cash (O2C) | A customer request or order | The customer’s payment is received and cleared | Sales, shipping, billing, accounts receivable |
| Procure-to-pay (P2P) | A need for material or a service | The supplier is paid | Requesters, purchasing, receiving, accounts payable |
| Plan-to-produce | A demand forecast or sales order | Finished goods are in stock and costs are settled | Planning, production, quality, cost accounting |
| Record-to-report (R2R) | Business transactions posted during the period | Closed books and financial statements | General ledger, controlling, financial reporting |
The four end-to-end processes that organize the Academy
Order-to-cash
Order-to-cash covers everything from a customer order to the cash arriving in the bank. In SAP, each step creates a document, and each document is created with reference to the one before it. That chain is called the document flow, and you can display it from any document in the chain.
- Sales orderCustomer, products, quantities, prices and requested date.
- Outbound deliveryShipping prepares what leaves the plant and when.
- Goods issueStock leaves the plant; inventory and cost of goods sold are posted.
- Billing documentThe invoice; revenue and the customer receivable are posted.
- Incoming paymentCash received and matched to the open invoice.
Procure-to-pay
Procure-to-pay is the mirror image. Contoso needs copper wire for alternator windings. A purchase requisition records the need (often created automatically by planning). Purchasing turns it into a purchase order to a supplier. When the wire arrives at the Detroit dock, receiving posts a goods receipt. When the supplier’s invoice arrives, accounts payable enters it and the system checks it against the order and the receipt. This check is called the three-way match. Finally, a payment run pays the supplier.
- Purchase requisitionAn internal request: what, how much, by when.
- Purchase orderThe legal order to the supplier at agreed prices.
- Goods receiptMaterial arrives; stock and a goods-received liability are posted.
- Supplier invoiceChecked against order and receipt (three-way match).
- PaymentThe payment run pays the supplier and clears the invoice.
Plan-to-produce
Plan-to-produce turns demand into finished goods. Planning looks at sales orders and forecasts, compares them with stock, and proposes what to make and what to buy. That run is called MRP (material requirements planning). Production orders are released to the shop floor, components are issued, operations are confirmed, and finished alternators are received into stock. Cost accounting then compares what the order actually cost with what it should have cost.
Record-to-report
Record-to-report is where everything lands. Every financial effect of the other three processes is posted to the general ledger. At period end, finance runs closing steps such as accruals, depreciation and currency revaluation, then produces the balance sheet, the income statement and management reports. Because the other processes post directly into the ledger, R2R depends on them being right.
The four processes are not separate islands. A sales order at Contoso can trigger planning, planning can trigger purchasing, purchasing and production both post costs, and all of it ends in the ledger. When a project team says a change is "only in sales," that is rarely the whole story.
What would you do?
A key user says: "We only changed how sales orders pick a price. Finance doesn’t need to be involved in testing." Which response best reflects how the processes connect?
- Order-to-cash: sales order, delivery, goods issue, billing, payment.
- Procure-to-pay: requisition, purchase order, goods receipt, supplier invoice, payment.
- Plan-to-produce turns demand into finished goods; record-to-report closes the books.
- Each step creates a document that references the previous one; that chain is the document flow.
Check your understanding · not graded
Lesson check
1. Which process ends with a supplier being paid?
2. What does the three-way match compare?
3. What is the document flow?
4. Which process produces the balance sheet and income statement?