Written by Nishiyama — Paddy & Water Inc. / Supply Chain

From Inquiry to Billing: Transaction Operations and Configuration by Sales Order Type

A Detailed Guide to SAP SD

June 2026

Introduction: The Design of a Company’s “Selling Power” through SD

SAP SD (Sales and Distribution) is the module that manages the entire process of commercial transactions with customers on the system — inquiry, quotation, sales order, delivery, billing, and payment collection. SD is not merely an “order management system”; it functions as the “control tower of the sales cycle,” spanning pricing, credit management, inventory allocation, logistics control, revenue recognition, and management accounting integration.

In companies where SD is not properly designed, problems arise such as “the price promised at the quotation stage changes at the time of order entry,” “shipping instructions are not automated, leading to frequent manual handling,” “billing omissions and duplicate billing occur,” and “customer-specific trading terms are managed in an ad-hoc, person-dependent way.” SAP SD resolves these issues by integrating business processes with the system.

This article covers not only SD’s standard order flow but also delves into special order types that frequently occur in practice (services, third-party orders, consignment, returns, etc.), explaining both transaction operations and SPRO configuration in detail.

Automatic Journal Entry Generation, Stock Movement, and Workflow

SD business transactions automatically execute both inventory reduction (invoking movement types in MM) and FI journal entry generation (account determination: VKOA) simultaneously. At each step of “Order → Delivery → Billing,” the system automatically generates financial journal entries for inventory, cost, and revenue.

SD Step	Automatic Stock Movement / Journal Entry Generation	Configuration Key
Delivery confirmation (Post Goods Issue) VL02N	Invokes movement type 601 (goods issue) to reduce inventory → automatically generates a cost of goods sold (COGS) entry (BSX issue ← GBB-VAX)	GBB/BSX conditions, OBYC
Invoice creation (VF01)	Accounts Receivable ← Revenue. Sales tax is automatically calculated via tax code. Revenue is simultaneously posted to CO-PA	VKOA condition technique, KOFI/KOFI00
Returns goods receipt (RE order → goods receipt)	Movement type 653 (returns receipt) restores inventory; a reversing entry (COGS reversal, inventory increase) is generated automatically	Copy control settings
Third-party order (TAS: triangular transaction)	No inventory movement at the company itself. The vendor invoice cost is posted directly to P&L (expense)	Item category: S

▌ Workflow: Approval Control for Credit, Pricing, and Shipping

– Credit block release WF (VKM1): Orders that exceed the credit limit are automatically blocked. A Fiori notification is sent to the credit representative → approve/reject – Approval of manual price changes: When the manual discount rate on an order item exceeds a threshold, an approval request is sent via workflow to the sales manager – Delivery block release: When a manual block has been set on a delivery, it is released upon approval by the warehouse manager – Billing block release: Inserting a final approval check of price and quantity before invoice creation prevents billing errors

1. The Overall Architecture of SAP SD

Integration between SD and Other Modules

SD is tightly integrated with FI (Financial Accounting), CO (Controlling), MM (Materials Management), PP (Production Planning), WM (Warehouse Management), and PS (Project System).

• SD ↔ FI: When an invoice is posted (VF01), journal entries for revenue recognition and accounts receivable are automatically generated. The credit limit (FD32) is linked to FI’s credit management and blocks orders/deliveries when the credit limit is exceeded.

• SD ↔ CO: When an invoice is posted, revenue, cost, and discounts are automatically transferred to CO-PA (Profitability Analysis). In MTO (Make-to-Order), the sales order item functions as a cost object linked with CO-PC.

• SD ↔ MM: Stock check (ATP: Available-to-Promise), inventory reduction at delivery, automatic generation of purchase requisitions for third-party orders, and goods receipt processing for returns are all linked with MM.

• SD ↔ PP: In make-to-order production (MTO), planned independent requirements or production orders are automatically generated from the sales order item.

• SD ↔ WM: In environments integrated with WMS (Warehouse Management), picking instructions and transport instructions are automatically generated from the SD delivery.

Organizational Structure of SD

SD’s organizational units consist of three layers: “Sales Organization → Distribution Channel → Division.” The combination of these three layers is called a “Sales Area,” and every sales transaction belongs to a specific sales area.

• Sales Organization: The organizational unit that bears legal responsibility for sales. It is linked to a company code. Example: “1000: Japan Sales Organization.”

• Distribution Channel: The sales route. Example: “10: Direct sales, 20: Distributors, 30: E-commerce.” Pricing and customer master conditions can be defined per distribution channel.

• Division: The product line. Example: “01: Electronic equipment, 02: Industrial equipment.” Set in the sales data of the material master.

• Sales Office / Sales Group: Optional auxiliary organizational units, used for managing the assignment of sales representatives and for reporting.

2. Inquiry and Quotation Management (Pre-Sales)

The Concept of the Inquiry Document

An inquiry is a document at the stage where “a customer asks about product/service information or an approximate price before deciding on a formal purchase.” It has no legal binding force and serves as the starting point for the subsequent quotation and sales order. Managing inquiries in the system enables “visibility into deal progress, reuse of past inquiries, and analysis of the conversion rate.”

Operation Example: VA11 Creating an Inquiry

• Launch VA11 (Create Inquiry). Select document type “IN (Standard Inquiry),” enter the sales organization, distribution channel, and division, and press Enter.

• Header data: Enter the customer code (Sold-to Party), requested delivery date, PO number (the customer’s internal reference number), and validity period (the inquiry’s valid dates).

• Item data: Enter the material code, quantity, and desired unit price (optional). SAP automatically retrieves the material’s standard price (condition record) and displays the price.

• VA12 (Change Inquiry), VA13 (Display Inquiry), VA15 (List Inquiries): The basic “create/change/display/list” pattern is common to all document types.

Managing the Quotation

A quotation is a formal proposal that includes a “commitment on price, delivery date, and quantity” in response to an inquiry.

A validity period is set for the quotation, and it lapses if it is not converted into a sales order within that period. When converting a quotation to a sales order, data is carried over based on the copy control (VTAA) settings.

Operation Example: VA21 Creating a Quotation

• Launch VA21 (Create Quotation). Select document type “QT (Standard Quotation).” Entering the inquiry number in the “Reference Document” field copies the content of the inquiry. It is also possible to create a new quotation without an inquiry.

• Setting the validity period: Set “Valid-From” and “Valid-To” in the quotation header. The system issues a warning if you attempt to convert to a sales order outside the validity period.

• Finalizing the price: The quotation price is automatically retrieved from the condition record (VK11), but it can also be manually adjusted through negotiation. Manually adjusted price differences are recorded on the price analysis screen (the Manual condition on the conditions screen).

• VA25 (List Quotations): Displays a list of unconverted quotations filtered by customer, period, sales organization, etc. Used for managing the conversion rate and for following up on expired quotations.

• Converting a quotation to a sales order: Entering the quotation number in the reference document field of VA01 (Create Sales Order) automatically copies the quotation data into the sales order. The reference quantity of the quotation and the order quantity are managed (partial conversion / full conversion).

3. Standard Order (Standard Order): OR

The Concept of a Sales Order and Major Document Types

A sales order is “a document in which the customer agrees to purchase a specific product in a specific quantity, at a specific price, and by a specific delivery date.” SAP SD defines multiple document types depending on the business purpose. The major standard order types are shown below.

• OR (Standard Order): The most common order for mass-produced items. Processed through the standard flow of inventory allocation → delivery → billing.

• RO (Repair Order): For repair and maintenance services. Integrates with the CS (Customer Service) module.

• KE (Consignment Issue) / KA (Consignment Pickup): For consignment transactions (described later).

• RE (Returns): Accepts returns from customers. Goods receipt and revenue reversal are processed through a reverse flow.

• CR (Credit Memo Request) / DR (Debit Memo Request): Adjustments that increase or decrease the billed amount.

The Structure of Order Header, Item, and Schedule Line

An SAP sales order has a three-layer structure: “Header → Item → Schedule Line.”

• Header: Information common to all items (customer, sales organization, payment terms, overall status, etc.).

• Item: Information for each material (item number, quantity, price, item category, delivering plant, etc.).

• Schedule line: Delivery-date split information indicating “when and how many units” to deliver for the item. Multiple delivery dates can be set for a single item.

Operation Example: VA01 Creating a Standard Order

• Launch VA01 (Create Sales Order), select document type “OR,” enter the sales area (sales organization / distribution channel / division), and press Enter.

• Header tab: Enter the Sold-to Party and Ship-to Party. Entering the customer code automatically pulls in master data (address, payment terms, credit limit, customer group, etc.). Enter the “customer’s PO number” and the “customer’s requested delivery date.”

• Item tab: Enter the material code and order quantity. Pressing Enter automatically pulls in the material master’s “sales view (MRP, delivering plant, material group)”, and the pricing conditions are automatically calculated.

• ATP check (stock availability check): After the item is entered, SAP automatically performs an ATP (Available-to-Promise) check and displays whether shipment is possible on the requested delivery date, along with the confirmed delivery date, on the schedule line. If stock is insufficient, an alternative delivery date is proposed.

• Price analysis (Conditions tab): On the item’s “Conditions” tab, you can review the breakdown of the price build-up: “Base price (PR00) → Quantity discount (K007) → Special discount → Subtotal → Sales tax (MWST) → Total billing amount.”

• Save (Ctrl+S): Upon saving, SAP automatically performs a credit check (comparison against the credit limit configured in FD32). If the credit limit is exceeded, a warning (caution) or a credit block (delivery block) is set.

Order Confirmation and Change Management

• VA02 (Change Sales Order): Used for post-order changes such as quantity changes, delivery date changes, and adding items. Change history (change log) is recorded by the system.

• VA03 (Display Sales Order) / VA05 (List Sales Orders): VA05 lets you filter and list orders by customer, period, item, and status. Filters such as “undelivered orders” and “unbilled orders” are practical in daily use.

• Status management: The order’s “overall status” is automatically updated based on the combination of “the item’s delivery status, billing status, and rejection reason.” When “fully delivered and fully billed” is reached, the overall status becomes “Completed (C).”

4. Delivery and Shipping Management

The Concept of Delivery Processing

A delivery is the process of actually sending the items of a sales order out to the customer. In SAP SD, an outbound delivery document is created, and inventory is issued through the flow of “Picking → Packing → Goods Issue (GI).” The GI posting is the trigger for both the physical reduction of inventory and the financial posting (inventory / cost of goods sold).

Operation Example: VL01N Creating a Delivery

• Launch VL01N (Create Delivery). Enter the “Shipping Type,” “Ship Date,” and “Shipping Point,” and specify the reference sales order number. Alternatively, use “VL10A (Collective creation of deliveries from sales orders)” to process multiple orders in bulk.

• Item tab: The order items are automatically copied. The delivery quantity can be adjusted (changed if only a partial delivery is being made).

• Picking: Confirm the quantity to be issued from the storage location on the “Picking” tab. When integrated with a WM system, a “Transfer Order (LT0A)” is automatically generated and picking is instructed via WM. Without WM integration, the picking quantity is entered directly on the VL02N screen.

• Packing: Set the packing units (cases, pallets) for the shipped goods on the “Packing” tab. If Handling Unit (HU) management is enabled, an HU is created.

• Goods Issue (GI): From VL02N, click the “Post Goods Issue” button. Simultaneously with the GI posting, a journal entry of “Inventory account Cr / Cost of Goods Sold (COGS) account Dr” is automatically generated, and inventory is reduced. After GI, the delivery document can no longer be changed or cancelled (cancellation requires VL09, GI reversal).

Delivery Monitor: VL06O

• VL06O (Delivery Monitor): Lists deliveries for which GI has not yet been completed, and can be filtered by status (awaiting picking, awaiting packing, awaiting GI). This is the entry-point screen for a shipping clerk’s daily work.

• VT01N (Create Shipment): Consolidates multiple deliveries into a single “shipment” for outsourcing to a carrier, managing delivery costs, and tracking. In companies that leverage the Transportation module (LE-TRA), the link from delivery to shipment is important.

Credit Management and Delivery Blocks

• FD32 (Set Credit Limit): Configures the customer’s credit limit, credit risk category (high/medium/low), and credit check control (whether to perform a credit check at order entry or at delivery).

• Credit block release (VKM3/VKM1): Deliveries that have been blocked due to a credit limit being exceeded are reviewed and released by the credit representative using VKM3. VKM1 is used to release orders with a credit block.

5. Billing

Invoice Creation and Financial Integration

Billing is the final step of the SD cycle. An invoice is created with reference to a delivery (with GI already posted) or a sales order (e.g., advance billing), finalizing the accounts receivable owed by the customer. Automatic posting to FI (Financial Accounting) and CO-PA (Profitability Analysis) is executed simultaneously with the invoice posting.

Operation Example: VF04 Billing Due List and Collective Billing

• VF04 (Process Billing Due List): Lists deliveries with GI already posted that have not yet been billed, and creates invoices in bulk. In many operations, this is run as a daily billing batch process.

• VF01 (Create Individual Invoice): Creates an individual invoice by specifying the reference document (delivery number or order number). Used when special price adjustments or manual billing are required.

• FI journal entries at invoice posting: Saving VF01 automatically generates a journal entry of “Accounts Receivable Dr / Revenue Cr · Sales Tax Cr.”

• CO-PA posting: At invoice posting, “revenue, sales discounts, and standard cost (COGS)” are posted to the profitability segment in CO-PA (this requires the KE4U/KE4W settings to be configured).

Operation Example: VF05 Invoice List

• VF05 (Invoice List): Searches for invoices by customer, period, invoice type, and status. Status filters such as “posted to accounting / not yet posted / error” are used to manage processing status.

• VFX3 (Process Billing Block): Reviews and releases invoices that have a billing block due to a price error, credit issue, etc.

• Invoice cancellation (VF11): Cancels an incorrect invoice. A reversing entry (cancellation document) is automatically generated at cancellation.

6. Service Orders

The Concept and Business Patterns of Service Orders

A service order is an order type that manages transactions in which “a service, rather than a physical product, is provided to the customer.” Equipment maintenance, consulting, software maintenance, training, and repairs are all subjects of service orders. Unlike the sale of physical goods, either “no delivery (physical movement of inventory) occurs,” or “inventory is consumed while a service is also provided.”

Types of Service Item Categories

Item categories for services are used differently depending on the nature of the service.

• SRVP (Service): A service item. No delivery is created; completion is processed through Service Confirmation. Used for effort- or time-based services.

• TAD (Service: No Delivery): A pure service-provision item that does not generate a delivery. The invoice is created directly from the order after the service has been provided.

• TAX (Text Item): A descriptive line with no price. Used for notes on quotations and orders.

• LEIS (Milestone Billing Service): An item category for project-type services that are billed in stages based on milestones (completion percentage or dates). It integrates with WBS milestones in the PS module.

Operation Example: Creating a Service Order

• In VA01, select an order type intended for services (e.g., “TA,” or a customer-defined type such as “DS”).

• Enter a “service item (a material master item set to item type = I (service/labor) or S (service))” in the item line. Because service items are not inventory-managed, “No inventory management” is set on the material master.

• Service quantities are entered in units such as “hours (h), days, or occurrences.”

• Service Confirmation: After the service has been provided, enter the completion date and actual effort in VA02, or record completion via a service confirmation document in the CS (Customer Service) module.

• Billing is processed via VF04 as a billing candidate after the confirmation. No delivery document is created.

Maintenance Contract

Recurring services (annual maintenance, monthly inspections, software maintenance) are managed as a “Service Contract,” automating periodic billing over the contract period.

• VA41 (Create Contract): Creates a maintenance contract with document type “WV (Service Contract).” Sets the contract period, target items, monthly billing amount, and billing schedule (monthly automatic billing rule).

• Automatic billing: Based on the contract’s billing plan, invoices are generated automatically on the configured dates, either processed via VF04 or executed automatically as a background job.

• VBOF (Update Billing Plan): Updates the billing plan when the contract period is extended or terms are changed.

Project-Based Services: SD-PS Integration

For large project-type service engagements (system implementation, construction, engineering), the SD order is linked with the PS project (WBS elements).

• By linking order items to PS WBS elements, costs and revenue for the project are managed centrally.

• Milestone Billing: Once a WBS milestone (e.g., “basic design complete” or “go-live complete”) is achieved, invoice issuance becomes possible. Milestone conditions are set in the order item’s “Billing Plan.”

• Revenue from work in progress: Revenue recognition based on the “Percentage of Completion” method, according to project progress, is designed through the combination of SD’s billing plan and CO-PC (order-related cost accounting).

7. Third-Party Orders (Triangular Transactions)

The Concept of Third-Party Orders

A third-party order (indirect procurement) is a transaction form in which “an order is received from a customer, and instead of shipping from the company’s own stock, the vendor (supplier) delivers directly to the customer.” By not holding inventory in the company’s own warehouse, inventory risk and logistics costs are reduced through direct shipment from the vendor to the customer. This is widely used by trading companies, wholesalers, and catalog sales businesses.

The third-party order flow is: “Sales order (VA01) → Automatic purchase requisition creation (ME51N) → Purchase order (ME21N) → Goods receipt confirmation (MIGO/MLGF) → Vendor invoice (MIRO) → Customer billing (VF01).”

Item Category and Schedule Line Category

• Item category TAS (Third-party): The item category for third-party order items. Selecting this item category automatically generates a “Purchase Requisition (PR)” when the order is saved.

• Schedule line category CS: The schedule line category for third-party orders. Rather than “standard delivery from stock (CP),” it specifies “purchase requisition generation (CS).”

• Material master settings: For a third-party order item, the material master is set with “MRP Type = ND (no MRP)” or “Procurement Type = F (external procurement).”

Operation Example: End-to-End Flow of a Third-Party Order

• Step 1 Sales order (VA01): Create an order with document type OR and item category TAS. A purchase requisition (PR) is automatically generated when saved.

• Step 2 Purchase requisition review (ME53N): Review the automatically generated purchase requisition in ME53N. Confirm that the “customer’s ship-to address” has been carried over to the delivery address on the purchase requisition.

• Step 3 Purchase order creation (ME21N): Create a purchase order (PO) from the purchase requisition using ME57 (source determination and PO assignment) or ME21N. Confirm the vendor, purchase price, delivery date, and ship-to address (the customer’s address).

• Step 4 Goods receipt confirmation (MIGO): Record, via MIGO (goods receipt posting: movement type 101), that delivery from the vendor to the customer is complete, based on notification from the vendor (shipping notice, delivery note). In a third-party order, since the actual receipt occurs at the customer’s site, it is processed as a “non-valuated goods receipt” or as “stock for the customer.”

• Step 5 Vendor invoice (MIRO): Match and post the invoice received from the vendor in MIRO. The MIRO posting finalizes the “purchase cost (COGS).”

• Step 6 Customer billing (VF04/VF01): After the MIRO posting, create the invoice to the customer via VF04/VF01. Billing after the purchase cost has been finalized allows the estimated margin at the order stage to be reconciled with the actual margin.

Accounting Treatment of Triangular Transactions

• At MIRO posting: “Purchase cost (COGS) account Dr / Accounts Payable Cr” is booked.

• At VF01 posting: “Accounts Receivable Dr / Revenue Cr · Sales Tax Cr” is booked.

• Profit: Revenue − Purchase cost = Transaction margin (gross profit), which is also posted to CO-PA.

8. Consignment Transactions

The Concept of Consignment

Consignment is a transaction form in which “the company’s own stock is placed in the customer’s warehouse (the consignment warehouse), and revenue is recognized only for the portion the customer actually uses (withdraws).” It is widely used by pharmaceutical, parts, and consumables manufacturers to support the supply chain by taking on the customer’s inventory risk on their behalf.

SAP SD’s consignment management is handled in four phases: “Consignment fill-up → Customer usage (issue) → Return pickup → Return.” Each phase uses a dedicated document type and item category.

The Four Phases of Consignment and Their Item Categories

• Phase 1 Consignment Fill-up: Document type “KB,” item category “KBN.” Movement from the company’s own stock to the customer’s consignment warehouse. Revenue is not recognized at this point (ownership remains with the company). The stock is managed in MM as “Customer Consignment Stock” (a special stock category per customer).

• Phase 2 Consignment Issue: Document type “KE,” item category “KEN.” Revenue is recognized when the customer actually uses (consumes) the consignment stock. An invoice (VF01) is issued for this document upon receiving the customer’s usage report.

• Phase 3 Consignment Pickup: Document type “KA,” item category “KAN.” Recovery of stock from the customer’s consignment warehouse back to the company’s own warehouse. Used when withdrawing stock that the customer did not use.

• Phase 4 Return: Document type “KR,” item category “KRN.” Used when receiving a return from the customer due to a quality issue or similar.

Operation Example: Consignment Management Flow

• Fill-up (KB → VL01N → GI): Create a KB-type document in VA01 → create the delivery in VL01N → post GI. After GI, the stock moves into MM’s “customer consignment stock” (movement type 631 for the goods movement).

• Receiving the customer usage report (creating a KE order): Upon receiving a usage report (monthly usage details) from the customer, create a KE-type order in VA01. Enter the usage quantity.

• Issue (KE → VF01): Create the invoice from the KE order via VF01. Simultaneously with the GI posting (movement type 633), the stock is consumed from the customer’s consignment stock.

• Stock check (MB58): MB58 (check consignment stock / project stock) allows you to check the balance of consignment stock by customer. The customer’s usage status and the company’s own consigned stock balance are periodically reconciled.

9. Returns, Credit Memos, and Debit Memos

Returns (Return Order): RE

A return is a transaction in which an item purchased by the customer is brought back to the company. Return processing executes a series of accounting entries that “reduce the customer’s accounts receivable, recover the inventory, and reverse the cost of goods sold.”

Operation Example: VA01 Creating a Return Order

• In VA01, select document type “RE (Returns).” Entering the original invoice number in the “reference document” field automatically copies the invoice items. Enter the return quantity and the reason for return.

• The item category “REN (Return Item)” is automatically set on the return order item.

• Creating the returns delivery (VL01N): Create a returns delivery (Return Delivery: document type LR) from the return order in VL01N. Once the goods are received from the customer, record the goods receipt (movement type 651) via MIGO, etc.; after inspection, the returned goods are placed into either good stock or scrap stock.

• Issuing the credit memo (VF01): After the goods receipt is complete, issue a credit memo (returns invoice) via VF01. A reversing entry of “Accounts Receivable Cr / Revenue Dr” is executed.

Credit Memo Request: CR

A credit memo request is used when “no physical return of goods is involved, but the customer is notified of a reduction in the billed amount.” Cases include incorrect billing of the price, failure to meet a service level, or compensation to the customer.

• In VA01, create a document with type “CR (Credit Memo Request),” referencing the original invoice number. Enter the reduction amount and the reason for the reduction.

• A “Billing Block” is automatically set on the CR document, and after approval by the responsible person, it is released and a credit memo invoice is issued via VF04.

• Issuing the credit memo in VF01: A journal entry of “Accounts Receivable Cr / Revenue Dr” is executed.

Debit Memo Request: DR

A debit memo request is used when “an additional invoice is issued to bill the customer for an additional amount.” Cases include billing for additional costs, correcting an under-billed price, or charging late-payment damages.

• In VA01, create a document with type “DR (Debit Memo Request).” Enter the additional billing amount and the reason.

• Issuing the debit memo in VF01: A journal entry of “Accounts Receivable Dr / Revenue Cr” is executed (the same as for a normal invoice).

Invoice Correction Request: RK

The Invoice Correction Request (RK) is “a correction-specific document type that manages both the incorrectly billed amount (CR) and the correct billed amount (DR) within a single document.” Compared to processing CR and DR separately, the basis for the correction and the difference amount can be seen at a glance.

• In VA01, select document type “RK” and reference the original invoice. A CR line (incorrect billing) and a DR line (correct billing) are automatically generated as a pair.

• The difference (correct billed amount − incorrect billed amount) is calculated, and a credit or debit invoice is issued.

10. Pricing

The Mechanism of Pricing: Condition Technique

SAP pricing is implemented through a general-purpose framework called the “Condition Technique.” Configuration defines “which combination of data (access sequence) is used to search for pricing condition records (condition type), and in what order the price is built up (pricing procedure).”

Components of Pricing

• Condition Type: The kind of price. Examples: PR00 (base price), RA01 (quantity discount %), K007 (customer-specific special discount), MWST (sales tax), VPRS (cost, for CO-PA posting), SKTO (cash discount).

• Access Sequence: The “priority order of key combinations” used to search for condition records. For example, it searches in the order “(1) material and customer → (2) material group and customer group → (3) material group overall,” and applies the first condition record found.

• Pricing Procedure: A table that defines all condition types by “line number, subtotal, and build-up order of conditions.” It has a structure such as “PR00 (base price) → RA01 (quantity discount) → K007 (special discount) → Subtotal (Net Price) → MWST (sales tax) → Total Amount.”

• Pricing Procedure Determination: The configuration (OVKK) that determines which pricing procedure to apply based on the combination of “sales organization × distribution channel × customer group × document type.”

Operation Example: VK11 Creating a Pricing Condition Record

• Launch VK11 (Create Pricing Condition). Select a condition type (e.g., PR00) and press Enter.

• Enter the key fields (sales organization, distribution channel, material code, etc.), and enter the price, currency, validity period, and quantity scale (e.g., ¥1,000/unit for 1–100 units, ¥950/unit for 101 units or more).

• VK12 (Change Pricing Condition) / VK13 (Display Pricing Condition): Used to change or view condition records.

• V/LD (Pricing Analysis): Allows debugging-style analysis of which condition records were searched via which access sequence, and applied, in the pricing calculation of an order. This is an essential tool for troubleshooting pricing setup errors.

Special Pricing Features

• Quantity Scale: Pricing that varies by quantity band. Used to set graduated discounts for large-volume purchases.

• Customer-Specific Price: Manages a fixed price for a specific customer using PR00 or a dedicated condition type.

• Validity period management: Condition records have a validity period (Valid-From / Valid-To). Annual price revisions are managed by creating a new condition record with a new validity period (past condition records are retained as history).

• WPUF (Mass Update of Pricing Conditions): A mass price revision at the material or customer-group level. In practice, it is also common to mass-register data in Excel format via LSMW or a BAPI.

11. Customer Master and Partner Functions

The Structure of the Customer Master

The customer master consists of three layers: “General Data, Company Code Data, and Sales Area Data.”

• General Data (XD01 → General Data): Customer name, address, phone number, tax number (corporate number), language, and bank account. Shared across multiple company codes and sales areas.

• Company Code Data (FD01 → Company Code Data): Payment Terms, Reconciliation Account, and Credit Group. Accounting management information on the FI side.

• Sales Area Data (VD01 → Sales Area Data): Customer Group, Delivery Condition, Incoterms, Shipping Condition, Customer Pricing Procedure group, and value mapping to CO-PA profitability segment characteristics.

Partner Functions

A single sales transaction involves multiple parties. SAP manages these using “Partner Functions.”

• SP (Sold-to Party): The party that places the order. Invoices are normally issued to the SP.

• SH (Ship-to Party): The delivery destination for the goods. A location different from the SP (the customer’s factory, warehouse, or a third-party site designated by the customer) can be specified.

• BP (Bill-to Party): The recipient of the invoice. Set separately when different from the SP (e.g., when a group company’s accounting department receives invoices collectively).

• PY (Payer): The organization that actually pays. Set when different from the SP (e.g., when a parent company pays on behalf of a subsidiary in bulk).

• Automatic determination of partner functions: When the SP is entered, the partner functions in the customer master (the SH/BP/PY linked to the customer code) are automatically determined. This enables an operation in which “entering just one code automatically sets the ship-to, bill-to, and payer.”

12. Material Master and SD Views

Material Master Views Relevant to SD

The SD views of the material master include “Sales: General/Plant Data” and “Sales: Sales Organization Data (1/2).”

• Sales: General/Plant Data: Delivering Plant, Loading Group, Transportation Group, the material group for stocked items, and the item category group (NORM/KMAT/DIEN, etc.).

• Sales: Sales Organization Data 1: Sales Unit, minimum order quantity, allowed over-/under-delivery tolerance, condition group, and Account Assignment Group (used for revenue account determination).

• Sales: Sales Organization Data 2: Item category group (NORM: standard item, KMAT: configurable item, DIEN: service, LEIH: rental item, etc.). This group, combined with the document type, automatically determines the item category (VOV4).

13. End-to-End Transaction Operations Guide

The Monthly Operational Flow of the Standard Order Cycle

This section organizes the transaction operations of a standard order cycle along the flow of “Inquiry → Quotation → Sales Order → Delivery → Billing,” making clear the person responsible and the execution timing for each step.

Step 1: Receiving and Registering the Inquiry (VA11)

• Responsible: Sales representative. Timing: Upon receiving an inquiry from the customer.

• Create an inquiry (IN) in VA11. Enter the material, approximate quantity, desired price, and requested delivery date. The inquiry is managed as a deal number and used to manage the progress of the opportunity.

• Periodically check the sales representative’s unhandled inquiries in VA15 (List Inquiries) and prioritize conversion to quotations.

Step 2: Creating and Presenting the Quotation to the Customer (VA21)

• Responsible: Sales representative, pricing representative. Timing: After the inquiry is received.

• Create a quotation (QT) in VA21, referencing the inquiry. Check the pricing conditions (VK11) and manually adjust the price if necessary.

• Print or output the quotation as a PDF (VF31: output processing) and send it to the customer.

Step 3: Creating the Sales Order (VA01)

• Responsible: Order entry clerk. Timing: Upon receiving the customer’s purchase order.

• Create the sales order (OR) in VA01, referencing the quotation. Confirm the delivery date via the ATP check, and enter the customer’s PO number in the PO number field.

• The credit check runs automatically. If a credit block occurs, it is released by the credit manager in VKM3.

Step 4: Creating the Delivery and Logistics Processing (VL01N/VL06O)

• Responsible: Shipping clerk, warehouse clerk. Timing: The ship date (the day before or the day of the planned delivery date).

• Use VL10A (Collective creation of deliveries from sales orders) to batch-process today’s shipments, or create them individually in VL01N.

• Check deliveries awaiting picking in VL06O (Delivery Monitor). Process in the order of picking confirmation → packing → GI posting.

Step 5: Creating the Invoice and Accounting Postings (VF04)

• Responsible: Billing clerk. Timing: After GI posting (the same day, or the following business morning).

• Display the list of deliveries with GI already posted in VF04, and create invoices in bulk.

• Check the accounting posting status of the created invoices in VF05. Identify and correct the cause of errored invoices in VFX3.

Step 6: Credit Management and Accounts Receivable Management

• FBL5N (Customer Line Item Report): Check the customer’s outstanding accounts receivable line items.

• F.28 (Issue Dunning Letters): Send dunning letters to customers whose payments have exceeded the due date, automated using SAP’s dunning program (F150).

14. Management of Key Master Data

The Customer Master Creation Flow

Operation Example: XD01 Creating a Complete Customer Master

• Launch XD01 (Create Customer Master: including sales area data). Select an Account Group (e.g., “0001: Sold-to party, 0002: Ship-to party, 0003: Bill-to party,” etc.).

• General data: Enter the company name, address, tax number, contact information, language, and currency.

• Company code data: Enter the reconciliation account (FI’s accounts receivable control account), payment terms, and credit group.

• Sales area data: Enter the customer group, delivery condition (Incoterms such as DDP/EXW), tax classification (domestic taxable, export tax-exempt, etc.), shipping condition (same-day shipment / advance notice required, etc.), and pricing procedure group.

Adding Sales Data to the Material Master

Operation Example: MM01/MM02 Configuring Sales Views

• In MM01 (Create Material Master) or MM02 (Change), select the “Sales: General/Plant Data” and “Sales: Sales Org Data 1/2” views.

• Set the delivering plant, item category group, account assignment group (used for revenue account determination), minimum/maximum order quantity, and sales unit.

• The item category group (NORM/DIEN/KMAT, etc.) is the basis for automatic item category determination in SD documents (VOV4). Service items are set to DIEN, and variant-configurable items are set to KMAT.

15. Detailed SPRO Configuration

15-1. Configuring Sales Document Types (VOV8)

The Sales Document Type is the core configuration of SAP SD. The document type controls all the behavior of the order’s business process (standard order / returns / credit memo / consignment, etc.).

• VOV8 (Sales Document Type Configuration): Creating new document types and customizing existing types. The main configuration items are shown below.

• Number Range: Specifies the numbering rule for document numbers (external numbering / internal automatic numbering) and the number range.

• SD Document Category: Defines the nature of the document (order = C, returns = H, credit memo request = K, etc.).

• Reference Mandatory: Configures whether document creation without a reference from a quotation or invoice is prohibited. For returns (RE), it is recommended to require a reference to the original invoice.

• Requested Delivery Date: Configures whether entry of the delivery date is required at order entry.

• Billing Block: Defines whether a billing block is automatically set for CR/DR document types. Used in operations where the block is released after an approval workflow.

• Credit Group: Configures whether a credit check is executed for this document type, and which credit group is used.

15-2. Configuring Item Categories (VOV7)

The Item Category controls the behavior of an order item — “whether inventory is allocated, whether a delivery is created, whether it can be billed, and whether a purchase requisition is generated.”

• VOV7 (Item Category Configuration): The main configuration items are shown below.

• Relevant for Delivery: Whether a delivery is generated. TAN (standard item) is Y, TAD (service) is N.

• Billing Relevance: Select from options such as “A: delivery-related billing, B: order-related billing, G: based on a paid service confirmation.”

• Special Stock: Specifies consignment (W), project stock (Q), etc.

• Automatic Batch Determination: Enables automatic batch selection for batch-managed items.

• Business Item: Whether this item category is business-relevant. Affects whether items with zero value or zero quantity are allowed.

15-3. Configuring Schedule Line Categories (VOV6)

The Schedule Line Category controls schedule-line-level behavior such as “inventory allocation, purchase requisition generation, and transportation scheduling.”

• CP (MRP-linked): The standard schedule line category that performs the ATP check and inventory allocation.

• CS (Third-party order): The schedule line category that automatically generates a purchase requisition. Used in combination with the TAS item category.

• CB (Consignment Fill-up): For consignment fill-up deliveries. Moves stock into the customer’s consignment stock.

• VOV6 configuration items: Defines the Goods Movement Type, MRP relevance, purchase requisition type, and transportation scheduling relevance.

15-4. Configuring Item Category Determination (VOV4)

VOV4 defines the “rule by which the item category is automatically determined” from the combination of “document type × item category group (from the material master) × usage × higher-level item category.”

• Example: “OR (standard order) × NORM (standard item) × (normal) → TAN (standard item category),” “OR × DIEN (service) → TAD,” “OR × KMAT (configurable item) → TAK (variant configuration item).”

• Item Category Usage: Determines the item category for special purposes such as “text (T), batch item (B), service (S),” etc.

15-5. Configuring Copy Control (VTAA/VTLA/VTFA)

Copy control defines “the control rules for copying data from document A to document B.”

• VTAA (Sales document → sales document copy control): Configures the copy rules for quotation → order and quotation → quotation. Controls “copy quantity, copy price, redetermine price, and copy requirements (such as mandatory full reference).”

• VTLA (Delivery → delivery copy control): The item copy rules when creating a delivery.

• VTFA (Delivery → invoice copy control): The copy rules from delivery to invoice. Controls “recalculation of the billing amount (redetermine pricing), copying of transfer costs, and determination of the billing type.”

• An important VTFA setting item: “Billing Quantity” — whether the basis for the billing quantity is the “delivery quantity (A)” or the “order quantity (B)” is an important setting for preventing billing omissions.

15-6. Pricing Configuration

Pricing Procedure (V/08)

• V/08 (Pricing Procedure Configuration): Defines each line (step) of the pricing procedure, setting “step number, condition type, from (the reference subtotal for the calculation basis), requirement (the condition under which this condition applies), statistical flag (X: a statistical value not reflected in the price), and print flag (S: printed on the item).”

• Subtotal: Defines lines that calculate an intermediate total in the price build-up. For example: “Step 900: Net price 1, Step 950: net price before tax, Step 990: total including tax.”

Access Sequence (V/07)

• V/07 (Access Sequence Configuration): Defines each access (a combination of a condition table and key fields) within the access sequence. For example: “Access 1: VKORG/VTWEG/KUNNR/MATNR (sales organization × distribution channel × customer × material) → Access 2: VKORG/VTWEG/KDGRP/MATNR (sales organization × distribution channel × customer group × material) → Access 3: VKORG/VTWEG/MATNR (sales organization × distribution channel × material).”

Pricing Procedure Determination (OVKK)

• OVKK (Pricing Procedure Determination): Determines which pricing procedure to use based on the combination of “sales organization × distribution channel × customer pricing procedure group × document pricing procedure group.”

15-7. Configuring Delivery Types and Shipping Points

• OVLK (Delivery Type Configuration): Defines the parameters (GI movement type, whether picking is required, goods issue block, etc.) for delivery types such as LF (standard delivery), LR (returns delivery), and NL (replenishment delivery).

• OVLA (Shipping Point Determination): Configures the rule for automatically determining the Shipping Point from the combination of “delivering plant × shipping condition × loading group.”

15-8. Configuring Billing Types (VOFA)

• VOFA (Billing Type Configuration): Defines type-specific parameters (timing of FI account posting, whether CO-PA posting is enabled, number assignment) for types such as F2 (standard invoice), G2 (credit memo), L2 (debit memo), and RE (returns billing).

• An important VOFA setting, “Posting Block”: Controls whether the invoice is posted to FI immediately upon creation, or only after a manual release. A block is set when there is a mass output followed by collective posting, or when there is an approval workflow.

15-9. Configuring Account Determination (VKOA)

This is the “Account Determination” configuration that decides which revenue account (G/L account) to post to when an SD invoice is posted.

• VKOA (Revenue Account Determination Configuration): Defines a mapping of “Application (V) × account determination type (KOFI, etc.) × sales organization × customer group × material account assignment group × account key (ERF/ERL/ERU, etc.) → G/L account.”

• Account keys: Purpose-specific keys such as ERF (Revenue), ERL (Returns), ERU (Unearned Revenue), and ERS (Freight Revenue) are assigned to each pricing condition type on the invoice, and each is posted to a different G/L account.

15-10. Configuring ATP (Availability Check)

• OVZ2 (Checking Rule): Configures “what is checked” for the ATP check (whether sales order stock, production planning, purchase orders, etc. are included) and whether it is a lead-time-based backorder check or a simple stock check.

• OVZ9 (Checking Group): Defines the checking group set in the “MRP 3 view → Availability Check” field of the material master, and the checking rule applied to that group.

• OMJJ (Movement Type Configuration): Verifies the settings for inventory updates and cost document generation for the stock movement type used at GI (601: goods issue for delivery).

16. Case Studies from Other Companies

Case 1: Electronic Component Manufacturer Company A — Third-Party Orders and Inventory Optimization

Background and Challenges

Company A, which sells electronic components, carries out catalog sales with a materials portfolio exceeding 10,000 items, making it financially difficult to hold all items in its own inventory. In particular, the inventory cost and obsolescence risk of long-tail items (low-frequency, low-unit-price) were a significant management challenge.

Introduction of Third-Party Orders (TAS) and Results

Company A introduced SAP SD’s third-party order functionality (the TAS item category), automating direct shipment from vendors to customers for long-tail items without holding its own inventory at order time. The flow from automatic purchase requisition generation → purchase order → customer billing was systematized, significantly reducing manual coordination effort. Working capital is reported to have improved as a result of the inventory reduction effect.

Case 2: Industrial Machinery Manufacturer Company B — Strengthening the Supply Chain through Consignment

Background and Challenges

At Company B, which supplies industrial machinery parts, the “wait time for emergency parts procurement” for its customers (companies operating production lines) was a risk factor for line downtime. The operation of consigning parts inventory to customers (consignment) was managed on an individual, person-dependent basis, making it difficult to track billing omissions for used stock and to grasp inventory surpluses or shortages.

Introduction of SAP Consignment Management and Results

Company B introduced the consignment functions (KB/KE/KA) and achieved real-time visibility of customer consignment stock via MB58. It also built an EDI integration in which a KE order is automatically generated upon receiving the customer’s usage report (electronic data), reducing billing omissions for used stock to zero. Customers achieved risk-free procurement based on “paying only for what was used,” which also strengthened the partner relationship.

Case 3: IT Services Company C — Automated Maintenance Contract Billing and SD-PS Integration

Background and Challenges

At Company C, whose main business is software maintenance and implementation consulting, monthly and annual recurring billing for its many maintenance-contract customers was managed manually, causing billing omissions and inconsistent billing timing. Large implementation projects were managed for effort and cost in PS (Project System), but this was not linked to SD orders and billing, resulting in duplicate data entry.

Results of Automated Maintenance Contract Billing and SD-PS Integration

Company C set up periodic automatic billing for maintenance contracts using SAP SD’s contract functionality (VA41, billing plan), achieving zero errors and omissions through monthly billing batch runs (VF04). For large projects, SD order items are linked to the PS WBS, and milestone billing (the LEIS item category) automates invoicing tied to WBS completion status.

End of report.

What SAP SD Can Do — Key Functions and Operations for Sales, Delivery, and Billing

SAP SD (Sales and Distribution) is the module that provides integrated management of the sales process from order entry through delivery, billing, and payment confirmation. It automates pricing determination, credit management, and shipping logistics, reducing lead time and ensuring accurate billing.

▌ ① Order Entry and Automatic Price Determination

– VA01: Simply enter the customer and material to automatically determine the price, delivery date, and shipping location – Condition Technique: Automatically calculates discounts, surcharges, and special prices based on the customer/material group combination – Credit Management: Automatically blocks orders that exceed the credit limit and notifies the credit representative via a task – Scheduling Agreement: Automatically rolls out delivery schedules from long-term supply agreements

▌ ② Delivery and Shipment Management

– VL01N: Automatically creates a delivery from the sales order. Manages picking lists, packing, and loading within the system – Inventory allocation: Automatically reduces inventory at Goods Issue, simultaneously and automatically posting the FI journal entry (cost of goods sold) – Shipping route optimization: Automatically proposes transportation routes based on the destination, weight, and volume – Export documentation: Automatically generates invoices, packing lists, and certificates of origin

▌ ③ Billing and Revenue Recognition

– VF01: Automatically creates the invoice in conjunction with goods issue, automatically posting the sales journal entry to FI – Billing Plan: Manages the schedule for milestone and recurring billing – Revenue Recognition: Controls the timing of revenue recognition based on performance obligations in compliance with IFRS 15 – Credit Memos and Debit Memos: Automatically processes reversing entries for returns and corrections