Station 5 of 10
The sales cycle in Dynamics 365 F&O
What you leave this station with
Running a full sales cycle and reading what delivery does to cost and revenue, and diagnosing a wrong ageing report from its structural cause.
Station four followed money on the way out. This one follows it on the way in.
The difference is not direction: a purchase cycle ends in a payment whose timing you control, and a sales cycle ends in a collection whose timing you do not.
The documents and their journals
| # | Document | The accounting entry |
|---|---|---|
| 1 | Quotation | None |
| 2 | Sales order | None — a commercial commitment |
| 3 | Packing slip | Cost of goods sold debit, inventory credit |
| 4 | Customer invoice | Customer debit, revenue and tax credit |
| 5 | Collection | Bank debit, customer credit |
Row three is what half of all projects ignore.
The packing slip is the moment goods leave, and it is what recognises the cost. Skip posting it — and invoice only — and the separation between delivery and invoicing disappears entirely. Cost and revenue then always land in the same instant, which hides a real problem rather than solving it.
The problem shows in the edge case: delivered 29 September, invoiced 3 October. Post the packing slip and you see September carrying a cost with no revenue, and you know to accrue. Skip it and you see nothing, and both months’ statements come out wrong with no warning from the system.
That is the real answer to “why did the margin drop this month for no reason”. An answer about timing rather than about pricing.
What decides the accounts
The user does not choose the revenue account. It is derived from the posting groups you designed in station three: the customer group, the item posting group and the tax group.
So a fault on one invoice is almost never a fault on one invoice. It is a wrong posting group producing a hundred wrong invoices. The fix is in the setup once, not in the journal a hundred times.
Unsettled collections
A customer transfers a million against seven invoices, and the collector records the receipt without settling it.
The result: the customer’s total balance is right and the ageing is entirely wrong. The seven show as ageing, the million shows as open. Then the finance director reads the ageing report and concludes that collections are deteriorating. They are not.
This is the commonest shape of “the system’s reports are wrong”. The system is right; the last step was skipped.
The rule: no month closes with unsettled receipts on the books and no written explanation.
Where this product sits against its alternatives on the sales and retail side is in the Dynamics 365 Finance & Operations guide.
Credit limits — set once, working daily
The commonest request three months after go-live: “stop selling to a customer over their limit.”
That is configuration rather than development, and three decisions sit in it.
| The decision | The options | What gets missed |
|---|---|---|
| What counts towards the limit | Invoices alone, or orders and unbilled shipments too | The latter is correct, or the customer exceeds their limit before you raise an invoice |
| What happens at breach | Warn, or block | A block with no approved exception stops real sales |
| Who lifts the block | Sales or finance | Finance — otherwise the limit is decoration |
The first row is the common technical error. A credit limit counting invoices alone lets you ship goods to a struggling customer as long as the invoice has not been raised — which is precisely the situation the limit exists to prevent.
The third row is political rather than technical. Putting the release in the hands of sales builds a control released by whoever benefits from releasing it. Write it into the design document by name, not by job title.
When revenue is not revenue
- An advance payment is a liability rather than revenue.
- An annual maintenance contract is spread over twelve months.
- A sale conditional on installation or inspection is not recognised before the condition is met.
All three are handled with deferred revenue released over periods. Recognising at invoicing shows a profit borrowed from the months ahead — the clearest note an auditor writes.
What you actually do in this station
- Run a full cycle: order, packing slip, invoice, collection. Post the packing slip deliberately and read its journal.
- Run the edge case: delivery at month end, invoice in the next, and compute the effect on both margins.
- Change an item posting group and watch the revenue account change without touching an invoice.
- Record a collection without settling, and produce the ageing.
- Finish the official “manage accounts receivable” path — 10 hours 12 minutes.
- Revisit order to cash for the general principle.
The three commonest mistakes
One: ignoring the packing slip. The separation between delivery and invoicing disappears, and the error shows in no report.
Two: correcting the revenue account on the invoice. The cure is a posting group, not a repeated manual journal.
Three: leaving collections unsettled. Credit decisions on a wrong report.
The acceptance test for this station
- Name the five documents and their journals, and which carries cost and which revenue.
- Explain the effect of skipping the packing slip on two months’ margins.
- Explain where the revenue account is derived from, and why it is not fixed on the invoice.
- Explain how a balance is right and the ageing wrong.
- Show the treatment of an annual maintenance contract invoiced in advance.
What comes next
You know where money enters and leaves. The next station explains the number that settles your profit before you sell anything: inventory and costing — and with it inventory close, an idea most other systems have no equivalent for.