Meaning of the order to collect
- Order to Cash (also known as O2C) manages the lifecycle of a sales process
- This process includes the sub-processes of receiving and processing sales to customers
- A contractual relationship is established with the buyer (this is an optional step and some companies need a formal agreement before they can fulfill orders)
- Orders are received through different sales channels
- Orders are fulfilled by shipping and logistics
- Invoice is generated and posted as sales
- Debt is recorded and tracked through collections management
- Funds are received and accounted for using cash applications
Sub-processes under the Order to Cash functional area:
- credit management
- Manage your customer’s credit profile and put checks and holds on the amount of credit that can be extended to a customer
- Order management (Order creation/Order registration)
- The process from taking the order and booking it in the system
- Execution of orders
- Ensure the company has the product available that can be shipped to the customer
- Distribution – Shipping and Logistics Management
- Actual shipment of the product to the customer
- Billing/Customer Billing – Customer Account Process
- Establish an invoice to the customer in accordance with regulatory requirements
- Customer collections
- Reminder process and reminder to the customer of unpaid dues and collection of money
- Cash request
- Accounting for money against a particular invoice
- Litigation management
- Manage disputes or adjustments arising in the natural course of business
Process flow for order-to-cash process
- Sales quote
- Provide a quote on the quality, price and terms of sale or product
- Purchase order
- Acknowledgment of receipt of a customer order and its specifications
- credit management
- Ensure customer is creditworthy and credit can be extended to customer
- Dispatch
- Sending the goods to the place of dispatch; and send the invoice to the invoice to the location
- Billing/Billing
- Sending the invoice to the customer which is fully compliant with the legal framework
- Collection management
- Remind the customer, issue follow-up letters and collect the money
- Litigation management
- Handle disputes or adjustments for various reasons
- Management of customer returns
- Processing of goods returned by the customer
- Customer payments
- Receive payments from customers and deposit them in the bank
- Cash request
- Hit a particular bill against the money or payment that has been received
- Accounting
- Ensure proper accounting during the process
- Reports
- Provision of required reports to management
Key roles during the process – Order to Cash
- Seller
- Order entry and management
- Accounts Receivable Accounting
- Finance
- Materials management
- Partner/customer management
- Key transactions during the
- Order-to-cash process
- Sales quote
- Purchase order
- Shipping of goods
- Customer return
- Return the material Receive
- Create shipments from orders
- sales receipt
- Create invoices from orders
- Generate invoices
Key Configurations / Perquisites
Some main elements or key configurations are prerequisite to this process before transactions can take place in any ERP or system:
- Sales products
- Price configuration
- Configuring clients
- Credit Scores/Credit Management/Credit Blocks
- Shipping Rules
- Ship To/Bill To Setups
- Types of sales documents
- Sales Invoice Formats / Commissions and Accounting Rules
- Sales Tax – Tax Setups
- Configurations of sales contracts
- Revenue recognition rules