What is Order to Cash

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