The Order 2 Cash Process - A Detailed Look

The Order to Cash cycle is the financial basis of any organization. Not only does it regulate how quickly an invoice or an order from a customer is converted to cash, it also determines the customer experience and perception of the service provider. Order to Cash refers to the business procedures for receiving and processing customer orders for products and services, as well as their payment.


O2C_InDetail_BlogPost.pngThis process seems straight forward, but each step has the potential for challenges, inefficiencies, and other issues that can delay the final and debatably most important stage of the process, receiving payment.

Step 1: Receiving the Order

The cycle typically begins when a system receives an order from a customer and processes the order, but is sometimes preceded by a quote requested prior to making a purchase. The order signifies the fact that the company and the customer have agreed to a predetermined relationship and it is now up to the company to begin work.

Step 2: Producing the Order

Next, the company is responsible for documenting the order and beginning the service or manufacturing process. The company builds and produces what the customer requires per their preferred specifications and allotted time frame. Any changes to the original schedule due to delays should be specified at this time as to avoid any confusion or discrepancies later on.

Step 3: Fulfilling the Order

Following documentation and production is fulfillment. This is the stage when the company delivers the finished product or service to the customer. Interacting with logistic partners and suppliers can be critical during this stage. If the order has been met successfully and timely, the customer takes ownership, expressing that the company has delivered the order to their satisfaction.

Step 4: Invoicing the Order

Now that the product has been shipped and delivered, or the service has been fulfilled, the most important stage of the cycle begins, the invoice to cash process. The company generates an invoice for the services it performed and sends it to the customer for payment. Invoice collection will follow. If the customer does not pay on time, this may include collections procedures. After the customer has made the payment, the company’s accountant will record this entry in their general ledger completing the cycle.

In order for the Order to Cash process to succeed efficiently, continuous monitoring of the cycle is required. It is important to be on the lookout for issues and areas needing potential process improvements. One way organizations often choose to improve the O2C process is through automation. Contact Amalto for more information on possible automation improvements your business could be missing out on.

Related Posts: If you believe your OTC process could benefit from Automation check out this recent post from Amalto on The Benefits of Automating your Order to Cash Process.