Order-to-cash (O2C) is the end-to-end business process that starts when a customer places an order and ends when the payment is collected and recorded. It covers order capture, fulfillment, invoicing, collections, and cash application, ensuring that what was sold is delivered, billed correctly, and converted into cash.
Key Stages in the Order-to-Cash Process
Order-to-cash usually includes these steps:
- Order entry: capturing the order details, pricing, quantities, and customer information
- Credit checks and approvals: validating payment terms, credit limits, and required approvals
- Fulfillment or provisioning: shipping goods, delivering services, or enabling software access and entitlements
- Invoicing: generating invoices based on contract terms, delivery, and billing schedules
- Collections: tracking receivables, sending reminders, resolving disputes, and managing dunning
- Cash application and reconciliation: matching payments to invoices and updating accounting records
- Reporting: tracking DSO, aging, bad debt, and billing accuracy
Why Order-to-Cash Matters
Order-to-cash affects revenue timing, customer experience, and financial control:
- Cash flow: faster invoicing and collection improves liquidity
- Accuracy: reduces revenue leakage from incorrect pricing, missing invoices, or untracked deliveries
- Customer experience: fewer billing disputes and clearer payment workflows
- Compliance and auditability: improves control over approvals, invoicing, and accounting entries
- Forecasting: better visibility into receivables and collection timing
O2C is often tightly linked to quote-to-cash and lead-to-cash processes but focuses specifically on post-order operations.
Order-to-Cash in Modern Automated Operations
Modern O2C workflows often use automation to reduce manual work:
- Integrated systems: CRM, CPQ, billing, ERP, and payment processors share order and invoice data
- Automated invoicing: subscriptions, prorations, and usage-based billing generated from contract and metering data
- Collections automation: reminders, payment retries, payment links, and dispute workflows
- Exception handling: alerts for failed payments, mismatched order data, or missing approvals
- AI-assisted matching: supporting cash application by matching payments to invoices and flagging anomalies
Strong data governance is important so contract terms and fulfillment events match billing rules.
Frequently Asked Questions
What is the difference between order-to-cash and quote-to-cash?
Quote-to-cash includes quoting and contracting before an order is placed. Order-to-cash starts at the order and covers fulfillment through cash collection.
What systems are typically involved in order-to-cash?
Common systems include ERP, billing platforms, invoicing tools, payment processors, and sometimes CRM and fulfillment systems.
What metrics are used to measure O2C performance?
Common metrics include days sales outstanding (DSO), invoice accuracy, dispute rate, collections rate, and aged receivables.
How does O2C work for SaaS subscriptions?
It includes provisioning entitlements, generating recurring invoices, handling proration, collecting payments, and reconciling subscriptions and invoices with accounting.
What causes order-to-cash delays?
Common causes include incorrect order data, slow fulfillment confirmation, billing errors, unclear payment terms, and unresolved invoice disputes.
