ORDER
TO CASH
In a simple word Order to cash (O2C) means the order
that gets converted to cash. And it has also
some other names like quote to cash, bill to cash etc.
Order To Cash Flowchart
Purchase Order Credit Management Check Inventory Accept Purchase Order
Getting a purchase order It checks whether a buyer Checks whether the If the product is available
from the customer. is creditworthy or not. product is available or not with them they create an
before approving an order. order & notify to customer.
Update Open AR Issue AR Invoice Deliver Goods and Services Create Sales Document
Means the payment that is
It will be containing the Product are getting delivered Create an invoice of the
need to be received from the
details of an order & all the to the customer using 3rd order to keep tracking on
customer side for the product
details. party courier service. it.
delivered.
Billing and Invoicing Collections Management Payment Initiation Payment Receipt
The billing & invoicing team Collects the payment from The payment initiation mean This receipt contains all the
generates invoices and delivers the customer after the the payment that the billing information that has
it to the customers via different due date by sending the customers pays to the client. made to someone.
modes like email, fax, post etc. reminders.
Deduction Management Cash Application
Payment that is being received
They look after the payment
is going to be updated ERP
shortage or claims that is
system & matches with payment
done by the customer & check
info & then close the open AR.
whether is valid or not.
1. Purchase Order
• This the first major step in the O2C cycle .
• In this the customer shows their interest towards product/goods and pitch their purchase order to the sales
team & then the sales representative update it in the Order management system.
2. Credit Management
• Credit management team checks whether the customer is creditworthy or not.
• If it’s a new customer then the credit analyst team provides a form through email or link for additional
information & looks at its financial position & after all the research & verification if it looks good then they
approve & provide a limited credit limit.
• If it's an existing customer, the credit team will look at the customer details from their CMS & ERP system &
analyze, if the customer is having any pending payments to be done to the company or not and if a
customer is having any pending payments then they will decrease the credit limit or reject the order & if
there is any incoming guaranteed payment from the customer then will release the order if any blocked.
3. Check Inventory
• After receiving a purchase order that is initiated from the customer end the order list gets deposited in the
sale representative system & then the order list goes to the warehouse team/person in which the person
checks whether the product/order is in stock or not.
4. Accept Purchase Order
• Once the availability verification of an order is done by the warehouse person then the sales order is created
and then it is being notified to the customer that product/goods are available with us and can be delivered.
5. Create Sales Document/ Sales Invoice
• Once the order gets confirmed, the sales invoice will get created by the sales team that will be having the
listing of all orders list with the price that helps them to keep track of orders & further it gets manually
updated in the ERP system.
6. Deliver Goods and Services
• When the goods or the product are ready for shipping then the 3rd party logistics service comes into action
in which they transfer the order to the customer and while the product or good that is being loaded to the
truck the Bill of Lading (BOL) is prepared and when the truck reaches to the customer end the Proof of
delivery (POD) helps them to verify the order whether it is there or not or if there is any missing order if all
the orders are present the customer will sign on it which represent a successful delivery.
7. Issue of Invoice AR
• When the order is delivered there will be an AR invoice which will be containing the order lists and the
price list and all the extra details about an order.
8. Update of open AR
• It mean the payment that are pending from the customer end and until the money is received is an open
account receivable and once payment is done by the customer than it’s a closed AR.
9. Billing & Invoicing
• The billing & invoicing team generates invoices and delivers it to the customers via different modes like
email, fax, post etc & if there is any issue between the invoice and the order then this team looks after
it.
10. Collection Management
• When a customer doesn’t pays the payment for an order beyond the payment date then the collection
management team takes over the control so that they can close the open AR.
11. Payment Initiation
• Payment initiation means when one company needs to pay an amount to the another company for the product
that was delivered earlier, so they ask to their account payable team to clear their payment.
12. Payment Receipt
• The receipt which contains all the payment information & is generated after the payment is done from one
company to the another company.
13. Cash application
• It means when an incoming payment from the customer is applied to the corresponding invoice and then
updated to the ERP system so that an open AR can be closed & the DSO (Day sales outstanding) also gets
reduced.
14. Deduction/Dispute Managment
• If a customer raise a claim or if there is any short payment done by the customer from the actual amount, then
the deduction management team will look after it and check whether it is a valid claim or not & then they will try
to resolve it as soon as possible by giving some offer or by trade promotion & will try to close the open AR then
they will update it to the cash application team & to ERP so that there will be no confusion between them.
