What is Order to Cash

Meaning of Order to Cash

  • Order to Cash (also known as O2C) manages the life-cycle of a sales process
  • This process encompasses the sub processes of receiving and processing customer sales
  • A contractual relationship is established with the buyer (This is an Optional step and some businesses need a formal agreement before they can execute orders)
  • Orders are received via different sales channels
  • Orders are fulfilled through shipping and logistics
  • Invoice is generated and booked as Sales
  • Debt is recorded and pursued through collections management
  • Funds are received and accounted using cash applications

Sub Processes under Order to Cash Functional area:

  • Credit Management
    • Managing the credit profile of your customer and putting checks and holds on amount of credit that can be extended to one customer
  • Order Management (Creation of order/Booking of order)
    • The process from taking the order and booking the same in the system
  • Order Fulfillment
    • Making sure that the firm has the product available that can be shipped to the customer
  • Distribution – Shipping and Logistics Management
    • Actual shipping of the product to the customer
  • Invoicing/Customer Billing – Account Receivable Process
    • Raising an invoice to the customer as per the regulatory requirements
  • Customer Collections
    • Dunning process and reminding customer about outstanding dues and collecting the money
  • Cash Application
    • Accounting for the cash against a particular invoice
  • Dispute Management
    • Handling disputes or adjustments arising in the natural course of business

Process Flow for Order to Cash Process

  • Sales Quotation
    • Providing a quotation about the quality, price and conditions of sale or product
  • Sales Order
    • Acknowledging the receipt of an order from the customer and its specifications
  • Credit Management
    • Ensuring the customer is credit worthy and credit can be extended to the customer
  • Shipment
    • Sending the goods to the Ship To location; and sending the invoice to the bill to location
  • Billing/Invoicing
    • Sending the invoice to the customer that is fully complaint with the legal framework
  • Collections Management
    • Reminding the customer, issuing dunning letters and collecting the money
  • Dispute Management
    • Addressing the disputes or adjustments due to various reasons
  • Customer Returns Management
    • Handling the goods that have been returned by the customer
  • Customer Payments
    • Receiving the payments from customers and depositing them in bank
  • Cash Application
    • Knocking off a particular invoice against the cash or payment that has been received
  • Accounting
    • Ensuring proper accounting during the process
  • Reporting
    • Making available the required reports to the management

Key Roles during the process - Order to Cash

  • Sales Personnel
  • Order Entry and Management
  • Account Receivable Accounting
  • Finance
  • Materials Management
  • Partner / Customer Management
  • Key Transactions during the
  • Order to Cash Process
  • Sales Quotation
  • Sales Order
  • Goods Shipment
  • Return from Customer
  • Return Material Receipt
  • Create Shipments from Orders
  • Sales Invoice
  • Create Invoices from Orders
  • Generate Invoices

Key Setups / Perquisites

Some key master elements or setups are prequiste to this process before transactions can take place in any ERP or system:

  • Sales Products
  • Prices configuration
  • Customers Setup
  • Credit Scores/Credit Management/Credit Holds
  • Shipping Rules
  • Ship to/Bill to Setups
  • Sales Document types
  • Sales Invoice Formats / Commissions and Accounting Rules
  • Taxes on Sales – Tax Setups
  • Sales Agreements Setups
  • Revenue Recognition Rules

Related Links

Creation Date Monday, 25 June 2012 Hits 32463

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