Order-to-cash (O2C)
Reviewed by Dasha ShakovVP Marketing, Proton
Updated
What is order-to-cash (O2C)?
Order-to-cash (O2C) is the full sequence of steps from receiving a customer’s order to collecting the payment for it. It runs through order entry, credit check, picking and shipping, invoicing, and collecting and applying the cash, and software evaluators use the term for everything a system has to handle on the selling side.
How it works
Delays anywhere in the chain show up as slower cash: an order stuck on credit hold, a late invoice or a deduction nobody researches all raise DSO. Its mirror image on the buying side is procure-to-pay.
Order-to-cash (O2C) example
An order taken Monday ships Tuesday, is invoiced Tuesday night on net 30 terms and is paid 35 days after the invoice, so the order-to-cash cycle for that sale is 36 days.
Related terms
- Procure-to-pay (P2P)Procure-to-pay (P2P) is the full sequence of steps on the purchasing side, from deciding what to buy to paying the supplier.
- Order entryOrder entry is putting a customer’s order into the ERP as a sales order, matching each item to the right SKU, quantity, unit of measure and price.
- InvoiceAn invoice is the seller’s bill for goods or services delivered, listing the items, quantities, prices, freight, tax, payment terms and amount due.
- Days sales outstanding (DSO)Days sales outstanding (DSO) is the average number of days a company takes to collect payment after a sale.
