Explainer
Order to cash runs from a customer order to the cash in the bank. Here are the steps, the measures that matter, where cash gets stuck and how systems and automation help.
By Christopher Fagan, Managing Partner, PEF Consulting Partners
Order to cash, or O2C, is the end to end process of fulfilling customer orders and collecting payment: order capture, credit checks, fulfilment, invoicing, collections, cash application and reporting. It touches sales, operations, finance and customer service, which is why it is often nobody’s single responsibility.
| Measure | What it tells you |
|---|---|
| Days sales outstanding (DSO) | How long it takes to collect |
| Invoice accuracy | How many invoices are right first time |
| Dispute rate and resolution time | The quality of everything upstream |
| Unapplied cash | How well cash application works |
| Bad debt | How effective credit control is |
| Order to invoice time | The speed of fulfilment and billing |
In energy and water the order to cash cycle is usually called meter to cash: meter reads, settlement, billing, payments and collections. Billing exceptions and unbilled accounts are the utility version of stuck cash, and our billing exception cost calculator puts a figure on it.
Integration between CRM and ERP, electronic invoicing, automated reminders and cash application tools can cut DSO and effort substantially, provided the order data is right at the start. Most order to cash problems are created at order entry and only found at collection.
Related reading: procure to pay explained, finance transformation, billing integrity and revenue assurance, ERP vs CRM.
The end to end process from receiving a customer order to collecting and applying the payment, including credit, fulfilment, invoicing and collections.
Order capture, credit check, fulfilment, invoicing, collections, cash application, dispute resolution and reporting, repeated for every order.
Quote to cash starts earlier, with configuring and pricing the quote, and is often used where sales and contracts are complex. Order to cash starts when the order is placed.
Get orders and invoices right first time, invoice promptly, resolve disputes fast with clear owners, automate reminders and cash application, and enforce credit limits.
If debtor days keep creeping up, look upstream at order entry and invoicing before adding more collectors. We can help you find where the cash is getting stuck.