O2C, also written OTC, crosses several teams. Sales or customer service takes the order, operations delivers it, billing raises the invoice and finance collects and applies the payment. Every handover can add days before cash arrives, so it pays to manage O2C as one process with one set of numbers.
Order to cash process steps
The steps below follow one order from entry to recorded payment. Names vary between companies and ERP systems, but the sequence is the same.
| Step | What happens | What holds up the cash |
|---|---|---|
| 1. Order management | The order is entered with prices, quantities, delivery details and the customer's purchase order number | Missing purchase order number, wrong prices |
| 2. Credit management | The order is checked against the customer's credit limit and payment history | Orders stuck on credit hold with nobody deciding |
| 3. Fulfillment | Goods are shipped or the service is delivered, with proof of delivery | Partial deliveries, no proof of delivery |
| 4. Invoicing | An invoice goes to the right contact with the agreed terms | Invoices sent late or with errors |
| 5. Collections | Reminders before and after the due date, calls and escalation | No contact until the invoice is overdue |
| 6. Cash application | Payments are matched to the invoices they pay | Payments without remittance details become unapplied cash |
| 7. Disputes and deductions | Short payments and complaints are logged, assigned and resolved | Disputes with no owner or deadline |
| 8. Reporting | DSO, aging and overdue balances are tracked | Reports built from stale data |
Steps 4 to 6 make up most accounts receivable work. The earlier steps decide how much of it there is, because a wrong price or a missing purchase order number at order entry often turns into a disputed invoice weeks later.
Order to cash vs procure to pay and quote to cash
Procure to pay (P2P) is the mirror process on the buyer's side, from purchase requisition to paying the supplier. Your invoice enters the customer's P2P process, where it is often matched against the purchase order and the goods receipt before anyone approves payment. A missing purchase order number or a quantity that does not match can stop it there.
Quote to cash adds the steps before the order, such as pricing, quotes and contracts, and is common in software and services. Record to report is the accounting close that takes the results of O2C into the financial statements.
How to measure the order to cash cycle
O2C cycle time is the number of days from order to cash. It splits into parts that different teams control, from order to delivery, delivery to invoice (the billing lag), invoice to due date (your payment terms) and due date to payment (days late).
Example. A UK wholesaler ships an order 2 days after receiving it, invoices 4 days after shipping and sells on 30-day terms, and the customer pays 13 days late. The cycle is 2 + 4 + 30 + 13 = 49 days. Cutting the billing lag to 1 day and late payment to 6 days gives 2 + 1 + 30 + 6 = 39 days.
With credit sales of £14,600,000 a year, or £40,000 a day, those 10 days mean £40,000 × 10 = £400,000 less cash tied up with customers. The figures are illustrative. For the collection side, also track days sales outstanding, the share of invoices disputed or corrected and the share of payments matched without manual work.
How to improve the order to cash process
- Capture billing details at order entry. Record the purchase order number and the contact who approves invoices.
- Use payment history in credit decisions. Review held orders daily so good customers are not kept waiting.
- Invoice on the day of delivery. Each day between delivery and invoice adds a day to the cycle.
- Remind customers before the due date. Then follow up within days of it and escalate on a fixed timeline.
- Match payments daily. Give every dispute an owner and a deadline.
- Prepare for e-invoicing. The UK government has said e-invoicing will be mandatory for all VAT invoices from 2029, as set out in its e-invoicing consultation response.
Sunbay covers O2C from the invoice to the recorded payment. It connects to your ERP or accounting system and CRM, sends reminders by email and SMS, makes AI voice calls, issues interest notes and demand letters and keeps every customer reply and agreement next to the invoice. It matches incoming payments using ERP data, predicts which invoices will be paid late and reports DSO and receivables aging. The integrations page lists the systems it connects to.
Frequently asked questions
What are the steps in the order to cash process?
Order management, credit management, fulfillment, invoicing, collections, cash application, dispute management and reporting. Some companies group them into fewer stages, but the path from order to recorded payment is the same.
Who owns the order to cash process?
Finance usually owns the end of it, through the credit manager or financial controller, while sales, customer service and operations own the earlier steps. Naming one owner for the whole cycle, with shared measures, stops problems from falling between teams.
What is a good order to cash cycle time?
One close to your payment terms plus the time it takes to deliver. Billing should take a day or two and days after the due date should be close to zero, so anything beyond that is delay you can work on.
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