The order to cash process, often called O2C, covers every step from the moment a customer places an order to the moment the payment reaches your bank. In many firms, an order passes through sales, stores, purchase, production, dispatch and accounts. As a result, every manual hand-off adds errors and delays. With an ERP, however, the order is entered once, and every team sees the same live information. So this guide explains each step of the order to cash process, where it breaks down, how ERP fixes it and how it differs by industry.
Key takeaways
- Enter once, use everywhere: a single order record feeds stock, production, dispatch and billing.
- Check early: also, credit and stock checks at order entry prevent most later problems.
- Bill fast: invoices should follow dispatch on the same day.
- Fit your industry: finally, trading, manufacturing and projects each need a different flow.
What is the order to cash process?
In simple terms, order to cash is the chain of tasks that turns a customer order into received payment. In addition, it links the sales team, the warehouse, production, logistics and finance.
When these teams work in separate tools, nobody sees the full picture. On the other hand, when the order to cash process runs inside one ERP, each step starts as soon as the last one ends. For the basics, read how an ERP system works.
The 8 steps of order to cash
Generally, the order to cash process follows eight steps, as the picture below shows:
- Order entry: first, sales converts a quotation into a confirmed sales order.
- Credit check: next, the system checks the customer’s credit limit and overdue amounts.
- Stock check: then it checks whether the goods are in stock and reserves them.
- Purchase or production: however, if stock is short, it raises a purchase order or a production order.
- Dispatch: after that, the warehouse picks, packs and ships the goods.
- Invoice: also, accounts raise the invoice from the dispatch, with the right prices and taxes.
- Payment: meanwhile, the team tracks due dates and records receipts against invoices.
- Review: finally, reports show cycle time, overdue amounts and order performance.
For more on the buying and storage steps, see the procurement process in ERP and warehouse management in ERP.
Where the order to cash process breaks down
In practice, most delays come from a few common gaps. The table below shows them, along with the ERP fix:
| Problem | Effect | ERP fix |
|---|---|---|
| Orders typed into many systems | Errors and lost time | One order record for every team |
| No live stock view | Wrong delivery promises | Real-time stock at order entry |
| Missing credit check | Bad debts | Automatic credit limits and holds |
| Slow invoicing | Late cash | Invoice created from the dispatch |
| Weak follow-up | Rising overdue amounts | Ageing reports and reminders |
| No order visibility | Constant status calls | Live order status on the web |
In short, a broken order to cash process costs both money and customer trust.
How ERP automates order to cash
With ERP, a customer order is entered only once. Then the information is available to every team. For example, the system checks stock as soon as the order is saved. If the goods are not available, it raises a purchase order, which production then uses to make the goods. Afterwards, finished goods return to stock, ready for dispatch, and accounts raise the invoice.
Moreover, a workflow moves the order to the next team as soon as one step ends. Besides, anyone with access can log in and see the order status. Because the system is web-based, customers can also track their orders. As a result, this single view of demand and supply shortens lead time, lowers cost and improves customer satisfaction. To learn more, read about ERP workflow management, the sales and distribution module and ERP demand forecasting.
Order to cash differs by industry
Every industry runs its order to cash process a little differently. Therefore, an ERP built for one type of business may not fully suit another:
- Trading and distribution: first, speed matters most, along with stock availability, schemes and van sales.
- Discrete manufacturing: also, make-to-order jobs need bills of materials, production orders and firm delivery dates.
- Process manufacturing: similarly, batches, expiry dates and quality release come before dispatch.
- Construction and projects: in addition, billing follows work progress, with retention and stage payments.
- Rental and services: finally, contracts drive recurring invoices instead of one-off orders.
For this reason, eresource built separate editions for different industries. For more, read about industry-specific ERP, ERP for trading and construction ERP.
KPIs to track
Above all, review a few numbers every month:
- Order cycle time: first, days from order to delivery.
- On-time, in-full: the share of orders delivered complete and on time.
- Invoice accuracy: also, the share of invoices raised without corrections.
- Days sales outstanding: the average days customers take to pay. See DSO for details.
- Overdue amount: in addition, receivables past their due date.
- Backorders: finally, orders waiting for stock.
As a result, you can see exactly where the order to cash process slows down. For live views, read about ERP business intelligence.
Order to cash with eresource
eresource is a web-based, AI-powered and no-code ERP with 37 integrated modules on one platform. It has also served businesses for 20 years, with 3,000+ go-lives. So here is how it supports the order to cash process:
- Quotation to order: confirmed sales orders allocate stock, plan fulfilment and drive invoicing.
- No-code approvals: also, set forms, fields and approval rules without a programmer.
- Prices and taxes: similarly, price lists and tax packs handle currencies and regional taxes.
- Van sales: book orders, issue invoices and receipts, and update stock on the move.
- Order insights: in addition, track fill rate, on-time delivery, backorders, cancellations and returns.
- Industry editions: finally, eresource Xcel, Bpro and Nfra suit manufacturing, process and construction flows.
To learn more, explore sales order management, see manufacturing ERP software in India or browse all eresource ERP products.
Frequently asked questions
What is the order to cash process?
In short, it is the chain of steps from a customer order to the payment, including credit check, dispatch, invoice and collection.
How is order to cash different from procure to pay?
Order to cash covers selling and collecting money. Procure to pay, on the other hand, covers buying and paying suppliers.
How does ERP speed up the cycle?
First, it removes re-typing. It also checks stock and credit at once and creates invoices straight from the dispatch.
What is DSO?
Days sales outstanding shows how long, on average, customers take to pay. So a lower number means faster cash.
Can customers see their order status?
Yes. For example, a web-based ERP can give customers access to track their orders.
Does eresource support different industry flows?
Yes. In fact, its industry editions cover manufacturing, process and construction flows, and no-code tools handle local needs.
Want to see a faster order to cash process with your own data? Start with a free ERP assessment, or book a free demo.
Also Read – Industry-Specific ERP System
