What is an Order to Cash Process?

Order-to-Cash Defined

The order-to-cash process is a set of business procedures for the entire order management cycle. Also known as O2C process or OTC process, it includes each step, from the receipt of a sales order, through to when you deposit the customer payment in your company's bank account. The order-to-cash process consists of various subsets of processes, including Order Management, Credit Management, Invoicing/Billing, Customer Payments, and Cash Application. Post-sale, Reporting provides the necessary accounting and performance metrics. Streamlining and automating the entire order-to-cash process, including each underlying step, can help businesses to optimize procedures for better overall efficiency. Identifying bottlenecks and areas of inefficiency are key to achieving optimal productivity.

The Order to Cash Process

The order to cash process consists of the following key steps. Sub-steps and additional procedures can be added to suit the specific needs of different businesses.



  1. Order ManagementOrder management is the first step in the order-to-cash process. It is the process by which businesses receive, track, and fulfill sales orders. This process begins when the order is placed and ends when the customer receives their goods or services. An Order Management System (OMS) is commonly used to track sales, orders, inventory, and fulfillment.
  2. Credit Management Credit management is a process that analyzes a customer’s financial health to determine whether to extend business credit. It begins with ensuring prospective customers are financially sound and creditworthy to help minimize the risk of late payment or default. Credit professionals analyze and interpret multiple data points to arrive at a logical decision of credit terms and limits to offer their customers. Sometimes, even customers that pay upfront are still assessed for credit by vendors for various reasons; for example, if a vendor wants to assess potential for up-selling with additional products or services.
  3. Invoicing/Billing Once a product or service is provided, the customer then receives an invoice. The invoice should capture the order details such as billing and shipping contacts, description of the goods and/or services provided, and itemed costs, including taxes and fees. Many organizations have order management systems that capture these details. The OMS will then process customer orders and generate invoices. Often, paper invoices are printed and mailed by an internal department or a third-party vendor. Invoices can also be sent by email.
  4. Payments When customers make payments on invoices, they are presented either by paper check or through an online billing portal. Electronic Invoice Presentation and Payment systems (EIPP), which customers use to access invoices and make payments online, can help increase the efficiency of the payments process.
  5. Cash Application Cash application is the final step in the order-to-cash process. Applying the payment to your company's books and reconciling your customer's outstanding balance signals the end of a successul sale. 
  6. Reporting – Post-sale, don't forget about reporting. Reporting provides insight into an organization’s accounts receivable and helps to reveal whether a company is collecting payments as expected or has impediments such as disputed invoices and late-paying customers that may impact positive cash flow. Reporting enables accounts receivable teams to make more informed business decisions and ultimately help improve business performance.

Why should businesses optimize their order-to-cash process?

As businesses grow and become more complex, the order-to-cash process can become more difficult to manage. To help with operational efficiency, companies should try to adapt each step in the process so that they continue to connect as a fluid, integrated system. A cohesive, end-to-end order-to-cash system that leverages technology and automation is most likely to result in increased efficiency.

Order Management Automation

Efficient order-to-cash systems begin with effective order management tools. Implementing a customer relationship management (CRM) system along with an order management system (OMS) can help to ensure more accurate and up-to-date customer and order information. These two software systems can reduce the manual processes that lead to errors and delays. Furthermore, integrating these systems with a company-wide Enterprise Resource Planning (ERP) solution enables businesses to leverage the same data throughout the entire OTC process for increased consistency.

Credit Management Automation

Automation within the credit management process benefits both the customer and the company extending credit. For the customer, submitting an online business credit application is much faster than completing pdf forms and submitting via email. Plus, since incomplete applications can’t be submitted (marking fields as “required” for example), online applications help to reduce errors and turnaround time.

Companies that extend business credit also benefit from automated decisioning by using credit scorecards. It’s much faster to score an applicant for creditworthiness using an automated decisioning engine than it is to manually (and subjectively) assess creditworthiness.

When automated tools such as online business credit applications and credit scorecards are integrated within the CRM and shared on an enterprise level, the order-to-cash process and workflows can become more efficient and more effective.

Invoice Automation

An EIPP system is an automated tool used in the Invoicing step of the order-to-cash process. An EIPP system should be integrated with the ERP system to achieve operational efficiency. This allows for a single repository and communication platform for all invoice-related documents and interactions. With this type of automation, customer payments are processed faster, errors are reduced, and processing costs are decreased.

Payment Automation

As with invoicing, implementing an EIPP system enables customers to access a single portal to make electronic payments. Introducing an online portal as part of an ERP system allows customers to engage digitally throughout the order-to-cash process. An EIPP system can save time and lower costs for both the company and the customer. It can also drastically improve the customer’s experience, since customers can access their account statements and update their information themselves online. D&B Finance Analytics Receivables Intelligence has a Payment Portal that offers e-invoicing and a customer payment portal.

Cash Application Automation

Once you're received your customers' payments, it's time to process the payment and deposit the funds. For larger companies or those with a high volume of invoices, cash application can be one of the most manual, time-intensive, and error-prone processes in the order-to-cash process. Automating this function means employees don't have to try and match payments to invoices and reconcile customers' outstanding balances. Cash Management from D&B Finance Analytics Receivables Intelligence automates and reconcile payments to enable no-touch cash application processes.

Reporting Automation

The reporting step of the order-to-cash process involves the production of analytics that disclose the financial status of a company. This provides a snapshot of the company’s cash flow. Automated reporting tools provide actionable insights that uncover deficiencies and improve overall operational efficiency. The reporting tools should connect to the ERP to enable the seamless flow of data throughout the enterprise. Transforming processes by removing boundary systems and focusing on the flow of master customer data throughout the enterprise is key to achieving operational efficiency.

What is the difference between order to cash and quote to cash?

The main difference between order to cash and quote to cash is that OTC does not include pricing or sending a quote to the customer and contract negotiations. These are done before the order-to-cash cycle begins and are the initial steps in the quote-to-cash process.

The order-to-cash and quote-to-cash processes have certain similarities. They both involve tools that capture and track pertinent order and customer information such as a CRM or OMS. They also both include steps involving order fulfillment, operations, and production. However, the quote-to-cash process consists of a larger set of business processes that begins with price quoting and/or negotiations and concludes with customer payment and reporting.

What are the challenges of the order-to-cash process?

Common challenges many businesses face involve efficiently operationalizing their order-to-cash process. Each sub-process of the OTC cycle typically has its own tools and systems which operate within their own silos. These individual platforms contain different data. If these platforms and systems are not connected, information cannot flow throughout the full order-to-cash cycle and the overall enterprise.

Common challenges within each step of the order-to-cash process:

  1. Lack of a CRM or OMS to track customer and order data – Manual processes can create bottlenecks and errors in the Order Management step of the order-to-cash process. When a CRM and/or OMS are present, if they are not connected to an ERP, inefficiencies will exist due to fragmented information. Examples are outdated customer data and inaccurate order information.
  2. Labor intensive credit analysis - Credit analysis can be labor intensive and time consuming if done manually. Online credit applications, credit scorecards, and automated credit analysis save time and create consistent and objective credit decisions. When automated credit tools are integrated within the CRM and shared on an enterprise level, the order-to-cash process becomes more efficient.
  3. Paper invoicing systems and manual customer payments – Manual invoicing procedures involve human labor, materials, and postage costs. These time-consuming tasks also create a considerable lag time. This results in delayed receipt of payments and recognition of revenue. An EIPP system creates end-to-end automation, from the electronic presentation of invoices to customers making payments via an online portal. The EIPP should connect to the ERP system to improve cash flow and establish a seamless order-to-cash process.
  4. Fragmented processes and inefficient reporting tools - The inability to track the progress of the order-to-cash cycle is often due to disparate systems used within each sub-process. Lack of dynamic and scalable platforms that connect to the ERP system can cause disconnected, delayed and inaccurate reporting information.

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