Order to Cash

Order to Cash is a management process classification used by SAP.

Order to cash (O2C or OTC) normally refers to the business process for receiving and processing customer sales. It follows “Opportunity to Order” and covers business-to-business (B2B) and business-to-consumer (B2C) sales. The term is most prominent in the design and improvement of Enterprise Resource Planning (ERP) systems such as SAP, Oracle and NetSuite.

In many business models a contractual relationship is established first via a Contract or Subscription. Orders are then received via different sales channels, such as phone, fax, email, internet or sales person. The contractual relationship is confirmed and the Orders are fulfilled through shipping and logistics. On completion of key events an invoice is generated and booked as Sales (subject to “Revenue Recognition” requirements). If payment has not already been received, the debt is recorded and pursued through dunning cycles until the funds are received. Order to Cash is completed by the Customer Care process (inquiries, requests and complaints).

If we consider the ERP system flow, this is typically categorized into the following eight sub-processes:

  • Customer presence
  • Order entry (creation of order / booking of order)
  • Order fulfillment (physical & digital fulfillment)
  • Distribution
  • Invoicing
  • Customer payments / collection
  • Cash Application…..
  • Deductions (If invoice Short Paid by Customer).
  • Collection