What is ORDER TO CASH (OTC or O2C)

Abhigyan Singh 10th Oct 2020

The order-to-cash (OTC or O2C) process contains everything from the order, packaging, and delivery of goods and services to depositing the money in the bank.
Order to cash (OTC or O2C) is a set of business processes that involve receiving and fulfilling customer requests for goods or services.
It is a business process for receiving and processing customer sales. It contains the whole process ranging from customer purchase order to Invoice.

order-to-cash (OTC or O2C) process flow

It covers business-to-business (B2B) and business-to-consumer (B2C) sales.
In 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 salesperson. 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. If payment has not already been received, the debt is recorded. Order to Cash is completed by the Customer Care process (inquiries, requests, and complaints).
Order to cash cycle consists of multiple sub-processes including:

  • The customer order is documented
  • Order is fulfilled or service is scheduled
  • Order is shipped to the customer or service is performed
  • Invoice is created and sent to the customer
  • Customer sends payment /Collection
  • Payment is recorded in the general ledger

It can also be defined as:
Order to cash refers to the business process in which customer sales orders are accepted by a
manufacture, the fulfillment of the order followed by shipping and receiving followed by the generating of
an invoice and collecting payment for that invoice.

  • Classic Order to Cash

Buyer orders products from Seller. The seller accepts Orders and confirms order fulfillment. Seller sends
Advanced Shipment Notification to the buyer as soon as products leave the Seller. Seller sends Invoice to Buyer.

  • Extended Order to Cash

Buyer orders products from Seller, Buyer may or may not place a change order. Seller may confirm all line items in the Purchase Order Confirmation or uses the Purchase Order Update to confirm pending line items.
Seller will send out Advanced Shipment Notification to Buyer. Seller will send out the Invoice to the Buyer.
The buyer pays the invoice.

  • Order to Cash with Logistic Service Provider

The process involves three trading partners, the Buyer, the Seller, and the Logistic Service Provider.

Authored By Abhigyan Singh

He is a continuous blogger and has blogged on different topic. He loves to surf Internet and always trying to get new Idea about new Technology and Innovations and sharing these great information to all the technology lovers.

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