What is Order to Cash
Learning objectives for this lesson are: Meaning of Order to Cash Process; Sub Processes under Order to Cash; Process Flow for Order to Cash; Key Roles & Transactions; Key Setups/Master Data Requirements.
Meaning of Order to Cash
- Order to Cash (also known as O2C) manages the life-cycle of a sales process
- This process encompasses the sub processes of receiving and processing customer sales
- A contractual relationship is established with the buyer (This is an Optional step and some businesses need a formal agreement before they can execute orders)
- Orders are received via different sales channels
- Orders are fulfilled through shipping and logistics
- Invoice is generated and booked as Sales
- Debt is recorded and pursued through collections management
- Funds are received and accounted using cash applications
Sub Processes under Order to Cash Functional area:
- Credit Management
- Managing the credit profile of your customer and putting checks and holds on amount of credit that can be extended to one customer
- Order Management (Creation of order/Booking of order)
- The process from taking the order and booking the same in the system
- Order Fulfillment
- Making sure that the firm has the product available that can be shipped to the customer
- Distribution – Shipping and Logistics Management
- Actual shipping of the product to the customer
- Invoicing/Customer Billing – Account Receivable Process
- Raising an invoice to the customer as per the regulatory requirements
- Customer Collections
- Dunning process and reminding customer about outstanding dues and collecting the money
- Cash Application
- Accounting for the cash against a particular invoice
- Dispute Management
- Handling disputes or adjustments arising in the natural course of business
Process Flow for Order to Cash Process
- Sales Quotation
- Providing a quotation about the quality, price and conditions of sale or product
- Sales Order
- Acknowledging the receipt of an order from the customer and its specifications
- Credit Management
- Ensuring the customer is credit worthy and credit can be extended to the customer
- Shipment
- Sending the goods to the Ship To location; and sending the invoice to the bill to location
- Billing/Invoicing
- Sending the invoice to the customer that is fully complaint with the legal framework
- Collections Management
- Reminding the customer, issuing dunning letters and collecting the money
- Dispute Management
- Addressing the disputes or adjustments due to various reasons
- Customer Returns Management
- Handling the goods that have been returned by the customer
- Customer Payments
- Receiving the payments from customers and depositing them in bank
- Cash Application
- Knocking off a particular invoice against the cash or payment that has been received
- Accounting
- Ensuring proper accounting during the process
- Reporting
- Making available the required reports to the management
Key Roles during the process - Order to Cash
- Sales Personnel
- Order Entry and Management
- Account Receivable Accounting
- Finance
- Materials Management
- Partner / Customer Management
- Key Transactions during the
- Order to Cash Process
- Sales Quotation
- Sales Order
- Goods Shipment
- Return from Customer
- Return Material Receipt
- Create Shipments from Orders
- Sales Invoice
- Create Invoices from Orders
- Generate Invoices
Key Setups / Perquisites
Some key master elements or setups are prequiste to this process before transactions can take place in any ERP or system:
- Sales Products
- Prices configuration
- Customers Setup
- Credit Scores/Credit Management/Credit Holds
- Shipping Rules
- Ship to/Bill to Setups
- Sales Document types
- Sales Invoice Formats / Commissions and Accounting Rules
- Taxes on Sales – Tax Setups
- Sales Agreements Setups
- Revenue Recognition Rules
Related Links
You May Also Like
-
At a high level, the essential elements in a warehouse are an arrival bay, a storage area, a departure bay, a material handling system and an information management system. As part of the process for enabling a warehouse layout, you must define warehouse zone groups, and zones, location types, and locations.
-
What is a Warehouse & why companies need them?
All organizations hold stocks. In virtually every supply chain, gaps exist between when something is produced and when a customer is ready to buy or receive it. Stocks occur at any point in the supply chain where the flow of materials is interrupted. This implies that products need to be stored during this period of gap.
-
What is Invoice to Cash Process
In this article, we will explore the business process area known as; Invoice to Cash; Also known as I2C. Learning objectives for this lesson are: Meaning of Invoice to Cash Process; Sub Processes under Invoice to Cash; Process Flow for Invoice to Cash; Key Transactions Fields; Key Setups/Master Data Requirements.
-
Business Case of Multiple Warehouses
Adding extra warehouses to business provides many benefits such as reducing shipping costs, increasing storage capacity, and having warehouses for specific purposes to simplify overall warehouse management. Multiple warehouses allow you to organize your inventory in a way that helps your business be more effective.
-
Overview of Warehouse Processes
The basic function of a warehouse is to store goods. This means that they receive deliveries from suppliers, do any necessary checking and sorting, store the materials until it is dispatched to customers. Traditionally warehouses were seen as places for the long-term storage of goods. Now organizations want to optimize their customer experience and try to move materials quickly through the supply chain, so the role of warehousing has changed.
-
Before shipping, businesses need to make sure that the items will arrive in good condition. Packaging is a form of protection against environmental threats that the product will face from the time it leaves warehouse facility until the time it reached the customer. The packaging is intended to provide protection for the item as it is being handled in the warehouse or when the item is being shipped.
-
To stay competitive in today’s tough market, the location of your warehouse is vital. To grow retail business need to offer to customers faster and affordable shipping time, which is dependent on the warehousing location as the location of the warehouse affects the transit time to ship orders to customers.
-
This article discusses the key documents that gets generated during the import/export process. These documents may apply to both invoice to cash as well as order to cash cycles. Also learn the major custom docments for India.
-
Warehouse management and distribution logistics involve the physical warehouse where products are stored, as well as the receipt and movement of goods takes place. Warehouse management aims to control the storage and movement of products and materials within a warehouse. These operations include the receipting of inwards goods, tracking, stacking and stock movement through the warehouse.
-
When a customer wants a product that has been stored in the warehouse, the same need to be picked off the shelf (or off the floor) and get it ready for shipping. Depending on how big is the warehouse, picking can take a while. (Many distribution centers cover more than 1 million square feet.). Hence, warehouse order picking methods are an important aspect within any warehouse.
