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
-
This article discusses the key documents generated during the order to cash process. Learn the documents that are created while processing AR transactions and business significance of each of these documents. This article is applicable to all ERP's and systems.
-
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.
-
The Outbound process starts with routing the shipments. The Outbound execution process starts from the point when pick tasks are completed for an outbound shipment and ends at the point where the outbound packages are loaded into trailers. The Warehouse Outbound process includes managing and controlling outgoing materials starting from the download of orders through to the shipping of products from the warehouse.
-
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.
-
Types of Inventory Count Processes
While dealing with lots of inventory in a warehouse, lots of things can go wrong. Shipments may not have the right number of units in them, or they could get damaged somewhere along the supply chain. Discrepancies in the stock may arise as part of every inventory control, and need to be corrected immediately after the inventory control procedure has been finished.
-
Overview of Third-Party Logistics
Third-party logistics (abbreviated as 3PL, or TPL) is an organization's use of third-party businesses to outsource elements of its distribution, warehousing, and fulfillment services. A third-party logistics provider (3PL) is an asset-based or non-asset based company that manages one or more logistics processes or operations (typically, transportation or warehousing) for another company.
-
Types of Order Picking Methods in the Warehouse
There are many different types of picking in a warehouse and each one works as a customized solution for each business. Depending on the size of your warehouse and inventory, the manpower you have on hand, and the number of customer orders made each day, there may be certain methods that are more efficient for you than others.
-
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.
-
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.
-
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.
