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What is order to cash (O2C)?

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Overview

Order to cash (also known as O2C or OTC) refers to the end-to-end business process that starts when a customer places an order and ends when a company receives payment for that order. It’s a critical part of supply chain and financial operations for most companies.

In a digital supply chain, especially with platforms like OpenText™ Business Network, many of these steps are automated and integrated across trading partners using B2B integration technologies (like EDI, APIs, and self-service portals), which improves speed, accuracy, and visibility.

Order to cash

What is order to cash?

Order to cash is the end-to-end business process that begins when a customer places an order and concludes when a company receives payment. It encompasses everything from order management and fulfillment to invoicing and collections. Within a supply chain, O2C is a critical workflow that connects customer demand with product delivery and financial reconciliation.

For B2B organizations, especially those operating in complex supply chains, the O2C process is essential for maintaining customer satisfaction, optimizing cash flow, and ensuring operational efficiency.

Why is order to cash important?

Order to cash is more than just a financial transaction—it’s a strategic process that impacts customer experience, revenue recognition, and supply chain agility. A streamlined O2C cycle helps businesses:

  • Accelerate revenue realization by reducing delays in order processing and payment collection.
  • Improve customer satisfaction through accurate order fulfillment and timely invoicing.
  • Enhance operational efficiency by automating manual tasks and reducing errors.
  • Gain visibility into order status, inventory levels, and payment cycles.
  • Strengthen compliance with tax regulations, invoicing standards, and audit requirements.

What is the difference between order to cash and procure to pay (P2P)?

Order to cash and procure to pay are two distinct business processes that serve opposite sides of a transaction. O2C is a customer‑facing workflow that begins when a customer places an order and ends when the business receives payment. It includes steps such as order management, credit checks, fulfillment, invoicing, and collections. This process is essential for generating revenue, maintaining customer satisfaction, and ensuring healthy cash flow.

On the other hand, P2P is a supplier‑facing process that starts when a company identifies a need and initiates a purchase order and concludes when the supplier is paid. It involves supplier selection, order placement, goods receipt, invoice processing, and payment execution. P2P is critical for managing costs, maintaining supplier relationships, and ensuring operational efficiency.

O2C is about selling and collecting payment, while P2P is about buying and making payment. Both are vital to a company’s financial and supply chain health, but they operate on opposite ends of the transaction spectrum.

What are the steps in the order to cash process?

The order to cash cycle is the backbone of revenue operations. It covers everything from the moment a customer places an order to when payment is collected and reconciled. Done well, O2C ensures healthy cash flow, stronger customer relationships, and operational efficiency. Done poorly, it leads to errors, delays, and missed revenue opportunities.

The process typically includes these key stages:

  1. Order management
    • Customer places an order (via EDI, portal, email, etc.)
    • Order is captured and validated (product availability, pricing, terms)
  2. Credit management
    • Credit check is performed to ensure the customer can pay
    • Credit limits are set or verified
  3. Order fulfillment
    • Products are picked, packed, and shipped
    • Delivery tracking and logistics coordination
  4. Shipping and logistics
    • Managing transportation and delivery, such as carrier selection, shipment execution, and delivery confirmation
    • Documentation like bills of lading and customs forms (if applicable)
  5. Invoicing
    • Invoice is generated and sent to the customer
    • May include EDI invoicing or electronic billing formats
  6. Accounts receivable
    • Payment is received and recorded
    • Reconciliation of payments with invoices
  7. Collections and dispute resolution
    • Follow‑up on overdue payments
    • Resolve disputes or discrepancies in billing or delivery
  8. Reporting and analytics
    • Performance metrics (e.g., days sales outstanding)
    • Insights into customer behavior, cash flow, and process efficiency

Steps in the order to cash (o2c) process

What is an example of O2C?

In retail, a common example of the order to cash process begins when a large retailer places a purchase order with a supplier. The order is transmitted electronically, validated against available inventory and agreed pricing, and then released for fulfillment.

The supplier prepares, packs, and ships the goods, while the retailer receives real‑time updates on delivery status. Once the shipment is confirmed, the supplier issues an electronic invoice that complies with regional tax regulations.

The retailer processes payment, which is matched automatically against the invoice, and both sides gain visibility into the transaction from order creation through to cash collection.

This seamless cycle reduces manual work, speeds up payments, and helps retailers and suppliers maintain strong, efficient trading relationships.

What are the challenges of O2C?

Many organizations face challenges in managing the O2C process, including:

  • Manual data entry and disconnected systems that slow down order processing.
  • Inaccurate or delayed invoicing leading to payment disputes.
  • Limited visibility into order status and payment timelines.
  • Compliance risks due to evolving tax and e‑Invoicing regulations.
  • High days sales outstanding (DSO) impacting cash flow.

Addressing these challenges often requires supply chain digitization and automation. Modern order to cash solutions streamline data flows across systems, reduce errors with electronic invoicing, provide real‑time visibility into orders and payments, and ensure compliance with global tax mandates.

By replacing manual, fragmented processes with integrated digital tools, businesses can accelerate cash collection, improve customer satisfaction, and strengthen financial performance.

What is OpenText O2C and how does it help with customer integration?

OpenText order to cash solutions automate and optimize the customer‑facing side of the supply chain—from order management to invoicing and collections. These solutions support customer integration by:

  • Enabling seamless order processing through electronic order capture and validation.
  • Facilitating real‑time communication with customers via digital channels.
  • Accelerating invoicing and payment cycles with automated billing and e‑Invoicing.
  • Enhancing customer satisfaction through accurate, timely order fulfillment and support.
  • Providing analytics and insights to improve forecasting and customer service.

By integrating customers into the digital supply chain, businesses can improve cash flow, reduce errors, and build stronger customer relationships.

What solutions does OpenText offer to help with O2C?

OpenText offers a suite of solutions within the OpenText™ Business Network Cloud that help organizations digitize, automate, and optimize the order to cash process:

OpenText Business Network Cloud

Connects trading partners through secure, scalable B2B integration, enabling seamless exchange of orders, invoices, and shipping documents. It supports multiple formats and protocols, including EDI and APIs, to ensure interoperability across global supply chains.

OpenText B2B integration

Automates the exchange of O2C documents such as purchase orders, order confirmations, advance ship notices (ASNs), and invoices. It reduces manual intervention, improves data accuracy, and accelerates transaction cycles.

OpenText e‑Invoicing

Ensures compliance with global e‑Invoicing mandates and tax regulations. It enables electronic invoice creation, validation, and submission across jurisdictions, helping businesses avoid penalties and streamline accounts receivable.

Together, these solutions help businesses:

  • Reduce DSO and improve cash flow.
  • Enhance customer experience through faster, more accurate order fulfillment.
  • Ensure compliance with global invoicing standards.
  • Gain real‑time visibility into O2C performance metrics.

How can we help?

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