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
-
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.
-
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.
-
Warehouses may seem like a simple, straightforward concept, but they actually include a variety of different types of warehouses that all have their own niche. The type of warehousing that’s right for you depends on your specific industry, location, and needs. From private warehousing, distribution centers, and climate-controlled warehouses, there’s an option to suit every business.
-
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.
-
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.
-
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.
-
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.
-
Inventory is money, and hence businesses need to perform physical inventory counts periodically to make sure that their inventory records are accurate. The traditional approach to conducting inventory counts is to shut down a facility during a slow time of year to count everything, one item at a time. This process is slow, expensive, and (unfortunately) not very accurate.
-
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.
-
One of the most important decisions when running a warehouse is its layout. Warehouse layout defines the physical arrangement of storage racks, loading and unloading areas, equipment and other facility areas in the warehouse. A good layout aligned with the business needs could have a significant effect on the efficiency.
