What is O2C

Your O2C, or order-to-cash, plays a vital role in the success of your company regarding logistics and operations, customer relationships, and cash flow.

Definition of O2C

Order-to-cash, commonly referred to as O2C, is a term used to describe a company’s order processing system, which includes processes involved in receiving and fulfilling customer orders.

What is O2C?

The O2C process is a complex system comprised of various activities and stakeholders. It refers to a company’s entire order management system — from the moment a customer places an order through to fulfillment. A successful order-to-cash process not only ensures smooth logistical operations but also enables you and your team to excel in all aspects of business.

Let’s break it down

Here’s a closer look at the steps involved in the order-to-cash process:
  1. Customer order: The O2C process begins as soon as a customer orders a good or service from your company. An efficient order management system ensures that order submission is easy and quick for the customer.
  2. Order fulfillment and shipping: Your customer’s order is prepared and shipped, or their service date is scheduled.
  3. Invoicing: An invoice is generated and sent to your customer to be paid.
  4. Accounts receivable: Outstanding invoices are flagged and reviewed by accounts receivable professionals.
  5. Customer payment: Receive customer payments and provide customer service to settle any disputes.
  6. Payment recording: After receiving payment for an order, accounts receivable records it the general ledger.
  7. Reporting: Reporting the order-to-cash process is necessary in order to obtain performance data. This data provides valuable insights into what is working within your O2C process and what needs to be improved.

Why is O2C important?

The O2C process impacts every part of your business. Without a seamless system, you open your company up to delays in order processing, fulfillment, shipping, invoicing, and, ultimately, cash flow. If one step in this process is slowed or even fails, the subsequent component will suffer, negatively impacting you and your customers. Because of this delicately balanced business eco-system, optimizing your O2C system is vital. After all, you worked so hard to get your customers to the order process, let’s ensure that they navigate through the process with ease.

How to optimize your O2C process

If you find yourself facing issues with your order-to-cash cycle, it may be time to automate. Automating better equips you and your team for order management by eliminating the common challenges associated with manual O2C processes. By eliminating repetitive accounting tasks, automating enables easy invoicing and improves overall cash flow.

Learn more about how you can simplify your order-to-cash management and increase cash flow.

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