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The order-to-cash process (sometimes abbreviated as O2C or OTC) is the all-encompassing sequence of steps from when a customer places an order to when the business receives payment.

Some may refer to this process as the “customer journey” or “product lifecycle.” All of these terms point to the same idea: the repeatable sequence of steps necessary to fulfill orders and get paid.

Order to Cash Process

Importance of O2C process

You may remember learning about ecosystems in elementary school science class. Natural ecosystems like rainforests, grasslands, and deserts have dozens of interdependent components. Throw off any one of these ecosystem variables (weather, wildlife population, vegetation), and the entire system falls apart. The same is true for a business’s O2C system. 

The O2C process is important for all eCommerce businesses to understand because it’s inextricably linked with supply chains, order fulfillment, logistics, and ultimately profit. 

Each step in the O2C process has a trickle-down effect that impacts every other area in the organization.

For example, your invoicing and accounts receivable process directly impact your cash flow. Your cash flow impacts your on-hand capital to invest in more products. Your product availability determines how quickly you can satisfy customer demand. 

And the cycle goes on and on. Business owners must take care to examine and optimize each component to have a smooth, profitable O2C process.

In this post, you’ll learn:

  • Each step in the O2C process
  • How to optimize each variable in the “ecosystem”
  • O2C best practices for optimal customer satisfaction

The order to cash processes

In this section, we’ll look at each of the possible steps in an O2C process and what each step entails. Note that some of these may not be applicable to your business, and their sequential order may vary based on your needs.

That said, this should cover all the potential components in an O2C process, plus some others you may not have realized.

Quote management

Businesses with longer purchase cycles or high-ticket items may require a preliminary quote process. This happens immediately after customer intent has been established by the sales team and the customer is ready to move forward into pricing conversations.

For many direct-to-customer sales (such as in eCommerce), this stage is likely not applicable. For those who do require quotes, some key factors to consider are clear sales process stages, quote generation tools, and CRM software for managing multiple prospects in the quote pipeline.

Order management

For most eCommerce businesses selling their products online or in brick-and-mortar stores, this is where the O2C process officially begins.

Within the order management phase, there are several sub-steps. The real benefit of optimizing this step in the O2C process comes from examining your workflow:

  1. A customer places an order either online or in-person at a point-of-sale terminal
  2. The point-of-sale terminal processes the payment through payment gateways and payment processors 
  3. The order processing system sends a signal to the IMS (inventory management system) or WMS (warehouse management system) to confirm that the goods are in stock and shippable
  4. A CRM system records the customer sale

Each of the tools mentioned in the steps above — POS terminals, payment processors, IMS platforms, and CRM software — must all communicate together seamlessly. 

Services like WooCommerce, Squarespace, and Shopify offer pretty straightforward POS and payment processor functionality. The only thing left is to make sure you’re integrated with your inventory management platform.

This is why  SkuVault prioritizes integrations with all mission-critical business apps across a spectrum of different business disciplines. We believe the IMS should be the hub of your order management.

That’s only possible when each of the components is communicating accurate, real-time data to one another.

Credit management

This next step won’t apply to 99% of eCommerce businesses. However, it’s important to mention for anyone selling high-ticket or B2B products. 

Some large sales may necessitate payment over time. This is especially common in enterprise software products, construction equipment, or vehicles. There’s one glaring problem — you need to maintain your cash flow to keep the business running.

That’s why a business may choose to extend a line of credit to their customers through a 3rd-party provider. This keeps cash flow humming while also accommodating the budgets of your customers.

Obviously, you’ll want to thoroughly vet your customers’ credit in this process. Similar to a bank offering credit to an individual, you are assuming the risk and responsibilities of repayment and collection. 

Many solutions like BlueVine, Fundbox, and SAP Credit Management exist to help small B2B or high-ticket operations offer lines of credit to customers, thus avoiding bottlenecks in their cash flow. 

Order fulfillment

Order fulfillment is the close cousin of order management — the two overlap quite a bit. You might say order management is the digital side of O2C (payment processors and the like), while order fulfillment is the physical side of it. 

Order fulfillment involves actually picking, packing, and processing orders for customers. This is where your IMS really takes a starring role. 

Once the purchase is approved by the customer’s issuing bank and the products are verified as shippable, it’s time to assemble the customer’s order.

At SkuVault, we’ve spilled lots of ink on the importance of warehouse management, inventory control, and all associated disciplines. All of these things directly impact order fulfillment. 

Feel free to click each link in the list below for more on the topic. 

For now, here’s a summary of all the required components in a good order fulfillment strategy:

Deep, real-time inventory visibility

If you don’t know what products you have on-hand or where to find them, how can you possibly expect to fulfill orders correctly and efficiently? Your IMS is your “single source of truth” for your on-hand products. Platforms like SkuVault let you see your on-hand inventory across all of your locations from one convenient dashboard.

A SKU and scanning system

One of the keys to staying organized and avoiding mis-picks is to create unique SKUs for each item in your warehouse. Many IMS platforms allow you to also tie several other pieces of critical data (such as lot numbers, group numbers, and serial numbers) to a particular barcode.

You do have a barcode scanning system, right? Barcode scanning is the easiest and most inexpensive way to mitigate unnecessary human error and keep your order fulfillment under control. 

Just make sure your barcode system integrates with your IMS. That way, whenever a product is ingested into your warehouse, moved within the warehouse, or picked, you can scan it and know your inventory data is up-to-date and accurate. 

Reorder points and safety stock

Nothing hurts more than watching customers turn to a competitor to buy something because you forgot to reorder and ran out of stock.

It may seem like common sense, but there’s a lot that goes into calculating when to reorder product. Businesses must consider factors like safety stock and lead time demand — and these are on a per-product basis. Multiply that by a dozen SKUs (or more) and that’s way too much to hold in your head.

That’s why we’ve built automatic reorder point reminders into SkuVault. You simply set up your par levels and the system automatically alerts you when it’s time to reorder. 

But you don’t need any software to set up par levels or safety stock (though we do recommend it). For some deeper reading on how to calculate these crucial metrics, check out our post on the topic here.

Order shipping

This next phase is all about how the packed order physically gets to the customer. It may seem straightforward, but eCommerce businesses have to toe the line of managing shipping cost vs. shipping time. 

Shipping fast through providers like FedEx or UPS will shorten the time between when the customer orders the product and when they receive it. But it may also cut uncomfortably close to your profit margins. 

On the flip side, you may save a bundle by going with a less favorable shipping option, but customers accustomed to free two-day shipping may grow antsy and turn elsewhere.

In addition to this, businesses must manage and track in-transit orders, communicate delays to customers, and process returns. All of these things are encapsulated in the order shipping phase.

Customer invoicing

Again, most eCommerce businesses settle their payments immediately. But we don’t want to leave any stone unturned here. For those who do high-ticket or B2B sales, how you receive money from customers hinges on your invoicing strategy.

The best way to optimize this phase is to eliminate any sort of manual invoice creation in your workflow. Invoice generation and management is a perfect example of something that’s easily automated with technology.

Many, if not all small business accounting platforms offer easy invoicing templates, including the ability to seamlessly turn purchase orders into invoices. Just make sure your accounting software integrates with your IMS so you’re not doubling your efforts to reconcile order and invoicing data.

Accounts receivable

Accounts receivable may seem like a very “corporate” term for small eCommerce operations. Perhaps it feels like a luxury to have an accounts receivable department (or even an accounting employee at all).

But accounts receivable is not primarily a department, but an asset account itself. It’s simply a reflection of outstanding payments held by businesses for services or goods rendered to customers but not yet paid for. 

In other words, accounts receivable is money that you’re owed. 

Regardless of size, all eCommerce operations must have a way to track outstanding invoices and send customers automated payment reminders.

Payment collections

Collecting payment from customers can often feel like a full-time job. Though many smaller eCommerce operations can’t afford to hire out these responsibilities. That’s why it’s important to choose an accounting management platform that not only sends out invoices and reminds customers but can keep you abreast of outstanding payments from a simple dashboard.

Reporting and analytics

You cannot fix what you cannot measure. When you’re dealing in systems as complex as O2C, you must have some end-to-end way of measuring and analyzing data. That means from the moment a customer places an order to the moment you’re paid, every step is tracked in a single system.

We know how important analytics are for forecasting and making cashflow decisions in an eCommerce business. That’s why we’ve built deep analytics and reporting features into SkuVault Core that track orders from the moment they’re ingested into the warehouse to the moment you receive payment. Capturing data is the first step. Then comes synthesizing and interpreting that data to better understand where your bottlenecks and hangups are.

Ask yourself: what parts of the O2C am I not capturing, and why? Where are there blind spots in my ability to trace the product lifecycle? 

Simple data tracking across the entire O2C process will often reveal systematic issues in your business.

Benefits of optimizing the Order-to-Cash Process

Now that you have a solid understanding of what the O2C process is, let’s talk a bit more about why it’s so important to optimize. How exactly does each of these areas impact your business?

The implications of optimization should be pretty clear, but just in case, here’s what improves when you optimize your O2C process:

Customer experience

Everything an eCommerce business does is in service of the customer experience. Without a positive experience, there will be no repeat business, there will be no social proof or marketplace rankings, and there will be no advocacy. 

A smooth, efficient O2C first and foremost improves the customer experience by getting product into the customer’s hands as quickly and cheaply as possible. 

Cost & time savings

In addition to providing the best solutions for your business and customers, an optimized O2C process will save you lots of time (and thus money).

Much of what we’ve discussed above can be solved by automation. If you’re not careful, you can find yourself deep in the tedium of manually creating invoices, reconciling data, or crunching inventory numbers manually in a spreadsheet.

All of this takes away from business development and high-level vision — the things that will really move the needle for your organization.

Improved accuracy

If your O2C process is integrated — that is to say, all the parts and components are communicating with one another seamlessly — you will mitigate scores of unnecessary errors. 

There are so many things that can go wrong in an O2C process. Incorrect amounts on invoices, reminders sent to customers who’ve already paid, mis-picks and mis-ships in the warehouse, and tons more.

Automating as much as possible not only has the benefit of saving time and effort but eliminating needless human error. 

This is especially true when you use an IMS like SkuVault to automate things like product reordering, pick list generation, forecasting, and more. 

Easier reporting and audits

Part of optimizing anything is putting it under a microscope and meticulously analyzing all the parts that make it work. The same is true for your O2C process.

Just by examining, capturing, and integrating your O2C process, identifying problems and reporting on progress will become much easier and simpler.

Whether it’s tracking the amount of unpaid invoices month-over-month or understanding cashflow patterns, an optimized O2C can help you not only meet your KPIs but discover ones you didn’t even realize you needed.

Downsides of an inefficient Order-to-Cash Process

On the flip side of the previous section, not optimizing your O2C process will produce the following adverse effects in your business:

  1. Inaccurate sales orders
  2. Dissatisfied customers
  3. Collection delays

Your business may be able to survive one of these for a while, maybe even two. But all three, when unchecked, will be detrimental to your operation. 

Order-to-Cash optimization best practices

We’ve peppered several recommendations and best practices for O2C optimization throughout this post, but let’s take a look at a few more. 

Audit your existing O2C Process

The first step in optimizing your O2C process is to perform an audit of your current process. Just as frequent warehouse audits are prudent for eCommerce businesses, frequent order-to-cash process audits will yield similar benefits.

A good first step is to track anywhere between 7-10 transactions all the way through the O2C process. Analyzing more than two or three transactions is important for uncovering systematic issues and isolating anomalies. 

The simple act of documenting the process will likely reveal many inefficiencies. Then, consider the following questions as you review the transactions:

  • What stages in this purchase are not accurately captured or tracked (blind spots)?
  • Are there any steps that take in a disproportionate amount of time or resources?
  • What, if anything, can be automated or templated? 

Invest in an Inventory Management System

If you’re selling physical goods, you will soon hit a ceiling in managing your inventory using manual processes.

A solid IMS will not only help you stay on top of your inventory but will act as a central hub for all your business software and O2C steps. 

One of the easiest ways to automate your order management and fulfillment is through a dedicated software platform. 

Automate your invoicing and collection workflow

Creating, sending, and following up on invoices, if performed manually, could very well be a full-time job.

(That is why accounts receivables departments exist in large companies, after all.) 

But for small to mid-sized businesses, a better way forward is to choose an accounting platform that automates these tasks. For example, QuickBooks Online offers professional, templated invoices, easy payment options, and reminders to follow up on payment with customers.

Beyond that, SkuVault integrates with QuickBooks so you can convert your orders directly into invoices and streamline the process even further. 

Study O2C Processes from similar businesses

It’s been said that “R&D” really stands for “rob & duplicate.” This is tongue-in-cheek, of course. Nobody is advocating for wholesale stealing. But if other companies are using best practices, why reinvent the wheel? 

There are many small to mid-sized businesses that are more than happy to share their O2C best practices and workflow. Much of this can be found by simply reaching out to these businesses and asking for advice.

Some businesses even publish their processes online for the benefit of others. Don’t underestimate the foundational practice of asking for help (then paying it forward once your O2C is optimized!).

Utilize technology and integrations 

Second to automation, the most important thing in O2C optimization is ensuring your software platforms or databases are all communicating with each other. This is only possible through integrations. 

Your CRM must share customer purchase data with your IMS as well as your accounting platform. Likewise, your IMS must be on the same page as your channel management platform and your shipping provider.

That’s why we believe a business’s inventory management platform is the hub of its O2C strategy. We’ve built our platforms to manage all your mission-critical integrations and give you a clear view of the health of your business.

We’d love to show you the specific ways a well-integrated IMS can optimize all areas of your business. For more information on Linnwork’s integrations and inventory control benefits, reach out to our team for a live demo today. 

Matt Kenyon

Matt Kenyon


Matt has been helping businesses succeed with exceptional content, lead gen, and B2B copywriting for the last decade. When he’s not typing words for humans (that Google loves), Matt can be found producing music, peeking at a horror flick between his fingers, or spending quality time with his wife and kids.