Skip to content
× FreshBooks App Logo
FreshBooks
Official App
Free - Google Play
Get it
You're currently on our Australian site. Select your regional site here:
4 Min. Read

What Is the Order to Cash (O2C) Cycle? Definition & Benefits

What Is the Order to Cash (O2C) Cycle?  Definition & Benefits

The order-to-cash (O2C) process plays a critical role in defining a company’s success. What’s more, it’s also pivotal in driving customer relationships. A lot of companies choose to pour their resources into the period of time before the sale.

But by optimizing the order to cash process, you can look forward to companywide benefits. In addition, using the right software solution can help you improve the functions of O2C to great effect. As a result, you will see better customer satisfaction, efficient operations, and fewer delays.

To learn about the O2C process and all that it entails, join us in our discussion and see how you can benefit from this method.

Here’s What We’ll Cover:

Order-to-Cash Cycle: What Is It?

How the O2C Cycle Affects Your Business

The 8 Steps of O2C

Key Takeaways

Order-to-Cash Cycle: What Is It?

The order to cash process refers to a business’s order processing system and all that it entails. And it starts as soon as a customer places their order. All of a business’s resources prior to that has to do with marketing, branding, or sales.

Please note that the functions that go into marketing, branding, and sales don’t necessarily stop when the order is placed. However, the core activities that go into them typically remain prior to the placing of the order.

Furthermore, it’s worth mentioning that the O2C process isn’t complete when the customer gets their order. Rather, there are still critical steps that take place after the completion of the order. For example, activity data throughout the O2C cycle needs to be analysed so that management can look for ways to optimize the process.

How the O2C Cycle Affects Your Business

For various reasons, companies should work toward optimizing the O2C cycle. First, O2C activities will affect the operations of the entire company. These operations can include everything from supply chain to inventory management to labour. If there is a bottleneck in one area, it can create problems for completely independent units.

And then there are the functions of accounts receivable and invoicing. These are performed during the O2C period to determine the company’s cash inflows. If there are delays in receiving payments, liquidity-related issues can experience complications. These can include accounts payable, acquisitions, payroll, and more.

And lastly, managing the O2C process reliably and consistently reflects how well you run your business. In order to effectively manage the O2C process, you must be able to excel in all areas of your company, including:

  • Technical management
  • Transportation
  • Manufacturing
  • Accounting
  • Fulfilment
  • Sales

This shows that you have a firm grasp of your operations. It’s also a good indication that you will continue to be successful in your business ventures.

Technology and the O2C Cycle

Technology is essential to the O2C cycle. Moreover, every part of the order to cash process can be improved with the help of technology. Proper O2C management involves a variety of technology, including:

  • Direct access to real-time data
  • Digital invoicing
  • Digital shipping
  • Automation

With these tools and resources working for you, collaboration will thrive in your company. As such, you can expect optimal results and productivity.

The 8 Steps of O2C

There are eight vital components of the order to cash cycle. Each of these steps requires individual attention to ensure optimal performance. It pays to carve out time for each process and focus on how you can improve it.

Not only will your business benefit, but so will your clients. You might consider assigning individuals or teams to each of these business processes. Task them with improving each component and see what kind of feedback you get.

If there’s a viable way to improve just one process, you will be that much closer to offering a better customer service experience.

  • Order Management
  • Credit Management
  • Order Fulfilment
  • Order Shipping
  • Customer Invoicing
  • Accounts Receivable
  • Payment Collections
  • Reporting & Data Management

It’s important to strive to streamline these business processes. In doing so, the O2C process will become a smoother part of your business operations. You will encounter fewer dissatisfied customers and potential business growth.

Key Takeaways

Both you and your clients stand to benefit from a streamlined order to cash process. As you work toward improving the customer experience, think of ways you can make the O2C cycle better. This is a big part of any business and it deserves your attention. With improvements, you can expect high customer satisfaction rates and overall efficiency.

If you are interested in learning more business insights and tips, please explore our comprehensive Resource Hub. There, you will find guides and articles that walk you through essential business actions. They include income taxes, registration, and more.


RELATED ARTICLES