{"id":1022,"date":"2021-09-01T12:54:17","date_gmt":"2021-09-01T17:54:17","guid":{"rendered":"https:\/\/www.shipbob.com\/uk\/blog\/order-to-cash\/"},"modified":"2026-02-16T18:56:46","modified_gmt":"2026-02-16T18:56:46","slug":"order-to-cash","status":"publish","type":"blog","link":"https:\/\/www.shipbob.com\/uk\/blog\/order-to-cash\/","title":{"rendered":"Understanding & Improving The Order-to-Cash (O2C) Cycle & Processes"},"content":{"rendered":"\n

Table of Contents<\/p>

** Minutes<\/p><\/div><\/div>\n

What is the order to cash (O2C) cycle?<\/a><\/p>\n\n\n\n

What makes the order-to-cash cycle so important?<\/a><\/p>\n\n\n\n

7 key processes in the order-to-cash cycle<\/a><\/p>\n\n\n\n

Best practices to improve your order-to-cash process<\/a><\/p>\n\n\n\n

Common problems in the O2C cycle and how ShipBob addresses them<\/a><\/p>\n\n\n\n

Order-to-cash FAQs<\/a><\/p>\n\n\n\n

<\/a><\/p>\n<\/div>\n\n\n\n

When a customer places an order, does it count as a sale?<\/p>\n\n\n\n

It\u2019s easy to assume that once a customer completes checkout, it magically turns into cash. But there\u2019s a lot that happens \u201cbehind the scenes,\u201d and it all must run smoothly for an order to turn into profit. <\/span><\/p>\n\n\n\n

This concept is known as the \u201corder-to-cash\u201d process (or O2C). For direct-to-consumer (DTC) brands<\/a>, it involves several steps, from processing an order to shipping it out. <\/span><\/p>\n\n\n\n

In this article, you\u2019ll learn how the order to cash process works, why it\u2019s important, and what you can do to ensure a smooth O2C process.<\/span><\/p>\n\n\n\n

What is the order to cash (O2C) cycle?<\/h2>\n\n\n\n

The order-to-cash (O2C) cycle refers to a set of business processes involved in turning an order into cash \u2014 or in other words, profit. <\/span><\/p>\n\n\n\n

Once an order is placed online, it must be processed. Once the customer\u2019s information is validated, items in the order must go through the retail fulfilment<\/a> process before they\u2019re ready to ship.<\/p>\n\n\n\n

During the O2C cycle, some inventory management and accounting tasks must occur, such as locating items in the available inventory to fulfil the order and receiving customer payments.<\/p>\n\n\n\n

A healthy O2C cycle requires order management software to track orders and record data, which is used to analyse O2C performance.<\/p>\n\n\n\n

What makes the order-to-cash cycle so important?<\/h2>\n\n\n\n

The O2C cycle plays a critical role in your business operations. There are several key order metrics<\/a> that are tracked to ensure customer satisfaction, including order accuracy<\/a> and on-time shipments \u2014 which all relate to establishing an efficient O2C process. <\/span><\/p>\n\n\n\n

Once orders are placed, you will need to process and validate order information, including delivery location, as soon as possible before you begin picking and packing orders. <\/span><\/p>\n\n\n\n

As orders move throughout the O2C cycle, systems and processes should be in place that give visibility into the process, including the ability to track orders at every stage.<\/p>\n\n\n\n

This way, you can keep your customers in the loop on their orders and track, analyse, and optimise the ecommerce fulfilment<\/a> process.<\/p>\n\n\n\n

7 key processes in the order-to-cash cycle<\/h2>\n\n\n\n

To create an efficient O2C cycle, below we cover seven key processes that must be developed and evaluated over time. <\/span><\/p>\n\n\n\n

1. Order management<\/h3>\n\n\n\n

The <\/span>order management<\/span><\/a> process begins as soon as a customer places an order and continues until their shipment has been received (or even sent back). It involves tracking the entire O2C process, from processing orders to managing returns<\/a> and analising performance. <\/span><\/p>\n\n\n\n

The process requires several moving parts, often controlled by separate entities, that are often integrated to create an efficient operation.<\/p>\n\n\n\n

Keep in mind that without the right software and technology, tracking a high volume of orders can be difficult and time-consuming.<\/p>\n\n\n\n

Before anything, you will want to consider implementing order management software that can help track all orders by status, let you view order tracking<\/a> details, and more, so you have all the data and information you need to track and manage the O2C process.<\/p>\n\n\n\n

If you sell across multiple sales channels, a more robust solution like a multichannel retailing<\/a> system can be integrated to automatically push the relevant information (order details, shipping details, delivery address, etc.) from your ecommerce store to a centralised system, such as 3PL\u2019s software<\/a>.<\/p>\n\n\n\n

2. Payment processing and credit management<\/h3>\n\n\n\n

Payment processing involves receiving payment for orders. After a customer submits an order online, a secure payment gateway captures their credit card details (or other payment method) and sends the info to your payment processor. <\/span><\/p>\n\n\n\n

The card-issuing bank then verifies the legitimacy of the transaction, either declining or approving the sale. If the transaction is declined, all relevant parties get notified about it. <\/span><\/p>\n\n\n\n

If it\u2019s approved, the payment goes through and the order is confirmed. The funds from the sale will get credited to your store or merchant account within the next few days, completing this part of the transaction.<\/span><\/p>\n\n\n\n

In situations where credit is applicable, a thorough credit management process is also necessary to minimise issues toward the final stage of the process.<\/span> For some ecommerce industries, there is more risk involved, and you may need a specialized high-risk merchant account<\/a>.<\/p>\n\n\n\n

3. Order fulfilment<\/h3>\n\n\n\n

Order fulfilment<\/span><\/a> refers to the warehouse picking<\/a> and packing stage of the order. <\/span>Once orders are placed and processed, the correct items must be located, then picked and packed before shipment.<\/p>\n\n\n\n

Early on in an ecommerce business\u2019s history, this step in the O2C process is often done in-house or from an office. However, in-house fulfilment<\/a> is time-consuming and can be costly if not done right. That\u2019s why DTC brands often delegate order fulfilment<\/a> to a 3PL like ShipBob.<\/p>\n\n\n\n

You can connect your online store<\/a> to ShipBob\u2019s technology and send inventory to one or more fulfilment centre locations based on where your customers are. Your ecommerce inventory<\/a> is then retrieved to ensure accuracy and avoid inventory shrinkage<\/a> before items are stored.<\/p>\n\n\n\n

4. Order shipment<\/h3>\n\n\n\n

Ecommerce shipping<\/span><\/a> is a vital stage in the O2C cycle. This stage requires more thought than simply packing orders and shipping them out. <\/span><\/p>\n\n\n\n

The <\/span>shipping experience<\/span><\/a> directly impacts customer satisfaction. Since most customers expect fast and affordable shipping, taking the time to establish a shipping strategy<\/a> is essential. <\/span><\/p>\n\n\n\n

The attractiveness of your shipping options can reduce cart abandonment<\/a> and increase average order value<\/a> and customer loyalty.<\/p>\n\n\n\n

When thinking through a strategy, you will need to decide the ecommerce shipping<\/a> methods you will offer, as well as any shipping incentives (affordable 2-day shipping<\/a> and\/or free shipping<\/a>), and choose which major and\/or regional parcel couriers<\/a> you\u2019ll partner with.<\/span><\/p>\n\n\n\n

Once orders are shipped, order tracking must be generated and sent to the customer, so they can track last-mile delivery<\/a>.<\/p>\n\n\n\n

5. Customer invoicing<\/h3>\n\n\n\n

Be sure to send your customers a digital receipt. <\/span>For DTC orders, once an order is processed, a receipt is automatically sent to the customer via a transactional email.<\/span><\/p>\n\n\n\n

However, there are some cases in which an online store would have to generate a more detailed invoice to send to a customer. This is common for B2B ecommerce<\/a> transactions that require it for accounting purposes.<\/p>\n\n\n\n

Some customer invoices, especially for wholesale or bulk orders, might also include information on what was purchased, who was involved in the transaction, when it occurred, and which payment method was used.<\/p>\n\n\n\n

Customer invoicing is crucial when dealing with large, international shipments. For instance, if you sell bulk orders to another company overseas, the destination country could estimate the value of the package incorrectly without the proper paperwork, which could potentially cost your customer more in import fees.<\/p>\n\n\n\n

6. Accounts receivable<\/h3>\n\n\n\n

Accounts receivable involves keeping track of and managing unpaid invoices of <\/span>finished goods<\/a> provided.<\/p>\n\n\n\n

It is a record of: the date of sale, to whom, the amount of money owed, and when payment is due. Depending on the circumstance, credit terms (when applicable) may vary from a couple days, to a week or up to one year.<\/p>\n\n\n\n

In many cases, one-off customer purchases receive payment at the point of sale. However, tracking accounts receivable is always required, especially if you offer subscription box orders<\/a> or a pay-later service, such as Affirm.<\/p>\n\n\n\n

Pay-later services are becoming more common, which allows a customer to choose a payment plan for often bigger purchases. In this case, partial payment is collected at point of sale and a reminder (via text or email) is sent to the customer to avoid missing additional payments.<\/p>\n\n\n\n

No matter if you solely offer point-of-sale purchases, special financing, or net days, implementing an accounting software like Quickbooks is a must for managing accounts receivable<\/a>.<\/p>\n\n\n\n

7. Reporting and data management<\/h3>\n\n\n\n

A proper O2C process would be hard to manage and improve on if there isn\u2019t any data being collected.<\/span><\/p>\n\n\n\n

Once your O2C process is in place, you will want to ensure that your supply chain technology<\/a> stack is well-connected and is pulling in the right data sources and information, including insights into orders, inventory levels<\/a>, shipments, and returns.<\/p>\n\n\n\n

Referring back to the first step, having an order management system<\/a> will allow you to see all sales order data in one place, making it easier to analyse the available information and make data-driven decisions.<\/p>\n\n\n\n

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\u201cWe utilise ShipBob\u2019s Inventory API, which allows us to programmatically retrieve real-time data on how many units of each product are currently stored at ShipBob\u2019s warehouses. We currently use this API to generate custom reports to tie this inventory data into our accounting platforms.\u201d<\/em><\/span><\/p>\n\n\n\n

Waveform Lighting Team<\/span><\/a><\/p>\n<\/blockquote>\n\n\n\n

Best practices to improve your order-to-cash process<\/h2>\n\n\n\n

If your current O2C process needs a bit of revamping, here are some best practices to help you decide on next steps and where to optimise. <\/span><\/p>\n\n\n\n

Upgrade your order management software<\/h3>\n\n\n\n

The right order management software<\/a> solution will make it easier to identify real-time problems because you can see the whole process from a birds\u2019 eye view instead of as separate fragments.<\/p>\n\n\n\n

For example, ShipBob\u2019s built-in order management system (that\u2019s part of our overall outsourced fulfilment solution<\/a>) makes it easy to filter orders by status, search for a specific order, edit orders post-purchase up until they are being picked, and shows how your customers\u2019 orders are distributed geographically.<\/p>\n\n\n\n

Upgrading your order management software to integrate with your entire logistics operations minimises the risk of human error, fulfilment delays, and orders being placed when items are out of stock<\/a> while improving speed, accuracy, and delivery.<\/span><\/p>\n\n\n\n

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\u201cI love that you can view orders based on when they are processing, completed, on hold, and in other stages. It is super helpful for us to have that and track the order every step of the way.\u201d<\/em><\/p>\n\n\n\n

Ines Guien, Vice President of Operations at Dossier<\/a><\/p>\n<\/blockquote>\n\n\n\n

Automate as much as possible<\/h3>\n\n\n\n

Ecommerce automation<\/a> is key to creating a streamlined O2C process. Automation is used to put time-consuming, error-prone tasks on autopilot to create a more efficient supply chain<\/a>. <\/span><\/p>\n\n\n\n

Automation can be implemented in any stage of the process, from order processing to shipping. <\/span><\/p>\n\n\n\n

For instance, an <\/span>automated order processing system<\/span><\/a> integrates with your sales channels and automatically processes and verifies orders as they come in. Orders can\u2019t be fulfilled until orders are processed, so automating the order processing step is a surefire way to enable faster fulfilment<\/a>. <\/span><\/p>\n\n\n\n

Though there has been tremendous advancements in logistics innovations<\/a>, implementing automation into your operations can be costly. <\/span><\/p>\n\n\n\n

Another approach is to work with a tech-enabled 3PL<\/a> like ShipBob that automates fulfilment<\/a> and uses best-in-class technology to streamline your logistics operations<\/a>, saving you time and money in the long run.<\/p>\n\n\n\n

Access and analyse data in real time<\/h3>\n\n\n\n

To improve your O2C process, you will need real-time access to relevant data so you can respond quickly before problems escalate. <\/span><\/p>\n\n\n\n

For example, real-time updates on stock availability<\/a> can let you know when to stop accepting orders for a particular product (and update stock counts accordingly). That way, you can avoid the risk of getting new orders for out-of-stock items that can\u2019t be fulfilled right away.<\/span><\/p>\n\n\n\n

Another great advantage of partnering with a 3PL like ShipBob is the ability to access fulfilment data and pull reports on fulfilment performance, which impacts your O2C cycle. For instance, from the ShipBob dashboard, merchants can get answers to questions like:<\/p>\n\n\n\n