What is an Order-to-Cash Process?

The Order- to -Cash (O2C) process is an end- to -end business process that includes all activities from the moment a customer places an order to the moment payment is received for the goods or services delivered. The process includes various phases that must fit together seamlessly to guarantee efficient and effective handling. Below you will find the most important steps in the Order-to-Cash process and where you can accelerate the flow with EDI.

Order creation:

The process starts when a customer places an order. This can be done via a webshop, via a telephone order, via e-mail, via EDI (ORDER) or via other sales channels. In this phase, all relevant data about the order is recorded, such as the type of product or service, quantity, price and delivery terms.

Order ackowledgement and processing:

After the order is received, it is checked for accuracy and stock availability. The order is then accepted and processed in the system. EDI sends a Purchase Order Acknowledgment (message type ORDRSP - Order Response). This includes allocating necessary resources, planning delivery, and generating appropriate documentation.

The goods or services are collected, packaged and prepared for shipment according to the specifications of the order. An EDI Dispatch Advice (DESADV), or shipping advice, is sent by a supplier to the buyer to provide information about the planned shipment of goods.

The logistics team ensures timely and accurate delivery to the customer.

After the goods or services have been delivered, an invoice is drawn up. This invoice contains all relevant details, including costs, payment terms and information on how payment can be made. Invoices (INVOIC) are automatically sent from the supplier to the customer using EDI.

The customer receives the invoice and is expected to make the payment within an agreed period. The finance team monitors outstanding invoices and takes action to obtain payments.

Once payment is received, it is recorded and the financial records are updated. Any discrepancies or ambiguities are resolved, and the process ends with an accurate financial reconciliation.

An effective Order-to-Cash process is vital for companies, as it not only optimizes cash flow, but also promotes customer satisfaction. Streamlining and automating these processes with EDI ensures efficient business operations and contributes to a healthy financial position.

Ready to start automating your O2C process with EDI?