Order-to-cash (O2C): the process, step by step
Also called: O2C, OTC, Order to cash, OTC business process
Order-to-cash (O2C or OTC) is the business process from a customer's order to cash in the bank. The steps, how it differs from procure-to-pay, and SaaS examples.
Order-to-cash (O2C, sometimes OTC) is the business process that turns a customer order into cash in the bank: the order is taken, the customer is invoiced, the payment is collected and applied, and the revenue is recorded. It is the seller’s half of every transaction, and in most finance teams it is where the bulk of the manual work sits.
The order-to-cash process, step by step
- Order management. The order is captured: what was bought, at what price, on which terms. In B2B SaaS this is usually a signed order form or quote.
- Credit management. Payment terms are agreed, such as card on file or net 30, and larger customers may be credit-checked.
- Fulfilment. For SaaS, provisioning: the subscription starts and the customer gets access to what they paid for.
- Invoicing. The customer is billed on the agreed schedule, monthly, quarterly or annually, in advance or in arrears.
- Collections. Payments are collected automatically or chased with dunning reminders when invoices go overdue.
- Cash application. Each payment is matched to the invoice it pays, including partial payments and credits.
- Reporting. Receivables, cash and revenue recognition are reported, and the books are closed.
Order-to-cash vs procure-to-pay
| Order-to-cash (O2C) | Procure-to-pay (P2P) | |
|---|---|---|
| Whose process | The seller’s | The buyer’s |
| Starts with | A customer order | A purchase requisition |
| Ends with | Payment received and applied | Supplier invoice paid |
| Key documents | Order form, invoice, receipt | Purchase order, goods receipt, supplier invoice |
| Owned by | Sales ops, billing, accounts receivable | Procurement, accounts payable |
| Main risk | Unbilled or uncollected revenue | Overpaying or paying the wrong supplier |
The two meet in the middle. Your invoice lands in your customer’s procure-to-pay process, which is why B2B invoices need the customer’s PO number, the right legal entity and the agreed payment terms on them. When any of those are missing the invoice gets rejected in the customer’s AP queue, and your days sales outstanding goes up.
Where order-to-cash breaks in SaaS
For a SaaS company the order isn’t a one-off. A subscription keeps generating invoices, and it changes along the way: seats are added mid-term, plans are upgraded, contracts renew at a new price. Every change is a new order that has to flow through the same steps.
The breaks happen at the handoffs. The deal is closed in the CRM and rekeyed into billing. A discount agreed in the quote never reaches the invoice. An upgrade is billed but the revenue schedule isn’t updated. Each gap is small on its own. Together they are revenue leakage and a slow month-end close.
That is why SaaS teams increasingly think in quote-to-cash terms: start the process at the quote, and make the quote the record that subscriptions, invoices and revenue all read from.
Order-to-cash in Bunny
In Bunny the accepted quote becomes the subscription, so the order never has to be rekeyed. Invoices are generated from that subscription on its billing schedule, payments are collected through your gateway or recorded against the invoice, overdue invoices get reminder emails, and revenue recognition reports read from the same records.
Frequently asked questions
What is order-to-cash?
Order-to-cash (O2C or OTC) is the end-to-end business process that starts when a customer places an order and ends when their payment is received, applied and recorded. It covers order entry, credit checks, fulfilment, invoicing, collections, cash application and reporting.
What is the difference between order-to-cash and procure-to-pay?
They are the two sides of the same transaction. Order-to-cash is the seller’s process, from customer order to cash received. Procure-to-pay (P2P) is the buyer’s process, from requisition and purchase order to paying the supplier’s invoice. Your order-to-cash runs into each customer’s procure-to-pay.
Is procure-to-cash the same as order-to-cash?
Not usually. “Procure-to-cash” is a loose blend of procure-to-pay and order-to-cash, sometimes used to mean the whole cycle from buying inputs to collecting from customers. For a SaaS company the useful split is still the two halves: what you buy (procure-to-pay) and what you sell (order-to-cash).
What is the difference between order-to-cash and quote-to-cash?
Quote-to-cash adds the steps before the order: configuring, pricing, approving and signing the quote. In B2B SaaS the order is usually a signed quote or order form, so quote-to-cash is the more complete view.
What are the steps in the order-to-cash process?
Order management, credit management, fulfilment or provisioning, invoicing, payment collection, cash application, and reporting, including revenue recognition.
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