Order-to-cash (O2C)
Order-to-cash (O2C) is the seller-side process that runs from receiving a customer order through fulfillment, invoicing, and collecting payment. It is the mirror image of the buyer's procure-to-pay cycle: your purchase order enters a supplier's O2C process as their sales order. Understanding it explains supplier behavior on credit checks, order confirmations, invoicing, and collections.
Examples
Credit hold surprise: A fast-growing battery startup triples order volume with a cell supplier. The supplier's O2C credit check flags the exposure and caps open orders at $250,000, delaying a launch build until the buyer negotiates a partial prepayment.
Disputed invoice, both sides: A buyer short-pays an invoice by $1,840 over a quantity mismatch. On the supplier side it sits as a disputed receivable for 45 days, and the supplier's collections team, not its sales team, becomes the buyer's main contact until it clears.
Terms arbitrage: A machine shop selling on Net 60 quietly adds 1.5% to quotes for customers who routinely pay at day 80, recovering its receivables cost.
Definition
Procurement people rarely run O2C, but they interact with it daily. Every PO you send becomes a sales order in a supplier's system, triggering credit review, order promising, fulfillment, an invoice, and a collections process if you pay late. When a supplier holds your order for a credit check or stops shipments over past-due balances, that is their O2C process working as designed.
The mirror with procure-to-pay is exact and useful. Your goods receipt is their proof of delivery; your invoice exception is their disputed receivable; your payment terms are their days sales outstanding. A buyer who pushes terms from Net 30 to Net 90 has not eliminated cost, only moved working-capital cost onto the supplier, who eventually prices it back in.
This is why clean buying behavior earns real treatment. Suppliers profile customers by O2C friction: accurate POs, few disputes, on-time payment. Low-friction customers get allocation during shortages and flexibility on rush orders. Chronic late payers discover their partner has quietly moved them to prepayment.
Related Terms
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