Order-to-Cash (O2C)
Quick answer
The end-to-end cycle from order receipt to invoice payment. A key cash-flow health indicator.
Key takeaways
- Order entry (lost days: 0-3) - phone/email orders, manual re-keying
- Credit check (0-2 days) - manual, no preconfigured limits
- Pick + Pack + Ship (1-3 days) - no WMS, no route optimization
- Invoicing (1-5 days) - invoices issued weekly, not at shipment
- Collection (15-45 days) - no automated follow-up, no dunning
Definition
Order-to-Cash (O2C) is the full chain: order received → credit check → stock allocation → shipment → invoicing → payment follow-up → cash received → bank reconciliation. Every extra day in the cycle = money locked in receivables.
Why it is a strategic KPI
In distribution and B2B services, a typical O2C cycle runs 35-65 days. At 50 days O2C on €5M monthly revenue, you keep €8.3M locked in receivables. Cutting 10 days releases €1.7M of cash.
Stages and where time leaks
- Order entry (lost days: 0-3) - phone/email orders, manual re-keying
- Credit check (0-2 days) - manual, no preconfigured limits
- Pick + Pack + Ship (1-3 days) - no WMS, no route optimization
- Invoicing (1-5 days) - invoices issued weekly, not at shipment
- Collection (15-45 days) - no automated follow-up, no dunning
- Reconciliation (1-7 days) - manual bank statement ↔ invoice matching
Automations that cut days
- EDI ORDERS → order in ERP within 5 min: -2 days
- Credit policy embedded in OMS: -1 day
- Auto DESADV + INVOIC at shipment: -3 days
- Automatic dunning (D+1, D+7, D+15): -8 days DSO
- AI reconciliation against MT940: -2 days
Total potential: -16 O2C days, large cash unlock.
Real-world example
A building materials distributor cut O2C from 58 to 41 days in 6 months with OMS + EDI + automated dunning. Cash unlocked: €4.2M on €18M annual revenue.
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Frequently asked
Difference between O2C and DSO?+
DSO (Days Sales Outstanding) measures only the collection stage (invoice to cash). O2C covers the whole cycle, from order to cash. DSO is a sub-metric of O2C.
Which O2C stage is the most expensive?+
Statistically, collection (45-60% of total duration). That is where most days are lost through missing dunning and unresolved disputes.
How do I measure O2C across multiple channels?+
Centralized in the OMS, segmented per channel (classic B2B, marketplace, EDI retail, e-commerce). Each channel has a distinct typical O2C.
Where CRMconnect fits
Related terms
DSO (Days Sales Outstanding)
Average number of days from invoice issue to cash collection. Key cash-flow indicator.
TechnologyEDI (Electronic Data Interchange)
Structured exchange of commercial documents between B2B partners, without emails or manual data entry.
B2B commerceINVOIC
The EDIFACT commercial invoice message - exchanged directly between supplier and customer (different from the fiscal e-Invoice).
LogisticsASN / DESADV (Advance Shipping Notice)
EDI shipping notice sent before goods physically arrive at the retailer - describes pallet, batch, quantity.