Procurement Glossary
Order-to-cash: definition, process steps and importance in Procurement
November 20, 2025
The order-to-cash process covers all steps from order placement to receipt of payment and forms the core of business processing. In Procurement , this process plays a central role in coordinating with suppliers and optimizing procurement cycles. Find out below what order-to-cash means, how the process works and which key figures are relevant for successful management.
Key Facts
- Order-to-cash refers to the entire business process from order to receipt of payment
- The process typically comprises 6-8 main steps: Order acceptance, credit verification, order processing, shipping, invoicing and payment processing
- Average cycle times vary between 30-90 days depending on the industry
- Digitalization can reduce process time by up to 50% and minimize error rates
- In Procurement , order-to-cash optimization enables better supplier integration and cash flow management
Contents
What is order-to-cash? Definition of the process
Order-to-cash describes the complete business process that begins with a customer order and ends with the receipt of payment.
Core elements of the order-to-cash process
The process is divided into several successive phases:
- Order acceptance and validation
- Credit check and credit rating
- Order processing and production planning
- Shipping and delivery
- Invoicing and payment processing
Order-to-cash vs. purchase-to-pay
While order-to-cash describes the sales process from the supplier's perspective, purchase-to-pay is the mirror image of the procurement process from the buyer's perspective. Both processes must interlock seamlessly in order to ensure efficient business relationships.
Importance of order-to-cash in Procurement
For purchasing organizations, understanding supplier order-to-cash processes is crucial for optimizing their own demand planning and supplier integration. Close coordination enables shorter lead times and improved planning reliability.
Procedure: How order-to-cash works
The successful implementation of an order-to-cash process requires a structured approach and clear responsibilities.
Process design and standardization
The first step involves defining a standardized process organization with clear interfaces between the departments. Roles, responsibilities and escalation channels are defined to ensure a smooth flow of information.
System integration and automation
Modern order-to-cash processes are based on integrated IT systems that automate goods receipt, invoice verification and payment processing. EDI interfaces and API connections enable seamless data exchange between business partners.
Continuous optimization
Regular process analyses identify bottlenecks and potential for improvement. Lean procurement methods are used to eliminate waste and continuously reduce throughput times.
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Important KPIs and targets
Order-to-cash performance is measured using specific key figures that reflect various aspects of the process.
Lead time key figures
The order-to-cash cycle time measures the total time from receipt of order to receipt of payment. Typical benchmarks are between 30-60 days, depending on the industry and payment conditions. Sub-indicators such as order-to-delivery time and invoice-to-cash time enable detailed analyses.
Quality and efficiency metrics
The first-pass yield rate shows the proportion of error-free orders, while the complaint rate identifies quality problems. The degree of automation and cost rates per order measure process efficiency and digitization progress.
Financial performance indicators
Days Sales Outstanding (DSO) and Cash Conversion Cycle evaluate the capital commitment, while the debtor default rate quantifies the credit risk. These key figures enable well-founded decisions to be made on process optimization and risk minimization.
Risks, dependencies and countermeasures
Order-to-cash processes involve various risks that can be minimized by taking appropriate measures.
Liquidity and default risks
Delayed incoming payments jeopardize liquidity and can lead to cash flow problems. Credit insurance, factoring and structured payment terms reduce these risks. Regular credit checks and escalation processes in the event of late payment are essential.
System failures and data integrity
IT failures can paralyze the entire process and lead to a considerable loss of sales. Redundant systems, regular backups and emergency processes ensure business continuity even in the event of technical faults.
Compliance and regulatory risks
Violations of tax, data protection or trade regulations can lead to legal consequences. Automated compliance checks and regular training minimize these risks and ensure compliance with all relevant regulations.
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Practical example
A medium-sized mechanical engineering company implemented a digital order-to-cash system to optimize its supplier relationships. By integrating EDI interfaces and automated document verification, the company was able to reduce its lead times from 45 to 28 days. The error rate fell by 60%, while customer satisfaction increased significantly.
- Automated order confirmation within 2 hours
- Real-time tracking for all participants
- Reduced manual intervention by 70%
Current developments and effects
The order-to-cash process is subject to continuous change due to technological innovations and changing customer expectations.
Digitalization and AI integration
Artificial intelligence is revolutionizing process automation through intelligent document recognition, predictive analytics and automated decision-making. Machine learning optimizes credit assessments and reduces manual intervention by up to 70%.
Real-time processing
Real-time processing enables immediate order confirmations and live tracking of deliveries. Cloud-based platforms create transparent communication channels between all parties involved in the process and significantly shorten response times.
Sustainability and ESG compliance
Environmental and social standards are increasingly being integrated into order-to-cash processes. Digital receipts reduce paper consumption, while sustainable purchasing strategies influence the entire value chain.
Conclusion
Order-to-cash is the foundation of efficient business processing and direct revenue generation. Digitizing this process enables significant efficiency gains and improved customer experiences. For purchasing organizations, understanding supplier order-to-cash processes is crucial for optimal procurement strategies. Continuous optimization and technological innovation will continue to determine competitiveness in the future.
FAQ
What is the difference between order-to-cash and purchase-to-pay?
Order-to-cash describes the sales process from the supplier's perspective, while purchase-to-pay represents the purchasing process from the buyer's perspective. Both processes are complementary and must be optimally coordinated to ensure efficient business relationships.
How long does a typical order-to-cash process take?
The lead time varies between 30-90 days depending on the industry and complexity. Simple standard products can be processed in 15-30 days, while customer-specific solutions can take 60-120 days.
Which systems support order-to-cash processes?
ERP systems form the backbone, supplemented by CRM software, EDI platforms and specialized order management systems. Cloud-based solutions are increasingly enabling integrated end-to-end processes with real-time data processing.
How can order-to-cash performance be improved?
Automation of repetitive tasks, standardization of processes and integration of different systems are key factors. Regular key figure analyses and continuous process optimization lead to sustainable improvements in overall performance.
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