Order-to-cash cycle

From Supply Chain Management Encyclopedia

Russian: Цикл от заказа до оплаты

The order-to-cash cycle represents the processes and steps involved from the time that an order is received until payment for the order is received by the seller. It includes elements of the order cycle (order receipt, order processing) and elements that occur after the product has been shipped (billing dispute resolution, transfer of funds from buyer to seller). The order-to-cash cycle is embedded within the cash-to-cash cycle. The importance of length of the the order-to-cash cycle is that a longer length increases day sales outstanding, which in turn affects the cash flow of the business. Beacuse of this many firms seeks ways to reduce to reduce the length of the order-to-cash cycle. A particular emphsis may be placed on reducing backlogs (to shorten the length of the order cycle), the number of errors made in ordering and invoicing systems (to reduce billing errors, and hence the number of billing disputes), and complexity (a shift toward everyday low pricing).