One-Stop Order-to-Cash (O2C) Guide for SaaS Businesses

Your Order-to-Cash (O2C) process is likely bleeding cash, and you don’t even realize it. 

Studies show that businesses lose up to 7% of their annual revenue due to inefficiencies in this cycle. 

From delayed payments to billing errors, every failure in O2C directly impacts your bottom line. 

In this article, we’ll expose the critical steps you’re likely missing in your O2C cycle, the shocking impact it has on your financial health, and how you can fix it to improve liquidity. 

It’s time to stop the leaks and take control.

Order-to-Cash at a glance

• The order-to-cash process begins when a customer places an order and continues until the order is fulfilled, paid for, and accounted for by the business.
• The eight steps in an Order-to-Cash process are order management, credit management, order fulfillment, order shipping, customer invoicing, accounts receivable, payment collections, and finally reporting and data management.
• Optimize your O2C process by leveraging an O2C automation tool, establishing clear payment terms upfront, and unlocking real-time access to business and finance insights.
• Streamline your Order-to-Cash process with Zenskar’s no-code contract engine and AI-powered billing, reporting and revenue automation.

What is Order-to-Cash?

Order-to-Cash (O2C) is a key process that covers everything from when a customer places an order to when the payment is received and logged to an accounts receivable system.

Why is optimizing the Order-to-Cash process important?

Post-pandemic, the O2C process saw the highest surge in automation, with adoption rates skyrocketing by 233%, according to Workato.

1. Faster order fulfillment

The more efficiently you manage orders, the faster your customers get what they paid for, which builds trust and loyalty.

2. Reduces time to payment

A shorter O2C cycle means businesses get paid faster. According to a study by Aberdeen Group, companies with the best O2C performance shorten their Days Sales Outstanding (DSO) by 30%. This faster cash conversion cycle not only improves liquidity but also allows businesses to reallocate resources toward other growth initiatives.

3. Improves billing accuracy

Reducing errors in the billing system reduces customer disputes and delays, resulting in faster cash receipts and smoother operations.

This accuracy also ensures compliance with accounting standards, improving the audit trail and minimizing the risk of financial misstatements. It also helps businesses stay in line with evolving regulations, reducing compliance-related issues down the road.

4. Optimizes revenue recognition

By automating revenue recognition solution within the O2C cycle, businesses can ensure that they are meeting regulatory requirements, in accordance with accounting standards like ASC 606 and IFRS 15, while maintaining consistent and predictable revenue streams. 

This compliance is critical for investors, auditors, and internal reporting.

What’s the difference between Order-to-Cash vs. Quote to Cash vs. Procure to Pay?

What are the steps in the Order-to-Cash process?

1. Order management

Function: Finance operations team

• Role: In order management, the finance operations team ensures that customer orders are captured (through different channels like your website, email, or by confirming an order with your sales rep) and validated, ensuring all relevant information is accurate.
  

• Responsibilities:
  
  • Verify order details (products, prices, terms).
    
  • Route the order to the appropriate teams for fulfillment (e.g., sales, logistics).
    
  • Use automation to track order status and flag discrepancies.
    
• Finance team involvement:
  
  • Ensure proper invoicing setup for the order based on customer agreements.
    
  • Validate that order terms (pricing, delivery) match the financial agreements.

When the order is being reviewed, the contract comes into play as it defines what products or services, at what price, and under what conditions are to be purchased. The pricing terms in your contract, along with other contract conditions, will then be moved to your billing tool.

2. Credit management (optional step)

• Function: Credit/collections team
  

• Role: The credit/collections team manages customer credit assessments, determining the creditworthiness of customers before extending payment terms.
  

• Responsibilities:
  
  • Run credit checks on new customers (or businesses) to assess risk.
    
  • Set credit limits based on customer financial stability.
    
  • Approve or deny credit requests.
    
• Finance team involvement:
  
  • Monitor and evaluate customer payment behavior.
    
  • Set payment terms that reflect the customer’s credit score and financial history.
    

3. Order fulfillment

• Function: Finance operations & supply chain/logistics teams

• Role: This process involves preparing the goods/services for delivery. Though this involves multiple teams (sales, inventory, logistics), the finance operations team tracks the process from a financial perspective.
  

• Responsibilities:
  
  • Ensure that the sales order corresponds to available inventory or services.
    
  • Collaborate with logistics to track the delivery timeline and ensure product readiness.
    
• Finance team involvement:
  
  • Maintain inventory-related costs and ensure appropriate recognition in the books.
    
  • Monitor if any adjustments (like discounts or pricing changes) are needed before shipping.

4. Order shipping

• Function: Finance operations & logistics teams
  

• Role: Shipping involves moving the order to the customer. For SaaS companies, this means that once a customer subscribes, you activate the account, deploy the software, pass on the licensee key or API credentials, or perform data migration from an old to a new system. This typically falls under the responsibility of the logistics team, but finance ensures costs are correctly tracked.
  

• Responsibilities:
  
  • Coordinate with the logistics department to ensure accurate delivery timelines and shipping data.
    
  • Confirm that orders are shipped to the correct location.
    
• Finance team involvement:
  
  • Monitor shipping-related expenses and account for those costs in the overall order fulfillment.
    

5. Customer invoicing

• Function: Accounts receivable team
  

• Role: Accounts receivable generates and sends invoices to customers for the goods or services they’ve received.
  

• Responsibilities:
  
  • Create accurate invoices based on customer orders.
    
  • Ensure invoices reflect all applicable costs (products, services, taxes, shipping).
    
  • Send invoices to customers promptly.
    
• Finance team involvement:
  
  • Ensure that the correct payment terms (net 30, 60, etc.) are reflected in invoices.
    
  • Utilize automation tools to speed up invoicing.
    

6. Accounts receivable

• Function: Accounts receivable team
  

• Role: Once the invoice has been sent to your customer, your accounts receivable team steps in to flag and follow up on overdue invoices. Rather than opting for a standard payment reminder tool that sends out automated reminders, you need a solution that lets you scale and personalize your debt communications.
  

• Responsibilities:
  
  • Send payment reminders for overdue accounts.
    
  • Manage and maintain customer payment terms.
    
  • Keep records of all accounts receivable and the status of each invoice.
    
• Finance team involvement:
  
  • Regularly follow up on overdue payments. You also need the flexibility to send out payment reminders based on specific thresholds or overages. For instance, when an invoice for a long-term CRM contract crosses the $20,000 threshold without payment, an immediate payment reminder needs to be sent to the client.
  • Ensure payment terms are clearly communicated and adhered to.
    

7. Payment collections

• Function: Accounts receivable & collections team
  

• Role: The collections team receives and processes payments from customers. They are responsible for ensuring that payments are collected on time and any discrepancies are resolved.
  

• Responsibilities:
  
  • Reconcile payments with outstanding invoices.
    
  • Process different payment methods (credit cards, ACH, checks).
    
  • Resolve any discrepancies between payments and invoices.
    
• Finance team involvement:
  
  • Ensure payments are accurately recorded in the financial system.
    
  • Track customer payment patterns to optimize collection strategies.

8. Reporting and data management

• Function: Finance analytics & reporting team
  

• Role: This team is responsible for analyzing the O2C process and identifying trends, bottlenecks, and areas for improvement across the cycle.
  

• Responsibilities:
  
  • Generate real-time reports on O2C metrics (e.g., DSO, payment collections, invoice status).
    
  • Analyze customer payment patterns to improve the collections process.
    
  • Identify issues or inefficiencies in the O2C cycle.
    
• Finance team involvement:
  
  • Use a finance analytics tool to track cash flow and optimize decision-making.
    
  • Provide actionable insights that help improve processes like invoicing and collections.
    

What are the challenges in running the Order-to-Cash process manually?

What are the best practices for optimizing the Order-to-Cash cycle?

1. Standardize and document all O2C workflows

• Develop clear, documented O2C workflows that are consistently followed across all departments.
• Regularly review and update procedures to adapt to business changes or regulatory requirements.
• Use process mapping to identify bottlenecks and standardize exception handling, ensuring smoother handoffs between teams.

2. Integrate systems for seamless order flow 

• Integrating ERP systems (e.g., SAP, NetSuite) with CRM platforms (e.g., Salesforce) ensures smooth data flow from sales to finance, eliminating silos and improving billing accuracy and revenue recognition.

• Many organizations use CRM platforms for sales and separate finance applications for AR, leading to disjointed processes. Bridging these systems ensures that customer data, order status, and payment information flow smoothly across departments, enabling predictive analytics, improved customer segmentation, and personalized offers. 

• E-invoicing accelerates the payment process and supports compliance with regulatory requirements. When integrated with ERP and AR systems, e-invoicing enables faster cash collection, improved cash flow, and enhanced visibility into outstanding receivables. 

3. Implement technology for optimization

• Leverage O2C automation platforms to unify order, fulfillment, invoicing, and payment data, reducing silos and manual re-entry. 
• Use real-time dashboards for end-to-end visibility, enabling proactive management of orders and receivables. 

4. Monitor financial health

• Deploy predictive analytics to forecast cash flow, identify at-risk accounts, and prioritize collections efforts.
• Track key O2C metrics (e.g., DSO, order cycle time, invoice accuracy) and set benchmarks for continuous improvement.
• Analyze customer payment patterns and use insights to refine credit policies and collection strategies. 

5. Use automation

• Implement AI-powered automation for repetitive tasks like order validation, invoice generation, payment reminders, and cash application.
• Adopt AI-driven tools for credit scoring, pricing, and fraud prevention to make smarter, faster decisions.
• Use intelligent workflows to route approvals, resolve exceptions, and trigger escalations automatically.
• Employ robotic process automation (RPA) for data entry, reconciliation, and reporting, freeing up teams for higher-value work.

6. Collaborate cross-functionally

• Create cross-departmental O2C task forces to address process pain points and drive innovation.
• Involve sales, finance, operations, and customer service in regular reviews to ensure alignment and shared accountability.
• Use collaborative platforms to break down silos, share real-time updates, and resolve issues quickly.

7. Foster customer communication

• Set clear payment expectations at the outset and reinforce them with transparent, timely communication throughout the O2C cycle.
• Use automated, personalized reminders and notifications to keep customers informed about order status, invoices, and payment deadlines.
• Gather and act on customer feedback to refine processes and remove friction points, boosting satisfaction and loyalty.

Out-of-the-box ideas

• Pilot AI-driven “smart order prioritization” to dynamically adjust fulfillment based on customer value, payment history, or urgency.
• Use generative AI to analyze customer claims and deductions, recovering lost revenue and reducing manual disputes.
• Implement customer-facing portals where customers can track orders, view invoices, and resolve issues independently, reducing support load and accelerating payments.

What are the key metrics for O2C optimization?

1. Days Sales Outstanding (DSO)

DSO is the average number of days it takes for a company to collect payment after a sale has been made. High DSO indicates that collections are slow, potentially pointing to issues like invoice disputes or late payment processes.

How to optimize it:

• Automate invoicing to reduce delays.
  
• Set up payment reminders for overdue accounts.
  
• Regularly review credit policies to ensure they align with customer payment behavior.

2. Cash Conversion Cycle (CCC) 

CCC shows the number of days it takes for a company to turn its investments in inventory and other resources into cash through sales. It’s calculated by adding the days inventory outstanding (DIO), days sales outstanding (DSO), and subtracting days payable outstanding (DPO). The shorter the CCC, the faster cash is generated from operations.

How to optimize it:

• Reduce inventory holding times by improving demand forecasting.
  
• Speed up collections by tightening credit terms and using automation.
  
• Manage payables effectively to avoid delaying cash inflows.

3. Invoice accuracy

Accurate invoices ensure faster processing and fewer disputes, leading to quicker payments and improved cash flow.

How to optimize it:

• Implement automated billing systems that pull data directly from contracts and orders.
  
• Conduct regular reviews of invoicing processes to catch recurring errors.
  
• Ensure all terms and conditions are clearly outlined in the contract and reflected in the invoice.

4. Payment lead time

Payment lead time is the duration between issuing an invoice and receiving payment. A shorter lead time means faster cash inflows. The faster a company receives payment, the better its liquidity and the easier it can reinvest in operations or growth.

How to optimize it:

• Provide multiple, convenient payment options for customers.
  
• Automate follow-up reminders for overdue payments.
  
• Offer early payment discounts to incentivize faster payments.

5. Credit risk

Credit risk evaluates the likelihood that a customer will default on payment. This is based on creditworthiness assessments and financial history. High credit risk can lead to bad debts, which negatively affect cash flow and profitability.

How to optimize it:

• Implement a robust credit assessment process during order intake.
  
• Use credit scoring tools and integrate them into the order management system.
  
• Set appropriate credit limits based on customer risk profiles.

Transform your O2C cycle with Zenskar

Traditional O2C automation tools often struggle to handle bespoke contracts, forcing manual handoffs between sales, finance, and development teams.

We eliminate these inefficiencies with Zenskar's AI-powered, no-code contract management, which integrates seamlessly with ERP, CRM, and CPQ systems. This streamlines workflows and empowers your sales team to close deals quickly, without the need for engineering support.

Zenskar’s AI-powered contract ingestion lets you simply upload your contracts and automates your billing AND revenue recognition, for any pricing or custom terms. Contracts AI extracts key contract details to generate invoices and performance obligations on the platform automatically.

All those hours your team spends reviewing custom contracts and entering details like pricing, discounts, free credits, renewals, and amendments into the system, eliminated entirely.

💡Zenskar’s AI offerings also include AI templates, AI agents, AI aggregation, AI analytics, and more. To learn more, check out our blog on how our AI finance tool automates billing and revenue recognition through intelligent workflows. 

Unlike disjointed financial operations that hinder scaling, our goal is to centralize data across systems, providing a single source of truth for your entire O2C process. 

Ready to optimize your O2C process? Schedule a demo to see how we can streamline your order-to-cash cycle or take an interactive product tour.