ERP Fundamentals2 min readUpdated August 4, 2026
The Order to Cash Cycle and Receivable Ageing
The chain from a customer order to money actually received, and how an A/R Aging report reads the health of receivables out of the same data.
O2CSales OrderInvoiceA/R AgingReceivablesAR
Order to Cash (O2C) mirrors P2P on the income side: from a customer order to cash arriving. What makes it interesting technically is the gap between the steps — goods can ship weeks before the money appears, and that gap is what a receivable is.
The steps and their documents
- 01Sales Order — the customer's order is recorded; nothing hits the ledger yet.
- 02Credit Check — confirms the customer is still inside their allowed credit limit.
- 03Item Fulfillment — goods leave the warehouse, stock decreases.
- 04Invoice — the bill is issued; this is where revenue and the receivable are recognised.
- 05Customer Payment — payment arrives and is applied against the relevant invoice.
- 06Deposit — funds are banked and reconciled against the bank account.
Reading an A/R Aging report
A/R Aging groups outstanding balances by how long they are past due. The calculation starts from the due date, not the invoice date — and the due date comes from the customer's payment terms.
| Bucket | Meaning | Usual stance |
|---|---|---|
| Current | Not yet due | Normal, no action |
| 1–30 days | Mildly late | Routine reminder |
| 31–60 days | Needs attention | Active chasing by the A/R team |
| 61–90 days | Problematic | Escalate, review the credit limit |
| Over 90 days | At risk of not being collected | Consider a provision |