Glossary
Order to cash,defined.
104 plain-English definitions for the accounts receivable, collections, cash application and credit terms finance teams use every day. From ACH payments to write-offs.
Order-to-cash basics
The cycle, the systems and the accounting it runs on.
- Accounts payable (AP)Money a business owes its suppliers for goods or services it has received but not yet paid for. Your invoice sits in your customer's accounts payable.
- Accounts receivable (AR)Money customers owe a business for goods or services already delivered on credit, recorded as a current asset on the balance sheet.
- AR subledgerThe customer-by-customer record of open invoices, credits and payments that rolls up to the accounts receivable balance in the general ledger.
- Business process outsourcing (BPO)Contracting a specialist provider to run a business process, such as collections or cash application, on your behalf.
- Cash flow from operationsThe cash a company's core business generates in a period, where collecting receivables faster shows up directly.
- Customer master dataThe core record for each customer in the ERP: legal entity, billing and remit-to addresses, contacts, payment terms, tax details and credit limit.
- ERPSoftware such as NetSuite, SAP or Oracle that holds a company's general ledger, orders, invoices and customer records.
- General ledger (GL)The master record of every financial transaction a company posts, organized by account, from which its financial statements are produced.
- Month-end closeThe work finance completes after each month to reconcile accounts and finalize the books. For AR, that means applying cash, reconciling the subledger and reviewing reserves.
- Multi-entity ARRunning receivables across several legal entities, currencies or ERPs, where the same customer may owe money to more than one subsidiary.
- Operating cycleThe time it takes to turn cash spent on inventory or services back into cash collected from customers.
- Order to cash (O2C)The end-to-end process from receiving a customer order to collecting and applying the cash for it: order management, credit, invoicing, collections and cash application.
- Procure to pay (P2P)The buyer's side of the transaction: requesting and purchasing goods, receiving them, then matching and paying the supplier's invoice.
- Quote to cash (QTC)The wider revenue process that starts before order-to-cash, at pricing and quoting a deal, and runs through contracting, billing and collection.
- Revenue recognitionThe accounting rules that decide when revenue is recorded, which can differ from when it's invoiced or when the cash arrives.
- Shared services center (SSC)A central team that runs transactional finance work, such as AR, AP and cash application, for all of a group's business units.
- Working capitalCurrent assets minus current liabilities: the short-term cash a business runs on, heavily shaped by receivables, payables and inventory.
Invoicing & billing
What gets sent to customers, and what they need before they'll pay.
- AP portalA buyer-run website, such as Coupa, Ariba or a retailer's own system, where suppliers must submit invoices and track their status to get paid.
- Consolidated invoiceA single invoice that combines several orders, shipments or billing periods for one customer, instead of billing each separately.
- Credit memoA document that reduces what a customer owes, issued for returns, pricing errors, agreed concessions or approved deductions.
- Debit memoA document that increases what a customer owes after the original invoice, for example to correct an undercharge or add a fee.
- E-invoicingExchanging invoices as structured data between seller and buyer systems, which a growing number of tax authorities now require.
- Early payment discountA discount for paying before the due date, written like 2/10 Net 30: 2% off if paid within 10 days, otherwise the full amount within 30.
- InvoiceA document a seller issues to request payment, listing what was delivered, the amount owed, the payment terms and the due date.
- Invoice to cashThe part of order-to-cash that runs from issuing an invoice to having the payment applied: delivery, collections, disputes and cash application.
- Payment terms (Net 30)The agreed conditions for paying an invoice. Net 30, for example, means the full amount is due 30 days after the invoice date.
- Pro forma invoiceA preliminary bill sent before goods ship or work starts, showing the expected charges. It isn't a demand for payment and isn't recorded as a receivable.
- Purchase order (PO)A buyer-issued document authorizing a purchase at agreed quantities and prices. Many buyers won't pay an invoice that doesn't reference a valid PO.
- Statement of accountA summary sent to a customer listing every open invoice, credit and payment on their account, with the total balance due.
- Supplier onboardingThe paperwork a new customer needs before it will pay you: vendor forms, tax documents, bank details and portal registration.
- Three-way matchAn accounts payable control that checks an invoice against the purchase order and the receiving record before approving it for payment.
- W-9 formA US IRS form a supplier gives its customers to confirm its legal name and taxpayer identification number. Many AP teams won't pay without one.
Collections
Getting paid on time, and what to do when you aren't.
- AR inboxThe shared mailbox where customers send remittances, invoice requests, disputes and questions to a company's accounts receivable team.
- Collection agencyA third party that pursues overdue debts on a creditor's behalf, usually for a percentage of what it recovers.
- CollectionsThe work of getting customers to pay what they owe on time: reminders, follow-ups, calls, escalation and fixing whatever is blocking payment.
- Collections cadenceThe timing and sequence of collection touches, such as emails, calls and statements, before and after an invoice falls due.
- Delinquent accountA customer account with invoices significantly past due, usually flagged for closer follow-up, a credit hold or escalation.
- DunningThe structured sequence of reminders sent as invoices approach and pass their due date, escalating in tone and channel.
- Dunning letterA written payment reminder for an overdue invoice: one step in a dunning sequence, from a polite first notice to a final demand.
- Final demand letterThe last written notice before an overdue debt goes to an agency or legal action, stating the amount due, a deadline and what happens if it isn't paid.
- Past dueAn invoice that hasn't been paid by its due date. It stays past due, and keeps aging, until it's paid, credited or written off.
- Payment planAn agreement that lets a customer settle an overdue balance in scheduled installments rather than in a single payment.
- Promise to payA customer's commitment to pay a specific amount by a specific date, recorded so collections can follow up if it's missed.
- Write-offRemoving an invoice balance from accounts receivable because it won't be collected, charging it to bad debt expense or the allowance for doubtful accounts.
Cash application & payments
How money arrives, and how it gets matched to invoices.
- ACH paymentAn electronic bank transfer through the US Automated Clearing House network, one of the most common ways US businesses pay each other.
- AR reconciliationConfirming that the AR subledger total matches the accounts receivable balance in the general ledger, and explaining any difference.
- Auto-match rateThe share of incoming payments applied to invoices automatically, without anyone researching the remittance by hand.
- BAI2 fileA standard bank file format that reports account balances and transactions, used to import bank activity for cash application and reconciliation.
- Bank reconciliationMatching the cash balance in the general ledger to the bank statement, accounting for deposits in transit, fees and timing differences.
- Cash applicationMatching incoming payments to the open invoices they pay and posting them in the ERP, so receivables and cash stay accurate.
- LockboxA bank service that receives a company's customer payments, deposits them and sends back the payment and remittance data for cash application.
- On-account paymentA payment recorded against a customer's account as a whole rather than specific invoices, usually until it's clear what the payment is for.
- OverpaymentWhen a customer pays more than the invoices it meant to settle, leaving a credit balance to refund or apply to future invoices.
- Payment reconciliationChecking that the payments recorded in your systems match the cash that actually reached the bank, and resolving any differences.
- Remittance adviceThe details a customer sends with or alongside a payment, saying which invoices it covers and explaining any deductions.
- Unapplied cashPayments received but not yet matched to specific invoices, left sitting on the customer's account or in a suspense account.
- Virtual card paymentA payment made with a single-use card number issued through the buyer's AP platform, which the supplier charges like any card transaction.
- Wire transferA fast electronic transfer between banks, often used for large or international payments, that carries little remittance information.
Disputes & deductions
Why customers pay less than you billed, and how to recover it.
- ChargebackA forced reversal or deduction of a payment that a customer, or their bank, claims wasn't owed.
- Compliance deductionA penalty a retailer deducts for breaking its supplier requirements, such as late delivery, incorrect labeling or a missing advance ship notice.
- Deductions managementValidating, resolving and recovering the amounts customers withhold from payments, from promotional allowances to shortage and damage claims.
- Invalid deductionA deduction the customer isn't entitled to under the agreement, such as a duplicate claim, an expired discount or a penalty for something that didn't happen.
- Invoice disputeA customer's objection to an invoice, for example to its price, quantity, terms or delivery, that holds up payment until it's resolved.
- Proof of delivery (POD)Documentation, usually a signed delivery receipt or carrier record, showing that goods were delivered, when and to whom.
- Reason codeA standard label given to a deduction or dispute, such as pricing, shortage or damage, that records why the customer didn't pay in full.
- Short paymentWhen a customer pays less than the full invoice amount, leaving a balance that needs to be explained, accepted or collected.
- Trade promotion deductionAn amount a retailer withholds from payment to settle promotional allowances, such as discounts, displays or advertising, agreed with a consumer goods supplier.
Credit & risk
Who gets credit, how much, and what happens when it goes bad.
- Allowance for doubtful accountsA reserve for the share of receivables a business estimates it won't collect, shown as a reduction of the receivables balance.
- Bad debt expenseThe cost of receivables a business doesn't expect to collect, recognized as an expense on the income statement.
- Bad debt recoveryCollecting payment on an account that was previously written off as uncollectible.
- Credit holdA block on new orders or shipments for a customer who's over their credit limit or seriously past due, until the balance is paid or the order is approved.
- Credit limitThe maximum outstanding balance a business lets a customer carry before new orders are held or reviewed.
- Credit managementDeciding which customers get credit, how much and on what terms, then monitoring that risk while they owe you money.
- Credit policyWritten rules for granting credit: who qualifies, how limits and terms are set, who can approve exceptions and when accounts are escalated.
- Credit risk monitoringWatching existing customers for early signs they may struggle to pay, such as slowing payments or credit score changes, and adjusting terms in time.
- Trade creditCredit one business extends to another by delivering goods or services now and accepting payment later, on agreed terms.
- Trade credit insuranceInsurance that pays out part of an unpaid invoice if a covered customer can't pay because of insolvency or prolonged default.
Metrics & reporting
The numbers finance teams use to judge receivables.
- AR agingGrouping open receivables by how long they've been outstanding, to show how much is current and how much is late.
- AR aging reportThe report that lists each customer's open balance by age: current, then 1–30, 31–60, 61–90 and more than 90 days past due.
- AR turnover ratioHow many times a business collects its average receivables balance in a period: net credit sales divided by average AR.
- Average collection periodThe average number of days it takes to collect receivables, closely related to DSO and the AR turnover ratio.
- Average days delinquent (ADD)The average number of days invoices are paid after their due date, calculated as DSO minus best possible DSO.
- Best possible DSODSO calculated from current receivables only: how fast you'd collect if every customer paid exactly on terms.
- Cash conversion cycleThe number of days between paying for inventory and collecting cash from customers: days inventory outstanding plus DSO minus DPO.
- Collection effectiveness index (CEI)The share of collectible receivables actually collected in a period, a measure of collections performance that DSO can hide.
- Collections forecastA prediction of how much cash will be collected and when, built from open invoices, payment terms and each customer's payment behavior.
- Days deductions outstanding (DDO)The average number of days deductions stay open before they're resolved, recovered or written off.
- Days payable outstanding (DPO)The average number of days a company takes to pay its own suppliers.
- Days sales outstanding (DSO)The average number of days it takes to collect payment after a sale, calculated from receivables and credit sales over a period.
- Percent currentThe share of total receivables that isn't yet past due, a simple and widely used measure of the health of an AR portfolio.
AI & automation
How software and agents take on order-to-cash work.
- Agent operating procedureA written procedure that tells an AI agent how to handle a type of work, encoded from the standard operating procedures a finance team already follows.
- Agentic AIAI that works toward a goal over several steps, deciding what to do, using tools and checking results, rather than producing a single response.
- AI AR agentSoftware that carries out accounts receivable work, such as reading emails, chasing invoices and matching payments, by reasoning through each case rather than following a fixed script.
- AR automationUsing software to handle accounts receivable tasks, such as invoicing, reminders and payment matching, with less manual effort.
- Audit trailA chronological record of every action taken on an account, who or which agent took it, and why, so decisions can be reviewed later.
- Autonomous financeFinance operations where software runs routine processes end to end, while people supervise, handle exceptions and set policy.
- BacktestingTesting a change to an automated process against past cases before using it on live work, to see what it would have done differently.
- Context graphA connected record of the people, documents, decisions and history around each customer and transaction, giving people and agents the full picture behind the numbers.
- ExceptionAny case that leaves the standard path, such as a short payment, a portal rejection, a disputed line or a missing PO, and needs investigating before it can be resolved.
- Human in the loopA design in which an automated system hands defined decisions to a person to review or approve before it acts.
- Managed AI serviceAI that the provider operates for you, with its own experts running and improving it, rather than software your team configures and runs.
- Multi-agent systemA setup where several specialized AI agents, for example for collections, disputes and cash application, each handle one area and pass work between them.
- Robotic process automation (RPA)Software bots that repeat scripted steps in other applications, such as clicking, copying and pasting, exactly as they were configured.
- Supervised autonomyGiving an AI agent independence in stages: it starts by proposing actions for approval and runs on its own only as its work proves reliable.
Less defining,more collecting.
Rex is the AI operations partner for order-to-cash. Its agents cover every account and resolve exceptions before cash gets stuck.