---
title: "Order-to-cash glossary: AR, collections and cash application terms | Rex"
description: "104 plain-English definitions of the accounts receivable, collections, cash application, deductions and credit terms finance teams use every day."
canonical: https://www.rex.inc/glossary
---

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.

[Learn more](https://www.rex.inc/learn-more) [Browse resources](https://www.rex.inc/resources)

## 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.](https://www.rex.inc/resources/glossary/accounts-receivable-vs-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.](https://www.rex.inc/resources/glossary/what-is-accounts-receivable)
- [AR subledger The customer-by-customer record of open invoices, credits and payments that rolls up to the accounts receivable balance in the general ledger.](https://www.rex.inc/glossary/ar-subledger)
- [Business process outsourcing (BPO) Contracting a specialist provider to run a business process, such as collections or cash application, on your behalf.](https://www.rex.inc/glossary/business-process-outsourcing)
- [Cash flow from operations The cash a company's core business generates in a period, where collecting receivables faster shows up directly.](https://www.rex.inc/resources/glossary/cash-flow-from-operations)
- [Customer master data The core record for each customer in the ERP: legal entity, billing and remit-to addresses, contacts, payment terms, tax details and credit limit.](https://www.rex.inc/glossary/customer-master-data)
- [ERP Software such as NetSuite, SAP or Oracle that holds a company's general ledger, orders, invoices and customer records.](https://www.rex.inc/glossary/erp)
- [General ledger (GL) The master record of every financial transaction a company posts, organized by account, from which its financial statements are produced.](https://www.rex.inc/glossary/general-ledger)
- [Month-end close The 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.](https://www.rex.inc/resources/ar-automation/month-end-close-ar-teams)
- [Multi-entity AR Running receivables across several legal entities, currencies or ERPs, where the same customer may owe money to more than one subsidiary.](https://www.rex.inc/resources/ar-automation/multi-entity-ar)
- [Operating cycle The time it takes to turn cash spent on inventory or services back into cash collected from customers.](https://www.rex.inc/resources/glossary/operating-cycle)
- [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.](https://www.rex.inc/resources/glossary/order-to-cash)
- [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.](https://www.rex.inc/glossary/procure-to-pay)
- [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.](https://www.rex.inc/glossary/quote-to-cash)
- [Revenue recognition The accounting rules that decide when revenue is recorded, which can differ from when it's invoiced or when the cash arrives.](https://www.rex.inc/glossary/revenue-recognition)
- [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.](https://www.rex.inc/glossary/shared-services-center)
- [Working capital Current assets minus current liabilities: the short-term cash a business runs on, heavily shaped by receivables, payables and inventory.](https://www.rex.inc/resources/glossary/working-capital)

## Invoicing & billing

What gets sent to customers, and what they need before they'll pay.

- [AP portal A 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.](https://www.rex.inc/resources/customer-portals/ap-customer-portals-guide)
- [Consolidated invoice A single invoice that combines several orders, shipments or billing periods for one customer, instead of billing each separately.](https://www.rex.inc/glossary/consolidated-invoice)
- [Credit memo A document that reduces what a customer owes, issued for returns, pricing errors, agreed concessions or approved deductions.](https://www.rex.inc/resources/glossary/what-is-a-credit-memo)
- [Debit memo A document that increases what a customer owes after the original invoice, for example to correct an undercharge or add a fee.](https://www.rex.inc/glossary/debit-memo)
- [E-invoicing Exchanging invoices as structured data between seller and buyer systems, which a growing number of tax authorities now require.](https://www.rex.inc/resources/invoicing-billing/e-invoicing-compliance)
- [Early payment discount A 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.](https://www.rex.inc/glossary/early-payment-discount)
- [Invoice A document a seller issues to request payment, listing what was delivered, the amount owed, the payment terms and the due date.](https://www.rex.inc/resources/glossary/what-is-an-invoice)
- [Invoice to cash The part of order-to-cash that runs from issuing an invoice to having the payment applied: delivery, collections, disputes and cash application.](https://www.rex.inc/resources/invoicing-billing/invoice-to-cash-automation)
- [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.](https://www.rex.inc/resources/glossary/payment-terms-net-30)
- [Pro forma invoice A 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.](https://www.rex.inc/glossary/pro-forma-invoice)
- [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.](https://www.rex.inc/glossary/purchase-order)
- [Statement of account A summary sent to a customer listing every open invoice, credit and payment on their account, with the total balance due.](https://www.rex.inc/resources/templates/statement-of-account-template)
- [Supplier onboarding The paperwork a new customer needs before it will pay you: vendor forms, tax documents, bank details and portal registration.](https://www.rex.inc/glossary/supplier-onboarding)
- [Three-way match An accounts payable control that checks an invoice against the purchase order and the receiving record before approving it for payment.](https://www.rex.inc/glossary/three-way-match)
- [W-9 form A 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.](https://www.rex.inc/glossary/w-9-form)

## Collections

Getting paid on time, and what to do when you aren't.

- [AR inbox The shared mailbox where customers send remittances, invoice requests, disputes and questions to a company's accounts receivable team.](https://www.rex.inc/glossary/ar-inbox)
- [Collection agency A third party that pursues overdue debts on a creditor's behalf, usually for a percentage of what it recovers.](https://www.rex.inc/resources/glossary/what-is-a-collection-agency)
- [Collections The work of getting customers to pay what they owe on time: reminders, follow-ups, calls, escalation and fixing whatever is blocking payment.](https://www.rex.inc/resources/collections/accounts-receivable-collections)
- [Collections cadence The timing and sequence of collection touches, such as emails, calls and statements, before and after an invoice falls due.](https://www.rex.inc/glossary/collections-cadence)
- [Delinquent account A customer account with invoices significantly past due, usually flagged for closer follow-up, a credit hold or escalation.](https://www.rex.inc/glossary/delinquent-account)
- [Dunning The structured sequence of reminders sent as invoices approach and pass their due date, escalating in tone and channel.](https://www.rex.inc/resources/glossary/what-is-dunning)
- [Dunning letter A written payment reminder for an overdue invoice: one step in a dunning sequence, from a polite first notice to a final demand.](https://www.rex.inc/resources/glossary/what-is-a-dunning-letter)
- [Final demand letter The 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.](https://www.rex.inc/glossary/final-demand-letter)
- [Past due An 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.](https://www.rex.inc/glossary/past-due)
- [Payment plan An agreement that lets a customer settle an overdue balance in scheduled installments rather than in a single payment.](https://www.rex.inc/resources/glossary/what-is-a-payment-plan)
- [Promise to pay A customer's commitment to pay a specific amount by a specific date, recorded so collections can follow up if it's missed.](https://www.rex.inc/resources/glossary/what-is-a-promise-to-pay)
- [Write-off Removing an invoice balance from accounts receivable because it won't be collected, charging it to bad debt expense or the allowance for doubtful accounts.](https://www.rex.inc/glossary/write-off)

## Cash application & payments

How money arrives, and how it gets matched to invoices.

- [ACH payment An electronic bank transfer through the US Automated Clearing House network, one of the most common ways US businesses pay each other.](https://www.rex.inc/glossary/ach-payment)
- [AR reconciliation Confirming that the AR subledger total matches the accounts receivable balance in the general ledger, and explaining any difference.](https://www.rex.inc/resources/glossary/accounts-receivable-reconciliation)
- [Auto-match rate The share of incoming payments applied to invoices automatically, without anyone researching the remittance by hand.](https://www.rex.inc/glossary/auto-match-rate)
- [BAI2 file A standard bank file format that reports account balances and transactions, used to import bank activity for cash application and reconciliation.](https://www.rex.inc/glossary/bai2-file)
- [Bank reconciliation Matching the cash balance in the general ledger to the bank statement, accounting for deposits in transit, fees and timing differences.](https://www.rex.inc/resources/cash-application/bank-reconciliation-ar)
- [Cash application Matching incoming payments to the open invoices they pay and posting them in the ERP, so receivables and cash stay accurate.](https://www.rex.inc/resources/cash-application/what-is-cash-application)
- [Lockbox A bank service that receives a company's customer payments, deposits them and sends back the payment and remittance data for cash application.](https://www.rex.inc/glossary/lockbox)
- [On-account payment A payment recorded against a customer's account as a whole rather than specific invoices, usually until it's clear what the payment is for.](https://www.rex.inc/glossary/on-account-payment)
- [Overpayment When a customer pays more than the invoices it meant to settle, leaving a credit balance to refund or apply to future invoices.](https://www.rex.inc/glossary/overpayment)
- [Payment reconciliation Checking that the payments recorded in your systems match the cash that actually reached the bank, and resolving any differences.](https://www.rex.inc/resources/cash-application/payment-reconciliation)
- [Remittance advice The details a customer sends with or alongside a payment, saying which invoices it covers and explaining any deductions.](https://www.rex.inc/resources/glossary/what-is-remittance-advice)
- [Unapplied cash Payments received but not yet matched to specific invoices, left sitting on the customer's account or in a suspense account.](https://www.rex.inc/glossary/unapplied-cash)
- [Virtual card payment A payment made with a single-use card number issued through the buyer's AP platform, which the supplier charges like any card transaction.](https://www.rex.inc/glossary/virtual-card-payment)
- [Wire transfer A fast electronic transfer between banks, often used for large or international payments, that carries little remittance information.](https://www.rex.inc/glossary/wire-transfer)

## Disputes & deductions

Why customers pay less than you billed, and how to recover it.

- [Chargeback A forced reversal or deduction of a payment that a customer, or their bank, claims wasn't owed.](https://www.rex.inc/resources/glossary/what-is-a-chargeback)
- [Compliance deduction A penalty a retailer deducts for breaking its supplier requirements, such as late delivery, incorrect labeling or a missing advance ship notice.](https://www.rex.inc/glossary/compliance-deduction)
- [Deductions management Validating, resolving and recovering the amounts customers withhold from payments, from promotional allowances to shortage and damage claims.](https://www.rex.inc/resources/glossary/deductions-management)
- [Invalid deduction A 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.](https://www.rex.inc/glossary/invalid-deduction)
- [Invoice dispute A customer's objection to an invoice, for example to its price, quantity, terms or delivery, that holds up payment until it's resolved.](https://www.rex.inc/glossary/invoice-dispute)
- [Proof of delivery (POD) Documentation, usually a signed delivery receipt or carrier record, showing that goods were delivered, when and to whom.](https://www.rex.inc/glossary/proof-of-delivery)
- [Reason code A standard label given to a deduction or dispute, such as pricing, shortage or damage, that records why the customer didn't pay in full.](https://www.rex.inc/glossary/reason-code)
- [Short payment When a customer pays less than the full invoice amount, leaving a balance that needs to be explained, accepted or collected.](https://www.rex.inc/resources/glossary/what-is-a-short-payment)
- [Trade promotion deduction An amount a retailer withholds from payment to settle promotional allowances, such as discounts, displays or advertising, agreed with a consumer goods supplier.](https://www.rex.inc/glossary/trade-promotion-deduction)

## Credit & risk

Who gets credit, how much, and what happens when it goes bad.

- [Allowance for doubtful accounts A reserve for the share of receivables a business estimates it won't collect, shown as a reduction of the receivables balance.](https://www.rex.inc/resources/glossary/allowance-for-doubtful-accounts)
- [Bad debt expense The cost of receivables a business doesn't expect to collect, recognized as an expense on the income statement.](https://www.rex.inc/resources/glossary/bad-debt-expense)
- [Bad debt recovery Collecting payment on an account that was previously written off as uncollectible.](https://www.rex.inc/resources/glossary/bad-debt-recovery)
- [Credit hold A 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.](https://www.rex.inc/glossary/credit-hold)
- [Credit limit The maximum outstanding balance a business lets a customer carry before new orders are held or reviewed.](https://www.rex.inc/glossary/credit-limit)
- [Credit management Deciding which customers get credit, how much and on what terms, then monitoring that risk while they owe you money.](https://www.rex.inc/resources/glossary/what-is-credit-management)
- [Credit policy Written rules for granting credit: who qualifies, how limits and terms are set, who can approve exceptions and when accounts are escalated.](https://www.rex.inc/glossary/credit-policy)
- [Credit risk monitoring Watching existing customers for early signs they may struggle to pay, such as slowing payments or credit score changes, and adjusting terms in time.](https://www.rex.inc/resources/credit-management/credit-risk-monitoring)
- [Trade credit Credit one business extends to another by delivering goods or services now and accepting payment later, on agreed terms.](https://www.rex.inc/glossary/trade-credit)
- [Trade credit insurance Insurance that pays out part of an unpaid invoice if a covered customer can't pay because of insolvency or prolonged default.](https://www.rex.inc/glossary/trade-credit-insurance)

## Metrics & reporting

The numbers finance teams use to judge receivables.

- [AR aging Grouping open receivables by how long they've been outstanding, to show how much is current and how much is late.](https://www.rex.inc/resources/glossary/accounts-receivable-aging)
- [AR aging report The 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.](https://www.rex.inc/resources/glossary/accounts-receivable-aging-report)
- [AR turnover ratio How many times a business collects its average receivables balance in a period: net credit sales divided by average AR.](https://www.rex.inc/resources/glossary/accounts-receivable-turnover-ratio)
- [Average collection period The average number of days it takes to collect receivables, closely related to DSO and the AR turnover ratio.](https://www.rex.inc/resources/glossary/average-collection-period)
- [Average days delinquent (ADD) The average number of days invoices are paid after their due date, calculated as DSO minus best possible DSO.](https://www.rex.inc/glossary/average-days-delinquent)
- [Best possible DSO DSO calculated from current receivables only: how fast you'd collect if every customer paid exactly on terms.](https://www.rex.inc/resources/glossary/best-possible-dso)
- [Cash conversion cycle The number of days between paying for inventory and collecting cash from customers: days inventory outstanding plus DSO minus DPO.](https://www.rex.inc/resources/glossary/cash-conversion-cycle)
- [Collection effectiveness index (CEI) The share of collectible receivables actually collected in a period, a measure of collections performance that DSO can hide.](https://www.rex.inc/resources/glossary/collection-effectiveness-index)
- [Collections forecast A prediction of how much cash will be collected and when, built from open invoices, payment terms and each customer's payment behavior.](https://www.rex.inc/resources/ar-metrics/collections-forecasting)
- [Days deductions outstanding (DDO) The average number of days deductions stay open before they're resolved, recovered or written off.](https://www.rex.inc/resources/glossary/days-deductions-outstanding)
- [Days payable outstanding (DPO) The average number of days a company takes to pay its own suppliers.](https://www.rex.inc/resources/glossary/days-payable-outstanding)
- [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.](https://www.rex.inc/resources/glossary/days-sales-outstanding-dso)
- [Percent current The share of total receivables that isn't yet past due, a simple and widely used measure of the health of an AR portfolio.](https://www.rex.inc/glossary/percent-current)

## AI & automation

How software and agents take on order-to-cash work.

- [Agent operating procedure A 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.](https://www.rex.inc/glossary/agent-operating-procedure)
- [Agentic AI AI that works toward a goal over several steps, deciding what to do, using tools and checking results, rather than producing a single response.](https://www.rex.inc/glossary/agentic-ai)
- [AI AR agent Software 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.](https://www.rex.inc/resources/ai-ar/what-is-an-ai-ar-agent)
- [AR automation Using software to handle accounts receivable tasks, such as invoicing, reminders and payment matching, with less manual effort.](https://www.rex.inc/resources/ar-automation/what-is-accounts-receivable-automation)
- [Audit trail A chronological record of every action taken on an account, who or which agent took it, and why, so decisions can be reviewed later.](https://www.rex.inc/resources/ai-ar/ai-ar-audit-trail-explainability)
- [Autonomous finance Finance operations where software runs routine processes end to end, while people supervise, handle exceptions and set policy.](https://www.rex.inc/resources/glossary/what-is-autonomous-finance)
- [Backtesting Testing a change to an automated process against past cases before using it on live work, to see what it would have done differently.](https://www.rex.inc/glossary/backtesting)
- [Context graph A connected record of the people, documents, decisions and history around each customer and transaction, giving people and agents the full picture behind the numbers.](https://www.rex.inc/glossary/context-graph)
- [Exception Any 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.](https://www.rex.inc/glossary/exception)
- [Human in the loop A design in which an automated system hands defined decisions to a person to review or approve before it acts.](https://www.rex.inc/resources/ai-ar/human-in-the-loop-ar-automation)
- [Managed AI service AI that the provider operates for you, with its own experts running and improving it, rather than software your team configures and runs.](https://www.rex.inc/glossary/managed-ai-service)
- [Multi-agent system A setup where several specialized AI agents, for example for collections, disputes and cash application, each handle one area and pass work between them.](https://www.rex.inc/resources/ai-ar/multi-agent-systems-finance)
- [Robotic process automation (RPA) Software bots that repeat scripted steps in other applications, such as clicking, copying and pasting, exactly as they were configured.](https://www.rex.inc/glossary/robotic-process-automation)
- [Supervised autonomy Giving an AI agent independence in stages: it starts by proposing actions for approval and runs on its own only as its work proves reliable.](https://www.rex.inc/glossary/supervised-autonomy)

## 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.

[Learn more](https://www.rex.inc/learn-more) [See the platform](https://www.rex.inc/platform)