Oracle Fusion-Order to Cash Cycle
- Satya
- 9 hours ago
- 2 min read
Oracle Fusion Order-to-Cash (O2C) Process Explained
The Order-to-Cash (O2C) process in Oracle Fusion represents the full business cycle from receiving a customer order to collecting the payment. It covers order entry, fulfillment, invoicing, and receipt — ensuring smooth coordination between Order Management, Inventory, Receivables, and Cash Management modules.
Types of Sales Orders
Standard Sales Order – Regular product sale from inventory.
Return Material Authorization (RMA) – Used when customers return goods; generates reverse accounting entries.
Internal Sales Order (ISO) – For transferring goods between internal business units or warehouses.
Drop Ship Order – The supplier ships goods directly to the customer on your behalf.
Back-to-Back Order – Customer order triggers an automatic purchase order to fulfill it.
Subscription Order – Used for recurring or periodic service-based billing.
Step 1: Sales Order Booking
At this stage, a customer order is entered and booked in the system. This represents a commitment, not an actual transaction, so no accounting entries are generated.
Scenario | Accounting Impact |
Goods / Inventory Sale | No Accounting Entry (Commitment Only) |
Services Sale (No Inventory) | No Accounting Entry (Commitment Only) |
Step 2: Pick and Shipment
Once the order is scheduled for delivery, the goods are picked from inventory and shipped. This stage triggers the Cost of Goods Sold (COGS) recognition and reduces inventory.
Scenario | Debit (Dr) | Credit (Cr) |
Goods / Inventory Sale | COGS (Expense – P&L) | Inventory (Balance Sheet) |
Services Sale (No Inventory) | N/A | N/A |
Step 3: AR Invoice Creation
After shipment (or completion of service), an AR Invoice is generated. This records revenue recognition and establishes customer receivables.
Scenario | Debit (Dr) | Credit (Cr) |
Goods / Inventory Sale | Accounts Receivable (BS) | Revenue (P&L), Tax Payable (if applicable) |
Services Sale (No Inventory) | Accounts Receivable (BS) | Revenue (P&L), Tax Payable (if applicable) |
Step 4: Cash Receipt
When the customer pays, the cash receipt is recorded. This clears the receivable balance and updates the bank account.
Scenario | Debit (Dr) | Credit (Cr) |
Goods / Inventory Sale | Bank / Cash (BS) | Accounts Receivable (BS) |
Services Sale (No Inventory) | Bank / Cash (BS) | Accounts Receivable (BS) |
Step 5: Adjustments / Write-Offs (If Any)
If there are unpaid balances or adjustments, these are handled through write-offs or provisions for doubtful accounts.
Scenario | Debit (Dr) | Credit (Cr) |
Goods / Inventory Sale | Allowance for Doubtful Accounts / Expense | Accounts Receivable |
Services Sale (No Inventory) | Same as Goods Sale | Same as Goods Sale |
Key Notes
Sales Order Booking – Represents a commitment only; no accounting impact.
Shipment (for Inventory Sales) – Reduces inventory and records COGS.
AR Invoice – Creates receivable and recognizes revenue.
Cash Receipt – Clears receivable and updates bank balance.
Services Business – Skips shipment and COGS; revenue recognized directly at invoicing.
Summary
The Oracle Fusion Order-to-Cash flow ensures end-to-end visibility across sales, fulfillment, and revenue recognition. While inventory-based sales include additional shipment and COGS accounting, service-based sales focus directly on billing and receivables.
Hope This Helps . Happy learning
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