# Order to cash: from a yes to money in the bank

> From a quote to cash in the bank, as one company runs it: which steps touch the books, and why an invoice, a payment and revenue are three different events.

Source: https://lopifi.com/learn/order-to-cash-process
Part of: Lopifi — US GAAP books on autopilot, checked by a CPA (https://lopifi.com)

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**What is the order-to-cash process for a startup?** From a quote to cash in the bank, as one company runs it: which steps touch the books, and why an invoice, a payment and revenue are three different events.

Order to cash is everything between a customer saying yes and the money landing in your bank account. For a founder it's the part of the back office that decides whether revenue becomes runway. The accounting track booked Northwind's first [Invoice](https://lopifi.com/md/glossary/invoice) in September: $22,000 to a trade customer, Alder Hardware, on 30-day terms. This track follows that invoice, and the ones after it, all the way to cash.

Quote (A price offered. No entry.) → Order (A commitment. Backlog, not revenue.) → Deliver (Goods delivered; control passes.) → Invoice (Dr AR, Cr revenue (or deferred revenue).) → Collect (Reminders on a schedule.) → Apply (Dr cash, Cr AR, matched to invoices.) → Review (Aging, DSO, the allowance.)

Order to cash, as Northwind runs it. Only three of these stages touch the ledger.

> **An invoice is a claim, a payment is cash, and revenue is recognition. Three events, often on three dates, and books that merge any two of them get something wrong.**

## The three dates on Northwind's first invoice

Alder's goods were delivered and invoiced on September 15, so the revenue was earned that day and the [receivable](https://lopifi.com/md/glossary/accounts-receivable) was booked with it (JE-7). Alder paid $14,000 on September 22 (JE-10). That entry moves a receivable into cash and never touches revenue. The remaining $8,000 was due on October 15, 2026.

*[Journal entries: JE-7, JE-10]*

The invoice and the collection, from the September book.

*[Figure: invoice lifecycle]*

INV-1001's life: issued for $22,000, then paid in two parts. The last $200 was settled by a credit note, not cash ([cash application](https://lopifi.com/md/learn/cash-application-explained)).

## One account in the ledger, one line per invoice underneath

Account 1200 is a [control account](https://lopifi.com/md/glossary/control-account). The general ledger holds one balance, and the detail (which customer, which invoice, how old) lives in the AR [Subledger](https://lopifi.com/md/glossary/subledger). At September 30 the subledger had one open invoice with $8,000 on it, and the control account said the same. Every report in this track, from the aging to DSO, reads the subledger, so the first control you need is that the two agree.

*[T-account: 1200]*

Accounts receivable at September 30: $8,000 owed.

> “A receivable is an entity’s right to consideration that is unconditional. A right to consideration is unconditional if only the passage of time is required before payment of that consideration is due.”

© Financial Accounting Foundation. All rights reserved.

— [ASC 606-10-45-4](https://asc.fasb.org/606/tableOfContent), A receivable is an unconditional right to consideration

**Use case — Bookings aren't revenue.** A signed order for next month is backlog. Some founders put it in a revenue forecast, which is fine as long as it's labeled as pipeline. It never goes in the books until the goods or service are delivered.

**Invoices from the accounting system (QuickBooks Online, Xero)**
- Pro: The invoice and the receivable are the same record
- Pro: Aging and statements built in
- Con: Manual dunning
- Con: Reconciling payments by hand
- Best for: A handful of B2B customers a month

**A billing platform with card on file**
- Pro: Charges the card on file on the due date
- Pro: Can retry a failed payment automatically
- Con: Payouts arrive net of fees and need a gross-up
- Con: Another subledger to tie out
- Best for: Subscriptions and self-serve

**Customer portals (the customer's AP system)**
- Pro: Required by some large buyers
- Pro: Payment status is visible
- Con: Slowest to cash
- Con: Every invoice must match the customer's PO
- Best for: Enterprise customers with procurement

Three ways a startup runs order to cash.

## Where this lesson's rules come from

- [ASC 606-10-05-3, -05-4; 606-10-25-23, -25-30](https://asc.fasb.org/606/tableOfContent) — Revenue from Contracts with Customers — the core principle, and recognition when control transfers (codification)
- [ASC 606-10-45-4](https://asc.fasb.org/606/tableOfContent) — A receivable is an unconditional right to consideration (codification)
- [ASC 310](https://asc.fasb.org/310/tableOfContent) — Receivables (codification)
- [Wikipedia, “Accounts receivable”](https://en.wikipedia.org/wiki/Accounts_receivable) — Accounts receivable (reference)

## Read further

- https://lopifi.com/md/journal-entries/sale-on-account
- https://lopifi.com/md/differences/accounts-payable-vs-accounts-receivable
- https://lopifi.com/md/differences/accrual-vs-cash-basis
- https://lopifi.com/md/startups/what-to-put-on-an-invoice
- https://lopifi.com/md/startups/ar-aging-and-collections
- https://lopifi.com/md/accounting/accounts-receivable
- https://lopifi.com/md/accounting/accrual-basis
- https://lopifi.com/md/docs/domain/05-order-to-cash

- **Track:** [Accounts receivable](https://lopifi.com/md/learn/ar)
- **Lesson:** Lesson 1 of 9 — 8 min
- **Terms taught:** [Accounts receivable](https://lopifi.com/md/glossary/accounts-receivable), [Invoice](https://lopifi.com/md/glossary/invoice), [Control account](https://lopifi.com/md/glossary/control-account), [Subledger](https://lopifi.com/md/glossary/subledger), [Revenue recognition](https://lopifi.com/md/glossary/revenue-recognition)
- **Previous:** [Filing 1099s: deadlines, Form 1096 and IRIS, AP · Lesson 8](https://lopifi.com/md/learn/1099-nec-and-1099-misc-at-year-end/filing-1099s-iris-and-form-1096)
- **Next:** [A correct invoice, and the tax on it, AR · Lesson 2](https://lopifi.com/md/learn/how-to-write-an-invoice)
- **The course:** https://lopifi.com/md/learn