What is Order to Cash (O2C)? Optimizing O2C For Defense and Aerospace

The Order-to-Cash (O2C) process sits at the heart of every defense and aerospace program. It links contractual commitments to revenue recognition, beginning when a customer places an order and ending when payment is received and reconciled. Along the way, it moves through contracts, program management, supply chain, and finance.  

Each business function tackles its share of the O2C process with its own systems and faces specific compliance responsibilities. Compliance is deeply intertwined with O2C in the Defense Industrial Base (DIB). Contractors must account for DFARS clauses, ITAR export controls, CMMC cybersecurity rules, and WAWF invoicing systems.  

In this article, we:  

• Explore common O2C challenges faced by DIB contractors  
• Explain how a well-managed O2C process improves program performance  
• See how Order to Cash software helps integrate workflows and accelerate cash flow 

The Components of the Order-to-Cash Process 

The O2C process is a sequence of connected stages. The specifics vary between companies and contracts, but each stage plays a role in converting an awarded contract into recognized revenue.  

Customer Order Management 

The O2C process begins when the customer places a contract or purchase order. Defense contracts often include detailed funding structures and delivery schedules, and the relevant data must be entered accurately into the contractor’s ERP system. Errors at this stage, such as mismatched funding mods or late cost data sweeps, can lead to defective pricing claims under TINA or delays in contract acceptance. 

Production and Supply Execution 

Once the order is accepted, production planning begins. Meeting contractual milestones depends on timely supplier delivery and accurate bills of material. Supply-side delays, incorrect FAIR submissions, or non-compliant manufacturing processes often result in delayed payment. 

Shipping, Invoicing, and Fulfillment 

As production concludes, goods are shipped and shipment data is uploaded into systems like WAWF/PIEE. Errors at this stage may result in rejected invoices and late payment. For example, entering incorrect data for Automated Export System (AES) filings or export license codes can result in shipment seizures or export violations. Incomplete or late receiving reports will hold up invoice processing and prevent timely payment. 

Cash Collection 

Finally, once acceptance is recorded and the invoice is submitted, contractors must track payment against Prompt Payment Act timelines. Discrepancies between the contract, shipment records, and invoicing details can delay cash collection and increase Days Sales Outstanding. 

O2C and Compliance Management 

Every dollar tied to a contract flows through the Order-to-Cash process. That makes O2C a focal point for oversight by DCMA, DCAA, and prime contractors. Missteps along the path from award to payment invite scrutiny and can delay revenue or jeopardize contract performance. 

Compliance violations don’t exist in isolation. A failure to secure receiving report acceptance, an unlicensed export, or storing controlled unclassified information (CUI) in an unauthorized cloud platform disrupts the smooth operation of the O2C process. In a highly regulated environment, errors at any stage may halt acceptance and introduce financial or legal risk. 

The complexity of defense contracting creates compliance exposure across the entire O2C cycle. Contractors must meet obligations under FAR and DFARS clauses, ITAR and EAR controls, and CMMC cybersecurity requirements. Under CMMC 2.0, only contracts involving Controlled Unclassified Information (CUI) require Level 2 certification—some through self-assessments and others through third-party assessments, as determined by DoD acquisition offices.  Even a task as administrative as generating an invoice carries regulatory weight that can influence whether payment is released or withheld. 

In the DIB, speeding up O2C means embedding compliance into every step. Building compliance into the process ensures that acceptance happens on time, documentation is complete, and invoices are accurate.  

O2C Challenges for the Defense Industrial Base 

Contractors in the Defense Industrial Base face a distinct set of challenges that make Order-to-Cash harder to execute than in commercial industries. The process must operate within multi-tier supplier networks and a complex regulatory framework. The result is an O2C environment that is fragmented and prone to costly delays when things go wrong. 

Manual Data Entry 

Many contractors still rely on manual entry to transfer key data into ERP systems and government portals. Every re-keyed line item introduces risk. A single mistyped field has the potential to trigger a rejection. Manual processes also complicate audit preparation and make it harder to trace errors or prove compliance. 

Misaligned Demand and Supply 

Lead times across aerospace and defense are long, and funding is often released incrementally. That mismatch creates constant tension between what’s been promised and what can be delivered. Contractors struggle to align production schedules with shifting requirements, especially when supplier delays, funding mod approvals, or engineering changes occur mid-cycle. The result: missed milestones, liquidated damages, stop-work orders, or excess inventory that ties up capital. 

Inefficient Supplier Onboarding 

Regulatory flow-downs from CMMC, ITAR, and Contractor Purchasing System Review (CPSR) make supplier onboarding a compliance exercise as much as a sourcing one. Contractors must collect and verify detailed cybersecurity and export documentation, often through disconnected systems. While source-to-pay processes absorb most of the initial burden, the downstream impact shows up in O2C. 

Limited Visibility 

Prime contractors depend on a sprawling network of Tier-2 and Tier-3 suppliers, many of whom lack the systems to share real-time updates. That blind spot leaves program and finance teams exposed. Without early warning, contractors are forced into reactive mode, scrambling to re-plan schedules, update contract mods, or explain missed deliveries to the customer. 

Compliance Overload 

Meeting requirements under FAR, DFARS, ITAR, WAWF, PIEE, NIST 800-171, and CMMC means touching multiple systems, portals, and forms, often with no integration between them. Contractors must enter the same data repeatedly to satisfy separate stakeholders, each with their own format and workflow. Duplicate entry inflates error rates and increases the burden on already stretched teams. 

Organizational Siloes 

O2C cuts across business development, contracts, program management, supply chain, and finance. But those teams rarely operate on a shared platform. Handoffs happen via email, spreadsheet, or manual uploads, with no single source of truth. As exceptions pile up, ownership becomes unclear. Resolution takes longer and quote-to-cash timelines grow. What should be a single, continuous process instead becomes a series of disconnected steps. 

The Benefits of Streamlining O2C with Order-to-Cash Software 

Order-to-Cash software creates measurable improvements to cash flow and customer satisfaction. For defense and aerospace contractors operating in high-compliance environments, the upside extends beyond operational efficiency. 

Lower Cost per Order 

Manual data entry, invoice rework, and rejected submissions increase the cost of executing a contract. Streamlining and automating aspects of the O2C process reduces those manual touches and enables earlier detection of errors. Reduced cycle times and exceptions result in meaningful reductions in the cost per contract. 

Faster Cash (Reduced Days Sales Outstanding) 

With better integration and real-time tracking, teams can complete acceptance steps sooner and submit cleaner, more accurate invoices. That accelerates payment and reduces Days Sales Outstanding. 

Higher Customer Satisfaction 

On-time, accurate delivery supported by clear communication and fewer exceptions translates directly into higher CPAR scores. Organizations that streamline O2C see reputational benefits and improvements to competitiveness. 

More Predictable Program Execution 

Real-time visibility into production status and supplier performance allows teams to respond earlier to delays. Companies experience fewer schedule slips, lower risk, and an improved ability to meet program objectives. 

How Exostar Accelerates Compliant Order-to-Cash for the DIB 

Exostar’s suite of integrated O2C solutions helps defense and aerospace contractors accelerate the Order-to-Cash process while maintaining full compliance with federal regulations. 

Streamline Data Exchange With Customers 

Exostar DemandLine eliminates manual data entry with two-way data exchange between customer data and your ERP system, synchronizing demand schedules, production and delivery commitments, and Advanced Shipment Notifications (ASNs). DemandLine users make smarter demand management decisions faster with accurate customer requirements. Risk identification alerts enable proactive intervention before discrepancies become disruptions. 

Accelerate Sourcing and Supplier Onboarding 

Exostar Supplier Management and SourcePass streamline compliance-heavy sourcing and supplier onboarding. 

• Supplier Management gives buyers instant access to a pre-vetted network of over 150,000 partners, complete with cybersecurity questionnaires and CMMC readiness profiles. It reduces onboarding time, streamlines ongoing monitoring, and improves visibility into supplier risk. 

• SourcePass accelerates sourcing events with structured RFx tools, bid templates, and export control restrictions built into the workflow. 

Together, these tools shorten procurement cycles and ensure onboarding delays don’t disrupt downstream delivery. 

Collaborate Securely With Suppliers 

Exostar SupplyLine automates the exchange of POs, delivery schedules, ASNs, and stock updates, keeping suppliers in sync with operational needs. Real-time visibility into supplier performance and shipping status reduces the risk of last-minute surprises so your projects meet delivery targets. 

Ensure Compliance Throughout the O2C Cycle 

Exostar’s CMMC Ready Suite and Managed Microsoft 365 solution support compliance across the full O2C lifecycle. 

• Managed Microsoft 365 provides a FedRAMP Moderate Equivalent Solution enclave for storing and exchanging CUI, with 85 of the 110 NIST SP 800-171 controls implemented out of the box. 

• CMMC Ready Suite includes tools for self-assessment, documentation, and continuous compliance tracking. 

Exostar helps aerospace and defense contractors reduce cycle time and accelerate cash flow across the entire Order-to-Cash process. If you’re ready to simplify operations and strengthen program execution, talk to our team to learn how our solutions can support your business.