Order to Cash Process: How To Optimize & Best Practices

Process Improvement
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Businesses strive to make their customers happy. When selling goods or products, this starts during the marketing of goods and services. But, the real action takes place when a customer makes an order, and that leads to its delivery and all the operations that take place in between.

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With the many moving parts, it’s vital to optimise the order to cash process so you can maximise customer satisfaction, add to the bottom line, and reduce inefficiencies.

We’re going to look at the order to cash definition, the order to cash process flow, and then share some of the order-to-cash best processes to help optimise your business’ operations.

Coming Up

What is Order to Cash Process?

Why is the Order to Cash Process Important?

Why is Technology Important in Order to Cash Process?

What are the Steps in Order to Cash Process?

How to Improve the Order to Cash Process?

What are Order to Cash Best Practices?

What are the Challenges in Order to Cash Process?

Final Thoughts

What is Order to Cash Process?

The order to cash process is a cycle that affects every aspect of business. It is your order processing system. The order to cash process (O2C) begins the moment a customer places an order. At this time, a plethora of required processes take place, such as fulfillment, invoice processing, payment processing, and the necessary accounting that comes along with it.

Without adequate software in place, teams are left to scramble and pick up the forgotten pieces. This can cause delays and bottlenecks. With finance automation software, these processes can all be streamlined and executed without delays or issues.

Why is the Order to Cash Process Important?

The order to cash process is clearly a defining part of any business’ functioning. It’s what gets cash to flow in after all!

It’s so important and of value because the order to cash process is what creates:

1. Revenue generation

Once an order is placed, the amount of time it takes to fulfill an invoice adds to the amount of time it takes your business to get paid.

2. Cost savings

With an automated order to cash process, your business can reduce mistakes and inefficiencies, thereby saving both money and time.

3. The customer experience!

Ultimately, a customer will base his or her experience off of the order to cash process. On their end, the time it takes to fulfill an order is the time they wait before they can start enjoying their new goods or services. The fast this process flows, the faster they can feel satisfied by their purchase.

Why is Technology Important in Order to Cash Process?

As with any financially-related business process, technology can only stand to make it better! When it comes to the order to cash process, automation solutions and connected systems make each step easy to complete.

With a connected software solution, you gain access to real-time information from anywhere. Additionally, your organisation gains internal control and increased transparency to see the process take shape and be completed.

Since the order to cash process involves so many moving steps and changing hands, technology increases collaboration and ensures that nothing falls through the cracks or gets stuck pending on someone’s desk.

What are the Steps in Order to Cash Process?

Let’s walk through the steps in the order to cash process. By doing so, it will become increasingly clear how technology is a main solution to improve the process.

1. Order Placement

The process kicks off when a customer places an order. In the case of ecommerce, it’s when the customer adds an item or service to their cart and checks out. Or, if it’s an order placed via email, it’s the moment they send the purchase order.

2. Order Management

Once the item or service has been ordered, the purchase order or confirmation is moved into the next responsible department to manage its fulfillment and execution.

3. Credit Management

When customers purchase items online, the transfer is typically made in real-time. However, for businesses placing large purchase orders on credit, the credit tends to run through a software approval process that ensures the customer is in good standing.

4. Order Fulfillment

Once all the financial pieces have been greenlit, the order can move through fulfillment to be processed. This is where the product gets delivered to the customer. At this stage, many issues can arise. For starters, inventory could be sold out.

Or, the business may have given a delivery date that won’t actually be possible to meet. Automation solutions can remove all these concerns as the system will make sure to keep data up-to-date so you have an accurate understanding of what’s happening within the business.

5. Invoicing

In order to be paid on goods and services that were delivered, an invoice is required. The invoice should accurately reflect the details and status of the order. Again, automation software can be utilised for this purpose to help you stay organised and on top of your accounts receivables.

6. Accounts Receivables

With automated accounting software, you can keep track of any outstanding invoices and track what’s overdue for payment. This is particularly useful if you have a high volume of transactions from multiple payment providers like Amazon, ebay, Stripe, Worldpay, Paypal and so on.

7. Collect Payment

When a payment has been made, the software will automatically update the system to reflect that payment is complete.

8. Data Management and Analysis

Once everything has been neatly tied up, businesses can leverage software systems to perform data analysis. This helps to review patterns and trends and make informed decisions as to where operations can be improved.

How to Improve the Order to Cash Process?

As you know, the order to cash process cannot and must not be overlooked. It’s a primary function to keep the money coming in and to make customers happy.

Here are a few ways to make the process as efficient as it can be:

1. Set Standards

Define clear standards and outline each step of the process. By doing so, everyone that is involved knows what is expected from them. It also makes it easier to rectify any bottlenecks or issues when the standards and process is defined.

2. Review the Process

Since the order to cash process is continuous, it should be monitored indefinitely and reviewed to optimise constantly. Check in to see how the process is going and be sure to review what’s working and what needs to be adjusted.

3. Utilise Automation

There’s no optimisation without automation in this day and age. With finance automation software implemented, you can streamline every step of the order to cash process. Software solutions help with inventory management, invoice management, reconciliations, accounts payable, revenue management, fulfillment, expense analytics, and more.

What are Order to Cash Best Practices?

When improving upon your process, keep in mind these order to cash best practices so you can speed up getting paid and boost your bottom line:

1. Analyse Your Process

In order to fix any problems, you have to first pinpoint where they reside. You can do this by taking the time to analyse your existing proess. If you find that there are places where manual work is taking place (and things are slipping through the cracks), consider deploying an automation solution to fill in those gaps.

2. Start Small

Start with the easiest places where change can be made. By attacking the low-hanging fruit, you can reap the most return for the least effort. This helps build momentum to attack bigger challenges.

3. Integrate

Technology can only work as well as you do. What this means is, it matters how you deploy and implement your systems. Choose automation software that integrates with your existing systems so that data doesn’t get lost. Most accounting automation tools can integrate with your ERP software, so look for tools that are equipped to do so.

4. Automate!

By choosing a no-code solution, you can begin automating your order to cash process almost immediately. This helps to increase operational effectiveness, and at the end of the day, helps to boost customer satisfaction. After all, that’s the goal, right?

What are the Challenges in Order to Cash Process?

With the many steps involved in the order to cash process, there’s no doubt that challenges are inevitable. Some of these challenges may be:

1. Incomplete Data

Without key customer data, it’s impossible to fulfill an order.

2. Credit Checks

If a customer has been declined for credit before, then this should signal extra caution when accepting purchase orders again. You don’t want to take on risky orders that may disrupt cash flow or damage relationships.

3. Low Visibility

When companies don’t automate or have connected systems, it becomes difficult to track cash flow and manage accounts receivables. This could lead to detrimental outcomes, such as making poor business decisions on the account of incomplete information.

As you can imagine, automation software remedies all of these hurdles by keeping your data connected, up-to-date and refreshed, clean, and organised. Plus, when you automate key financial processes, you maximise your internal controls and visibility.

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Final Thoughts

The order to cash process is a key process to optimise for any type of business. When you have an order to cash process that is streamlined, your business can add to its bottom line and support customers better. This not only leads to increased revenue, but it also helps to build brand loyalty and a positive brand reputation.

Automation software can play a pivotal role in optimising your order to cash process. When you automate complex financial processes, you save time, reduce errors, increase productivity, and benefit customer relationships.


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