The order to cash process (abbreviated as O2C or OTC process) is an extremely important part of the business process. The order to cash process is a frequently overlooked and underfunded opportunity to increase business efficiency, improve cash flow and strengthen customer relationships. It is important for companies to identify the opportunities, reduce the costs associated with the O2C process, and recognise the benefits of investing in smart solutions.
What is order to cash?
The process from receipt of the order until payment of the invoice is included in the order-to-cash process. This includes the entire production process. The aim is to optimise this process in such a way that all parts of the process can do their work properly. This requires time, money and resources. Many entrepreneurs are less good at one of these three parts. But sooner or later, getting the order-to-cash process in order is a prerequisite for successful growth.
If an organisation does not have this in order, it will often be the first to notice this in its cash flow. But it can also lead to dissatisfied customers because the production process is wrongly designed. In other words, the O2C process is one of those cross-company processes that can make or destroy your business. The outcome of this process can affect everything from customer satisfaction and cash flow management to employee satisfaction.
Order 2 cash process steps
The steps of the process differ in detail, of course. Depending on the market, the product or the service there are important differences. For example, a car manufacturer has a different order-to-cash process than a consultancy firm. But it is mainly that the focus points differ in different organisations.
In any event, the order-to-cash process always begins with the booking of the order. Resources, time and money must then be made available. A planning system can be used for this. Production then takes place. In complex production companies, this process is related to almost all other parts of the organisation. If, for example, a poor HRM policy results in high levels of absenteeism, production, and thus the order to cash process, will be delayed. After production, the delivery takes place. Invoicing usually takes place immediately afterwards. The last step is aftercare and quality control.
Order to cash process optimisation
The purpose of an O2C process is to deliver goods to customers in exchange for cash. However, since the process has two sides, order management and receivables, it is highly interdependent. Teams that drive these two parts of the process end up working in silos, which is not suitable for an efficient process.
Although improvements can be thought of in every part of the O2C order to cash process, Payt order to cash specialises in the accounts receivable management process. The invoice to cash process. Many organisations think that the work is done when the invoice is sent. But that is not the case. It is estimated that 30% of bankruptcies are solely due to a lack of liquidity, not a bad business model or return on investment. Moreover, the invoicing process is also a good time to check the quality of your products or services. Customers are happy to tell you how they experienced what they received.
Using software to improve your O2C order to cash
To improve the order-to-cash process, order to cash software is the best option whenever possible. It forces you to think carefully about how to set up the business process optimally. And once it is set up, it does not make mistakes. There are several comprehensive software packages that automate a large part of the business process. Think for example of SAP or Oracle Netsuite. This software ensures that the required resources are present and scheduled in time for on-time delivery. Most organisations do not have such a complicated production process. Automation is also important for these organisations.
What we have noticed is that few ERP or financial packages have a complete solution for the collections process. It is easy to implement by linking it to the financial package, and it provides immediate benefits.
Are you interested in finding out more about Payt and our solutions for your challenges in account receivable management? Please contact us, we will be happy to assist you with our comprehensive software solutions.
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