Businesses must process customer orders using efficient processes to get paid for them promptly. The order-to-cash (OTC or O2C) cycle is made up of a number of steps towards making that happen, starting with order placement and finishing with payment. With a streamlined OTC cycle, you can deliver benefits like better cash flow and satisfied customers. Let’s take a closer look at OTC cycles and review some strategies for automating and optimising processes.
The Definition of Order-to-Cash
Order to cash is usually abbreviated as OTC or O2C. It comprises the range of steps involved in processing customer orders. The steps typically include things like:
- Order management.
- Order fulfilment.
- Payment processing.
With a streamlined OTC cycle, you can maintain healthy cash flow thanks to a shortened time between receiving orders and confirming payment. You may even experience revenue boosts by ensuring customer bills aren’t accidentally left unpaid.
Is Order-to-Cash the Same as Quote-to-Cash?
OTC focuses on order processing and payment, but quote-to-cash (QTC) refers to a broader process that companies use when they offer goods/services with variable prices. With configurable products or project-based services, a QTC process is often required. It involves the addition of several steps like quote preparation into the OTC process. These might include:
- Tailoring an offering to a customer’s needs.
- Creating and presenting a quote.
- Negotiating the details of an offering.
Once the terms are set, the order is placed and the remaining cycle proceeds as OTC.
What Do You Need to Know About Order-to-Cash?
We have established that you can improve cash flow with an efficient OTC cycle, and this is crucial for many businesses. You can also bring about an improved customer experience. Automation can help accelerate the OTC process as orders can be processed more quickly, enabling a shorter time to invoice. To facilitate an efficient OTC process, you need integrated functions across different parts of the business along with advanced automation and collaboration tools – this is what an ERP system like NetSuite or Sage 200 specialises in.
The OTC process is one of the primary touchpoints between the customer and your business. For this reason, it is pivotal for customer satisfaction. Order placement should be simple for customers, and it should be very clear what they owe and when they must pay, as well as when their order will be delivered. With an efficient OTC cycle, you can ensure your customers receive their ordered goods swiftly.
The 9 Steps in the Order-to-Cash Process
A typical OTC process incorporates the following 9 steps, which are initiated from the moment a customer places their order:
- Customer Purchase: Whether a simple online order or a conversion via a sales associate, this is where the process begins. All the relevant information needs to be captured accurately to initiate the subsequent step in order processing and fulfilment.
- Order Management: Once the purchase is confirmed, order management propels the order through the remaining steps. The order must be tracked at each stage for an efficient process, and the customer should be kept informed. If problems arise, they should be quickly resolved. With an ERP system in place, issues like inventory levels will already be known before an order is placed.
- Credit Management: If sales are made on credit, the customer’s financial risk should be assessed. Credit checks or references may be required, and this should be attended to diligently to minimise the risk of balances going unpaid.
- Order Fulfilment: This includes the picking and packing of ordered items and shipping to customers.
- Order Shipping: The customer should be notified when an item is shipped, with an estimated arrival date. Shipping can be complex, and a lot of work typically goes into finding the most reliable and cost-effective shipping methods.
- Invoicing: With timely invoicing, you can accelerate the cash-to-order cycle and improve cash flow. Make sure invoices are distributed to customers promptly – ERP system can help with this by drawing supporting information like sales or purchase orders automatically.
- Accounts Receivable: It is down to the accounts receivable team to ensure payment is collected once an invoice is sent out. The finance management tools in an ERP platform can facilitate a seamless accounts receivable process by automatically tracking due dates for invoices.
- Payment Collection: Not all customers pay their bills on time, and these payments need to be tracked and chased.
- Reporting: With the use of software that automates data collection and analysis, companies can analyse the efficiency of each stage of the OTC cycle. ERP software integrates data from every area of the business and uses advanced analytics and reporting tools to help with this.
5 Best Practices in the Order-to-Cash Process
Improving the OTC process is a key consideration for most businesses. Here are 5 ways you can enhance the OTC cycle:
- Carefully analyse each step in the process and identify areas for improvement.
- Start with areas that offer the highest return for the least effort.
- Implement automation wherever possible.
- Integrate operations and data using a high-quality ERP system.
- Listen to customers and staff.
You Keep Mentioning ERP – How Does it Help With Order-to-Cash?
Manual OTC processes can be slow and labour-intensive, causing problems for you and your customers. You might experience issues like:
- Poor cash flow.
- Shipping delays.
- Inaccurate billing.
Enterprise Resource Planning (ERP) solutions like NetSuite and Sage 200 can enable you to streamline and accelerate the OTC cycle. With integrated data under a centralised platform and a wealth of automation tools, you can streamline processes at every stage of the OTC cycle.
Even if you have complex, subscription-based pricing models, ERP lets you monitor operating efficiency and automate key financial processes. With real-time dashboards and business intelligence tools, you will be able to monitor efficiency and identify bottlenecks to optimise your OTC cycle.
Why Choose Eventura as your ERP Implementation Partner?
As Sage 200 Partners and NetSuite Solution Providers, we can help you identify which solution will fit your business needs the best. Our expert team of business analysts, developers, consultants, technicians and support staff can guide you through your entire project, from initial scoping through to implementation and on-going support.
We’re also managed IT service providers meaning we can help you identify your entire IT infrastructure requirements from day one. If you would like to speak to one of our ERP experts, you can request a free call back here.