What is Order To Cash (O2C or OTC)?

ABCAdda | Updated Aug 05, 2022

Order to cash (O2C) processes are an essential part of business success and also play a huge role in managing a company’s customer relationships. While many companies focus most of their resources on customer order time, streamlining O2C processes can yield important Benefits to O2C that are spread across the organization.

The good news is that an integrated software solution can significantly expand the range of O2C functionality. As a result, you can streamline your O2C processes from start to finish to serve customers more quickly and efficiently, minimize errors and delays, and ensure performance data has maximum business impact.

What is the order to cash process?

From ordering to checkout is the company’s entire order processing system or processing customer orders. It starts the moment the customer places an order. Anything previously related to branding, marketing or sales functions.

However, it should be noted that the branding, marketing and sales functions do not stop at customer orders. Still, their main activity usually lies in the customer relationship phase, i.e., before the start of the O2C cycle.

While some may think that the O2C process is complete when the order is received and paid for, there is another important step guide after this action. Activity data recorded during the order to cash cycle UK should be analyzed to help management identify opportunities for improvement or optimization.

Or

Order to cash meaning?

Order-to-Money (OTC or O2C) is a business process that involves receiving and fulfilling customer requests for goods or services. This is a top-level or contextual term used by management to describe the financial component of a customer’s sale.

What is meant by order to cash cycle?

The order-to-cash cycle, often abbreviated as the O2C cycle or OTC, describes how your business receives, processes, manages and fulfills customer orders. This means handling all aspects of sales, including shipping goods, receiving payments, creating invoices, and reporting end-to-end processes.

The OTC market affects your bottom line and customer relationships, so the process needs to be appropriately streamlined.

What are the steps in the order to cash process?

While it can vary from industry to industry, a typical order to cash USA (United States of America) flow occurs in the steps listed below:

What are the steps in the order to cash process

  1. Place and manage orders: Order placement is the culmination of all sales and marketing activities. Once a customer places an order through e-commerce, checkout, direct selling, etc., the “Message to Cash” process begins. At this point, the company should not waste time accepting orders after ensuring that the orders can be filled correctly. All order details are recorded in the sales book.
  2. Credit management: When assessing order viability, the supplier also assesses the customer’s credit risk. This phase thoroughly reviews the buyer’s loan portfolio and solvency. Loan conditions are also worked out at this early stage to prevent payment risks or delays.
  3. Execution of orders: To ensure companies can fulfill all incoming orders, they must maintain a significant inventory that can handle current and potential future orders. As a result, inventory values ??must be updated in real-time to prevent taking orders the company cannot fulfill. If the company inadvertently receives an order for an item that is out of stock, the problem should be flagged, and the order canceled immediately.
  4. Order delivery: Once the order is ready, it will be handed over to the logistics partner responsible for last-mile delivery. All details of delivery terms are also shared with them to avoid last-minute trouble. After the shipping partner has successfully dispatched the order, the supplier collects proof of delivery and a bill of lading for recording purposes.
  5. Billing or invoice: Most B2B transactions are processed through invoices, which allows for smooth and timely delivery of products or services. The billing and invoicing team must create accurate invoices to ensure smooth and timely payment after delivery. The team needs to consider variables such as order details, specifications, price, order date, delivery date, etc., to create invoices and share them with customers.
  6. Payment collection: Once an invoice is issued, the billing team tracks and collects payments from the customer. Meanwhile, the AR team will contact the customer regarding the outstanding payment within the specified time limit. Customers who are late or negligent in payment must have their accounts flagged and credit facilities canceled on their behalf.
  7. Ledger management: For all payments received in the previous stage, the cash debit must be matched against the bill and only settled after matching the numbers. The information is then added to the general ledger, and any disputes must be resolved within the stipulated time limit.

What are the benefits of order to cash cycle?

  • The order cash process has comprehensive Benefits O2C on the whole company in all processes. This always requires or includes supply chain management, inventory management, and more. Congestion or delay in one segment can cause problems for independent units.
  • Second, an organization’s cash flows depend on the collection and accounts receivable functions performed throughout the order-to-cash cycle. Therefore, any form of delay and collection delay can potentially disrupt accounts payable, payroll, potential acquisitions, and other liquidity problems.
  • Finally, consistent and reliable O2C processes demonstrate that your business is legitimate and your organization’s trustworthiness. To properly maintain O2C processes, you must go beyond every aspect of the business, from production, sales, technical management, delivery, etc.

Why is the order to cash process important?

Implementing an end-to-end order-to-cash process is critical to completing customer orders within the set deadlines. A well-established cash flow cycle can help reduce production costs while increasing productivity.

Increased productivity can also reduce labor costs or expedited shipping costs. In addition, monitoring every component of the order-to-payment cycle helps companies maintain high performance and leads to greater customer satisfaction.

By optimizing the order-to-cash cycle United States of America (USA), you can:

  • Simplify the buying process for your customers
  • Reduce time from order to fulfillment for your customers
  • Minimize the need for agent intervention
  • Complete the order right the first time it is given
  • Fulfill orders on time for customers
  • Ensure fast conversion of accounts receivable and customer collection
  • Avoid re-entering order information and forms
  • Prove to your customers that your business is professional and you value their time
  • Avoid return orders and make sure you have enough products
  • Improve data reporting and timeliness accuracy

Now that you better understand why you should prioritize your OTC cycle let’s look at the seven steps in this process and what each step entails.

What is the difference between Procure-to-Pay and Order-to-Cash?

While deposit orders and payment terms may seem relatively similar, they describe very different processes. Payment orders cover all business processes related to sales, whereas payment delivery covers all processes related to supplier deliveries (i.e., purchase requisitions).

So the difference between Procure-to-Pay and Order to Cash India is quite simple – one applies to sell orders, and the other applies to delivery.

How do you improve order to cash automation efficiency?

Complex O2C processes require automation to meet the challenges of timeliness and accuracy. Early automation solutions focused on discrete processes but could not handle all O2C processes.

Today, advances in new technologies such as artificial intelligence (AI) and analytics applied to automation make it possible to automate O2C processes. Together with extensive data management, this technology enables O2C digital transformation.

 

AI-driven O2C connects disparate processes to provide accurate and timely information through reports and dashboard visualizations across companies, regions, or a line of business and individual customers.

O2C intelligent hyper-automation platforms like Emagia integrate data lake technology to consolidate financial information across the enterprise and bring the necessary data from multiple external sources to one place, creating a single source.

 

In addition, the Unified Data Lake enables the connection and communication of information between individual processes.

AI-powered robotic process automation reduces the team’s manual data entry, while cognitive data entry extracts information from multiple sources, including raw documents, eliminating manual data entry.

In addition, machine learning increases the level of automation and improves forecast accuracy.

Digital assistants interact with and assist customers in resolving inquiries and paying bills, providing a positive customer experience that is critical in a highly competitive environment.

Analytics interprets large amounts of data to create more accurate cash flow forecasts. The descriptive, predictive, and prescriptive analysis provides accurate forecasts and suggestions to support cash management and enable data-driven decision-making.

Together, these technologies increase efficiency exponentially, freeing human staff from tedious and repetitive tasks so they can focus on problem-solving, user experience, and applying insights to financial management.

Although CFOs have historically understood the relationship between sales, credit, AR, billing, withholding, and cash demand, organizing and managing these processes as efficient end-to-end processes are beyond the capabilities of technology.

Finally, this is no longer the case. Companies that map their O2C flows are finally able to successfully automate the process from ordering to payment through comprehensive AI-based analytics solutions like Emagia.

How optimizing the order to cash cycle

Without an optimized OTC cycle, you jeopardize your ability to meet your customers’ needs. This can harm the growth and revenue of your business—and who wants that?

So, consider the different steps in this process and work to adapt them to suit your specific business, product or service, and customer base.

There are various solutions and many tools for optimizing the O2C chain. Different types of software can be used to increase the efficiency of your process. This could be CRM, ERP, analytics tools…

Regardless of the solution you decide to implement; several features should always be considered, including:

  • Order fulfillment and processing automation
  • Centralized customer data
  • Collaboration tools and Communication (quick messaging, project management…)
  • Analytics tools (dashboards, custom reports…)
  • Document digitization for more efficient document management
  • Billing and quote management tools
  • Integration with other solutions (e.g., ERP with CRM)
  • They ensure that your company can maximize its digitization efforts.

What are the best ways to implement the OTC process?

what are the best ways to implement the order to cash process

As businesses grow and become more complex, the order-to-cash process can become more challenging to manage. To support operational efficiencies, organizations should strive to match each step in the process to remain connected as a seamlessly integrated system.

A coherent and comprehensive order-to-cash system UK (United Kingdom) that leverages technology and automation will likely lead to greater efficiencies.

  • Order management automation: An effective order to cash system USA starts with an effective order management tool. Implementing a Customer Relationship Management (CRM) system with an Order Management System (OMS) can help ensure more accurate and up-to-date information about customers and orders.

These two software systems can reduce manual processes that cause errors and delays. In addition, integrating these systems with enterprise resource planning (ERP) solutions allows enterprises to use the same data across OTC processes for greater consistency.

  • Credit management automation: Automating credit management processes benefits customers and lending companies. For customers, submitting an online business loan application is much faster than filling out a PDF form and sending it via email.

Since incomplete applications also cannot be submitted (for example, by marking a field as “required”), online applications help reduce errors and processing time.

Business lending companies also benefit from automated decision-making through credit scorecards. It’s much faster to assess an applicant’s creditworthiness using an automated decision-making engine than to assess creditworthiness manually (and subjectively).

When automated tools such as online business loans and credit card applications are integrated with CRM and shared at the enterprise level, order-to-cash processes and workflows can become more efficient and effective.

  • Invoice automation: The EIPP system is an automated tool used in the invoicing step of the order-to-cash process India. The EIPP system needs to be integrated with the order to cash process in the ERP system to achieve operational efficiency.

This enables a single filing and communication platform for all documents and invoice-related interactions. With this automation, customer payments are processed faster, errors are reduced, and processing customer order costs are reduced.

  • Payment automation: As with billing, implementing the EIPP system allows customers to access a single portal to make electronic payments. The launch of the online portal as part of the order-to-cash process in the ERP system allows customers to engage digitally throughout the entire process, from ordering to cash payment.

The EIPP system can save time and reduce costs for both the company and the customer. It can also significantly improve the customer experience as customers can access their bank statements and update their information online.

D&B Finance Analytics Receivables Intelligence has a payment gateway that offers e-invoicing and customer payment gateways.

  • POS app automation: Once you’ve received the customer’s payment, it’s time to process the payment and deposit the funds. For larger businesses or those with a high volume of invoices, using cash can be one of the most manual, time-consuming, and error-prone processes of the order-to-cash process.

Automating this feature means employees don’t have to try to match payments to invoices and reconcile unpaid customer balances. Cash Management by D&B Finance Analytics Receivables Intelligence automates and reconciles payments to enable touchless cash application processing.

  • Report automation: The reporting step of the order-to-cash process involves analyzing the company’s financial position.

Automated reporting tools provide actionable insights that uncover deficiencies and improve operational efficiency. Reporting tools must be connected to the ERP to enable a smooth data flow across the organization.

Process transformation by eliminating system boundaries and focusing on critical customer data flows across the enterprise is key to achieving operational efficiencies.

What exactly can order-to-cash (OTC or O2C) do for your analytics?

  • The need for analytics: In this new environment, advanced analytics is more important than ever to make sound business decisions. With good order-to-cash analysis, such as For order to cash example, the order to cash process Europe with Analytics, you can assess operational performance, forecast future results/revenues, and identify growth opportunities.
  • Single Source of Truth: What if we let you know you have the information you need? Within your order-to-cash solution, a single source of truth is provided for your entire order management process and financial application.
  • Improve order processing and efficiency: You want to see the big picture, but small details matter too. You need an order-to-cash-like Data Marketplace to cover your entire business process from order entry to payment.

Extracting value from your order-to-money data requires mapping and modeling and allows you to analyze and improve the performance of each function in your order-to-money cycle.

This gives you an idea of ??where past costs have come from and where you can make process improvements in the future.

  • Customer Experience: Executives rely on data to make decisions, and businesses need data to shape customer experiences successfully. The order-to-cash process USA Analytics will identify improvement opportunities and strengthen customer and brand relationships. For example, an order tracking software solution can turn the onboarding process into an opportunity to learn more about a company’s sales channels.
  • Accounts Receivable/Finance: Tired of analyzing your daily cash flow and using separate spreadsheets to analyze your company’s performance across multiple dimensions? Enhanced intelligence results in a real-time display of metrics such as Days Sales Outstanding (DSO) and Days Inventory Outstanding (DIO). This metric measures the extent to of a company relies on short-term versus long-term capital for its operations.

Order to Cash SAP?

Order-to-Cash SAP is the point of integration between Finance (FI) and Sales (SD). It is also called OTC or O2C for short. It is a business process that spans from sales orders to shipping and invoicing.

Consists of SO, shipping, postal goods issue (PGI) and customer invoicing. The OTC process is critical in enterprise resource planning (ERP) software. Both SAP and Oracle major ERP software include this process.

Its configuration affects the finance and sales, and distribution modules. It is an end-to-end process from customer inquiries to delivery of goods to invoices and cash payments.

The process starts when a customer requests an item from stock (finished goods for the company). The customer accepts the offer for the article and orders the desired quantity.

Next, a user from the company places an order and sends it for processing. Finally, inventory is picked up from the warehouse and shipped to the customer. The billing process also starts with shipping and can be shipped with an item or later. This is a common OTC scenario in general.

How AI optimized

Artificial intelligence and machine learning can improve order-to-cash cycles in several ways. In business, data is the currency of the world, and this technology is designed to use data to improve business operations and decision-making.

They do this by analyzing large amounts of information and looking for patterns humans cannot see. When the AI ??lens focuses on order-to-cash data, companies can use the patterns found to streamline processes and save time.

What is the difference between order to cash and quote to cash?

The main difference between order cash and quote to cash offer is that OTC is not about pricing or sending offers to customers and negotiating contracts. Instead, they are done before the order-to-money cycle and are the first step in the offer-to-money process.

The order-to-money and quote-to-money processes have certain similarities. In addition for example both include tools that capture and track orders and relevant customer information, such as CRM or OMS.

Both involve steps that involve order fulfillment, operations, and production. However, the bid-to-cash process consists of a more extensive set of business processes that begins with a quote and negotiation and ends with payment and billing to the customer.

What is the difference between procure to pay and order to cash?

While deposit orders and payment terms may seem relatively similar, they describe very different processes. Payment orders cover all business processes related to sales, whereas payment delivery covers all processes related to supplier deliveries (i.e., purchase requisitions).

So the difference between Procure-to-Pay and Order-to-Cash is quite simple – one applies to sell orders, and the other applies to delivery.

Conclusion

Therefore, most operational costs are spent on managing the order-to-cash cycle India. The greater the inefficiency in the circuit, the greater the risk of the potential loss. Because of this, many companies are now daring to outsource best practices in the order-to-cash management industry.

Dedicated order-to-cash outsourcing service providers can manage customer order management, finance and accounting, billing data entry and maintenance, and customer service, enabling businesses to streamline these cycles and processes.