The order to cash is one of the important parameters that describe the organisation success and also plays an important role in determining the relationship with its customers. order to cash process is an entity of a company’s order processing system.
Its starts immediately when a customer places an order. Before placing an order, everything is related to some function of branding, marketing, managing or sales. Once the customer places an order, everything is dependent on order to cash.?Their core activities are dependent on the order to cash cycle.
While some people may think that Order to cash is completed when order is placed and received successfully, but there are some important functions apart from placing an order and receiving the confirmation messages.
Activity data recorded through the order to cash process must be properly analysed and optimised to help management organisation to identify and optimise the opportunities.
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Technology plays a crucial role in every process
Technology plays an important role in every process of order to cash process. Every field of order to cash process can be improved drastically through the use of innovative, modern and interconnected systems. Optical management of the Order to cash method requires different parties to have access and control to accurate, real-time information at any instant.
In the end, getting results from order to cash process requires the addition of technology, process management and multiple collaboration.
There are eight major steps that make an order to cash process. They are:
1. Order Management
The first steps that formulate the order to cash process are order management. Order management begins immediately after a customer places an order.
Through an eCommerce platform on your website, an email to the sales department or an immediate notice to an operational team or even notifying the team management, you are responsible for the order management as soon as the order purchase confirmation is made from the customer side.
Company’s order management system must be automated, and instant notification through mail or any text message should kick the series of actions in other departments that will not only notify about the order placement confirmation, but it will enhance the team coordination and responsibility within the company.
A study at IBM found that the companies who have adopted best technology in order to cash process were 85 per cent more effective at order management than those you are still using the manual way of order to cash process. Make sure that new order to cash process is organised properly, and notify relevant team immediately to ensure accurate and proper fulfilment.
2. Credit Management
Effective credit management on the front end of the order to cash process minimises issues that occur as you reach the end of the process. In cases where a credit request is made, every first customer when an order is placed should automatically be sent through the credit approval process.
An automated process can take care of direct approvals or denials, and the finance person gets notified for cases that require more strict reviews.
The order management software helps the companies by sending customers who have current credit approval directly to the final updated software. Meanwhile, customers who have made earlier defaults on a previous order, or who are new and applying for the first time should be treated as a new customer.
Automated credit management makes complex tasks easy for companies such as account receivables, and set strategic credit guidelines only to trustworthy customers.
3. Order Fulfilment
Automated inventory management software is a very important component of the order fulfilment process. Inventory counts must be updated on the sales side in order to maintain the list of the orders whose fulfilment cannot be processed. In the condition of out of stock, the order does make its fulfilment, it must be removed or updated immediately.
Then you need to notify your customer about this information about the cancel of order and avoid such billing issues and maintain a long relationship with the customers.
Orders that are sent for the fulfilment must be standardised in the digital format so that any employee of the company can start decrypting them and immediately start to work with the relevant details. Paper order, as well as legacy programs, don?t share order data which often leads to inconsistency, inaccuracies, bottlenecks and const clarifications.
4. Order shipping
The success of the company is highly dependent on great logistics that is why the shipping portion of the order to cash process need to be properly audited to ensure its high meets and demands standard.
Data from the order and fulfilment management functions must be immediately updated to the logistics team so that they can plan and update the carrier pickup schedule and gets the order to the customers on time.
5. Customer Invoicing
Any case related to credit management and account deductions, invoicing delay and inaccuracies can slow the pace of the company and lead to cash problems that create a huge problem for the entire organisation.
When accurate invoices are sent out on reliable timetable, finance can effectively forecast inflows and plan for expense accordingly. A study carried out by Aberdeen Group found that companies that excel at order to cash process requires less input for invoices as compared to 80 per cent of the companies that scored less and lied at the bottom tier.
The invoicing system needs to get correct and updated information from staff who are responsible for account updates and account receivables. Data points need specifics such as credit items, costs, order date and shipping date and time so that invoices get automated with correct information and get updated on the system.
6. Accounts Receivables
Automated accounting systems need to display outstanding invoices at pre times before they are overdue and account receivable representative need to review these invoices to determine if there are any possibilities or any error related to the delayed payment.
For example- unpaid invoices on past orders with more than 40 items should be flagged, notified and automated payment reminder should be marked for the future review.
As soon as errors are deducted, account receivables professionals must quickly check those data and update the system and eliminate such error from every ordering system, find out the information breakdown and send the revised invoice immediately.
7. Payment Collection
The first thing that should be done in defence against collection backlogs is to have had document payments received at the specific period of time. The organisation faces issues when customers payment notification and invoices are not successfully placed and updated in the ordering screen.
This creates a huge problem when customers are asked for the payment which they have already been remitted. It also causes big inaccuracies in cash estimates, causes a big problem for the finance and operation team to inaccurately forecast cash deficits.
When an invoice lapse due into the overdue period, the customer should be notified and their invoice must be flagged and their account should be placed at hold. When they try to place another order, the automated system must trigger and notify the team and customer about the previous default mode for the previous order.
Account receivable person should start contacting the customer and notify them with the invoice and overdue amount and tell them about the penalties for the invoice.
Accounting and finance leaders must review such overdue account on a regular basis and report such bad credit to the company for the better future forecast.
8. Reporting and Data management
Interconnected software programs can track performance data across every stage of order to cash process. By analysing and monitoring the data, company leaders can see the overall performance and overlook of order to cash process affects everything in the organisation.
This includes the relationship with customers, length of the sales cycle and customer service functions.