What Is the Order-To-Cash Process?
Automate your order-to-cash process for a seamless and streamlined customer experience
From order to cash: At first glance, this sounds like a process that is absolutely standard in companies. But this is not the case because the order-to-cash process, or O2C for short, is a more complex matter than one might suspect. There is a simple reason for this: the path along a company's complete value chain involves many internal company procedures and processes.
The decisive keyword is efficiency. In this article, you will learn how you can automate the order-to-cash process in your company and make it efficient, what advantages an agile system offers both you and your customers, and where you can find support.
A Quick Note on the Order-To-Cash Process
The order-to-cash process describes the purchasing process. Specifically, it refers to the process from ordering a product or service - i.e., the conclusion of an order - to receipt of payment. The generic term thus encompasses many different sub-processes. These include the receipt of the customer order, i.e. the purchase order, the execution of the order, the creation of the invoice and the monitoring of the receipt of payment.
Due to the complexity of the topic and the fact that many different processes have to be merged, the automation of the process becomes more and more important in order to achieve optimal results. Therefore, so-called ERP systems (ERP = Enterprise Resource Planning) support companies in fully digitizing and automating the order-to-cash process.
Process Mapping in the Order-To-Cash Process
An order-to-cash process can be roughly divided into four phases or areas:
- Pre-sales activities
- Order processing
- Invoicing, i.e. the issuing of the invoice
Pre-sales activities include the actions that take place before an order is processed. It starts with the contact between the customer and the company. Already from this the wish for an offer can arise. In most cases, however, the customer makes a non-binding inquiry in advance. This involves comparing their needs with the product or service. This is followed by the offer with all the important facts for a potential order. Pre-sales activities also include the contract as well as a delivery schedule containing the number and delivery date of the respective products or services. Don't forget: everything that ultimately goes over before the order itself is optional.
Processing the order
The processing of the order is one of the central variables of the order-to-cash process. In a modern ERP system, the order itself contains numerous details such as:
- Information about the price
- Key data on the exact goods and/or services
- Information on the delivery quantity and delivery date
- Information about the shipment
- Information on billing such as payment terms
The order processing is followed by the shipment. As an alternative to the shipment of goods, service companies are considered to have provided the respective service. Important for the documentation of the shipment is the transport order with packaging and transport details. This is followed by the goods issue and the actual shipment.
Once the goods are delivered, the next step is the payment process. Normally, payment is made as soon as the customer has received the ordered goods or service. However, advance payment is also possible. Invoicing also includes receivables management and the possible creation of credit notes.
We note that the process chain of the order-to-cash process is long and very detailed. It ranges from pre-sales activities to the processing of an order and the shipment of goods or the provision of a service to complete accounting.
Automation of the Order-To-Cash Process
For the automation of individual processes, there are, of course smart solutions for business process management or process mining. While business process management focuses primarily on the analysis and optimization of processes, process mining is even more efficient when it comes to the preparation of individual processes.
But what about the automation of the entire order-to-cash process? The answer is clear: it is hardly possible to do so completely without automation in this day and age, as the process is far too extensive and in most companies spans many departments.
Many interfaces harbor a large potential for errors. It is therefore hardly possible to work error-free with manual process control. Imagine that employees in every department make entries in the system during sales processing. Is there a final correcting instance for all these entries? Probably not. This is precisely why manual order entry is particularly prone to errors. Such errors can then run through the entire process chain. In addition to the high potential for errors, manual entry also involves a risk of manipulation, which in case of doubt can cause great damage to your company.
By automating the order-to-cash process, you can avoid these scenarios. By implementing a fully automated workflow and standardized processes, your company will gain significant efficiency. The individual processes run hand in hand in an automated manner, which optimizes administration. In addition, you increase productivity through automation, which is mainly related to time savings. This is because the management of orders is now no longer carried out by employees, but by the system. This means that the most significant consequence of OTC process automation can be an increase in your sales.
Conclusion and Outlook: Order-To-Cash Process Is and Remains Important
The more effective the order-to-cash process is designed as a central company variable, the more success your company will record. If you manage the entire process automatically, you will have a precise overview of all steps. What is the status of a particular order? Where do the goods still have to be delivered? And for which customer is payment still outstanding? These questions are answered at a glance in the system. In addition, an optimized order-to-cash process also benefits your customers: If everything runs smoothly from start to finish for an order, this strengthens the customer relationship. The key to this is automating the order-to-cash process.
Are you wondering how to automate the order-to-cash process in your company? Arvato Systems offers modern, smart and efficient solutions in the area of process management. Contact our experienced subject matter experts free of charge and without obligation and receive individual advice.