A Step-by-Step Guide on Order to Cash Cycle and How to Improve its Management
Order to cash is one of the high-level business processes for receiving and processing client’s orders. Companies must optimize their order to cash cycle so they can maintain efficient and smooth operations. There are various processes involved in the whole order to cash cycle, and each of them impact’s a firm’s overall business model.
Technological advancements are using both B2B and B2C companies to adapt seamless transactions. Improving the company’s current order to cash process significantly impacts its revenues and growth. Having an efficient order to cash processes benefits firms as it lessens the time spent on collections.
What is the Order to Cash Process?
Order to cash pertains to the company’s entire ordering processing system. It starts from the time the client places an order. All processes prior to order placement usually are part of marketing, branding, advertising or sales functions.
Many people think that the order to cash process is already complete after the order has been placed and paid. However, several activities are occurring after these actions. It pays for companies to analyze each activity recorded during the entire order to cash cycle to help them identify the areas that require optimization.
What are the Processes Involved in Order to Cash?
The order fulfillment stage involves the checking and updating of inventory so that the company can fulfill all orders.
However, there are cases when the order has been processed, some products are either out of stock, or the service is no longer available. When this happens, companies should inform the clients immediately so the order can be cancelled to avoid problems at the billing and payment stage. Likewise, fulfilling orders timely is necessary for companies to earn the trust of their clients.
Customer Invoicing and Account Receivables
Sending invoices to clients is a crucial stage as inaccuracies and delays can snowball and result in liquidity problems for companies. Cash problems, after all, can disrupt the whole company’s operations.
Likewise, enterprises must flag outstanding invoices before they become overdue. The Accounts Receivable team must also check these invoices to find any possible errors that could delay the client’s payment. If there are errors, then the Accounts Receivable analyst must review pertinent information from the ordering system to trace the error source and send the client a revised invoice as soon as possible.
Payment Reporting and Data Management
How to Improve Order to Cash Cycle
Manually tackling tasks is prone to human error. Automating tasks, on the other hand, ensures that processes will be done uniformly every single time.
For example, automating the order management system and having automated notifications are beneficial for the company as they can kick off a series of actions from various departments. Automation allows the company to keep every department involved in the loop.
Automation of invoices and payment collections allows companies to send invoices to clients quickly. Customers, in turn, will receive the digital invoice and can settle their accounts online. The system then records the payments.
Standardizing Order to Cash Process
Accurate Customer Information
It seems impossible to maintain accurate client information across different systems, but it’s not an excuse for companies to slack off in ensuring accurate customer data. After all, inconsistent information will create many problems, including hampered productivity and poor customer satisfaction.
Companies can’t always use the same systems for all their departments, especially when the business expands as other systems are put in place. However, some solutions have trigger functions capable of sending an automated notification or email to another team when there are changes in customer information. Other systems also have limited integration capabilities as well.
In the end, many consider the order to cash process as the financial backbone of any company. An organization’s growth is often directly correlated to the efficiency of its order to cash process. Improving the order to cash cycle is then necessary. Automating and standardizing processes and ensuring accurate customer data are just some of the strategies businesses can employ to ensure high efficiency in their order to cash cycle management.