Order to Cash
Efficiently Optimize Working Capital
Order to Cash (O2C or OTC) entails the business processes involved in a company’s ordering processing system, including order fulfilment, customer invoicing and payment collection. The O2C process, is critical not just to ensure an optimal customer experience, but to determine a company’s cash inflows as well. In addition, the O2C process impacts other activities, such as labour, supply chain management and inventory management. The more efficient the order to cash cycle is, the less time an organization is likely to spend on payment collections. A critical component of any company’s assets, the O2C process can make or break a business, given its impact on a company’s future cash flow. For the cash cycle to be streamlined, the invoicing system and accounts receivable function requires to be free of bottlenecks. Therefore, reducing the cycle time between when accounts payables are due and the payment collection is complete ensures the business maintains a positive cash flow.
To address this requirement, Quatrro’s end-to-end solution provides a holistic view of the order to cash process in real-time. This, in turn, innovates and improves the organization’s order management system, by speeding up payment collections and reducing overheads.
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Frequently Asked Questions
Yes, in accounting terms, the accounts receivable process, also known as order to cash (O2C or OTC), is a business process that spans the entirety of the order processing system, from receiving the sales order to order fulfilment. It also entails logging an entry in the accounting books. The O2C team can function under various models, usually a shared service model or an outsourcing model where certain parts of the order management system are handled by a third-party.
The Order to Cash process starts with the order from a customer and ends with the ‘cash’ payment for that order.Order Placement and Management:
The customer places the order through the sales function of the company, followed by the supplier organization ensuring that there are no delays in the order approval process or no order re-entries exist.
Order placement and management is arguably the most important step in the order processing system. It is critical that the orders are accurate, and that the customer receives verification that the order has been placed. In fact, all the organization’s departments involved in the order processing system, must be flagged on time.
In addition, automating the order management system is important, as not only are the business processes involved in the order processing system optimized, but inventory management will be reduced as well.Credit Management:
Once an order is placed, the supplier credit department evaluates the customer’s credit risk. A proper credit management process involves a thorough review of the customer’s credit portfolio and aligning the risk against the supplier’s credit policy. This ensures that the suppliers are accepting orders from customers who will be able to pay them back.
Centralizing an organization’s credit management system ensures a streamlined customer experience, as well as improved business processes.Order Fulfilment:
Inventory management is a key component of order fulfilment. To avoid orders that cannot be filled, supply chain management must be properly executed, to check and update inventory in real-time. If, on the other hand, the order is processed but the product is out of stock, the customer is notified and the order is cancelled.Order Shipping:
The order gets prepared for shipment, and is handed over to the carrier services. However, deliveries that are taking longer than expected must be flagged, with the carrier and the customer. After the delivery, the O2C team collects the following documents from the carrier service:
Proof of Delivery:The document includes the list of goods sent and their quantity, signed by the customer’s warehouse representative acknowledging receipt of delivery.
Bill of Lading:The detailed list of truck cargo in the form of a receipt that the shipper of the cargo gives to the person consigning the goods.Customer Billing or Invoicing:
The billing and invoicing team generates invoices and delivers it to customers via email, postal mail, EDI, and other channels. Once the customer makes payment and the O2C team receives it, the O2C team marks the outstanding invoice as closed.Payment Collections:
Payment collections are vital for any organization, especially when a company provides its goods on credit. However, if there is a lapse in the payment and the invoice remains outstanding beyond the terms extended, the customer must be flagged, and their credit must be put on hold.Cash Reconciliation and Ledger Management:
Once the payment is received, it is matched with the outstanding invoice to reconcile cash. It is then added into the general ledger for the record and to reflect appropriately in the financial reports.