What does Order to Cash mean?
Once an order comes in, it goes through a business’s whole order processing system, from when the order is accepted until the payment is made and an entry is made in accounting.
Everything before an order is sent out involves other tasks, like sales, marketing, or branding. It’s important to remember that these functions don’t stop working once a customer makes an order. Instead, their main tasks usually happen in the stages of the customer journey that come before the order-to-cash process starts.
Like words
OHC ·O2C
Quote-to-Cash vs. Order-to-Cash
Order-to-cash covers everything from when a customer makes an order to when that order is paid for. Quote-to-cash, on the other hand, covers a broader range of business activities.
Quote-to-cash includes the order-to-cash process as well as other processes and managing contracts. Simply put, the quote-to-cash process begins with a customer’s intention to buy, not with the actual purchase, and ends with the realization of income.
Order-to-cash and quote-to-cash are not the same in two critical ways. The first is that the set, price, and quote (CPQ) steps are not part of order-to-cash; they are done before and are part of the quote-to-cash step.
Part of contract lifecycle management is included in order-to-cash, but not all. This is the second key difference.
Outside the normal order-to-cash cycle, customer contracts are made and negotiated ahead of time as part of the quote-to-cash process.
How does the order-to-cash process work?
The process from order to cash has seven steps:
Get the order.
This is when the customer places their order. The business’s order management system will inform them, and certain people, teams, and systems will also be told about the order. This is the very first step in the order-to-cash process. After this is done, the following steps can begin:
Take care of customer payments.
After the customer orders, the business has to handle their payment. How they do this depends on their chosen payment method, such as a credit or debit card.
There is an eCommerce system in place that will do most of the work here by sending it for review. The system will then either accept or reject the payment. Getting paid by the customer is the first step in the order-to-cash process. Once payment is accepted, the next step is fulfillment.
Finish the order.
The order needs to be filled now that payment has been accepted. That means finding the things or parts and preparing them for the person who bought them.
A method for managing inventory will do most of the work here by telling people filling orders where to find items, etc.
Send the package.
After the item has been packed, it should be sent to the customer using the chosen delivery method, such as home delivery, click-and-collect, next-day delivery, or same-day delivery.
This can be done by hand or automatically. Still, companies need to ensure the fulfillment information is used to get the package ready for shipping so that the correct item gets to the correct customer at the correct address and with the correct delivery method.
Write the bill.
A customer statement is a piece of paper that lists the things that were bought and the price the customer paid. Companies keep track of what’s been paid for and shipped by sending a customer statement for every purchase and order. This way, there are no money problems.
Get the money.
The payment from the customer was accepted in Step 2, but it has not yet been collected.
If everything has gone as planned, the company’s order management and billing tools should take care of this part of the cycle automatically. The customer’s payment method should automatically go through, as shown on the invoice.
Write it up and look it over.
The order-to-cash process doesn’t end as soon as the customer pays.
Businesses need to report on all the information related to the order-to-cash process. Integrated systems, like automated buying and billing, make this step easier because they track all the information about customers, orders, and sales. Businesses need to look at the order-to-cash process data to find places where the process isn’t working as well as it could. They can then fix these problems to ensure the process always runs smoothly, which is good for customers and the bottom line.
When it’s time to cash in,
Optimizing the order-to-cash process can help businesses eliminate waste, reuse working capital, reduce bottlenecks, and make customers happier. It can also cut down on delivery time. It takes a business a certain number of days to turn revenue into a stock that can be sold and then back into revenue as part of the sales process. This is called the cash cycle. By ensuring systems are automated and work together, an optimized order-to-cash cycle can reduce businesses’ time to turn goods back into cash.
Making the most of order to cash
As was already said, improving the order-to-cash process can make a big difference in a business’s cash conversion cycle by eliminating waste and giving customers a better experience.
Why improving the order-to-cash process is a good idea
Getting the order-to-cash method right has three main benefits:
- Better customer experience: businesses can improve the billing, shipping, and payment processes. This helps to make customers happier and sets them up for long-term trust and repeat business.
- 2. Revenue Optimization: Businesses can get more money by eliminating wasteful steps in collecting payments. A better general customer experience is another benefit of optimized fulfillment processes. This helps keep customers for a long time and increases their lifetime value.
- Better cash flow: Improving the order-to-cash method can help you find new ways to cut costs. To save more money on operations, businesses may be able to fix some delivery and billing problems, improve inventory workflows, and eliminate other inefficient processes. The extra money these savings bring in can be added to the business.
Pay Cash Order: What to Do Best
One of the best ways businesses can improve their order-to-cash process is to follow a few best practices.
Make a standard.
Having standards, rules, and laws that everyone in the company must follow makes things consistent and makes the order-to-cash process run more smoothly. With company-wide standards, everyone is working at the same level and quality, which improves the results as a whole. As a natural result, team members become more efficient and can find and fix problems more efficiently.
Ensure that the systems are linked.
Having inventory, CRM, and inventory management tools is excellent, but they are only helpful if they can work together to make the order-to-cash process more automated. Businesses can reduce human mistakes and speed up the order-to-cash process by ensuring their systems work together.
Keep an eye on the process.
Monitoring the order-to-cash process regularly makes it easier to find problems stopping it from working as well as possible. Because technology constantly improves, methods and procedures must adapt to succeed.