Simple Steps to Improve Your Order to Cash Process

Acquiring working capital is the foundation of business. Unfortunately, many businesses don’t have the quick access to liquid cash they need because their money is all tied up in an improperly functioning supply chain.

Let’s take a look at what you can do to improve your order-to-cash process in just a few quick steps.

What is the Order to Cash Process?

Before you can make any improvements to your order to cash (O2C) process, you have to understand what it means. Order to cash refers to the entire breadth of steps in the customer cycle, beginning with taking a customer’s sales order via some form of electronic format (internet, e-mail, salesperson, fax, or some other means.), creating an invoice, collecting payment for that invoice and then delivering the receipt to the customer.

To better understand the entire process here is a list of steps, in order:

1. Customer requests a quote or makes an order.
2. Salesperson fields the order or quote and creates an invoice.
3. Finance and accounting file the invoice and push it along the supply chain where the product is officially purchased or assembled.
4. The manufacturer delivers the completed product to the customer.
5. Customer completes transaction by paying the amount as agreed upon per the invoice.

Identify Sales Inefficiencies

Now that the entire process has been laid out, it becomes easier to see where discrepancies are possible and which end is responsible for them. Identifying where your problems are coming from is the first step towards eradicating them from your supply chain. There could be many signs indicating that your pipeline has inefficiencies, but here are some of the most common problems:

• Quotes/sales orders are full of inaccurate pricing or other clerical mistakes.
• Order processing requires too much time and is labor intensive.
• Customers are filing complaints about slow quotes or other sales processes.
• Management is routinely involved in approval for low-level sales.
• Invoices are not being sent to customers immediately following completion of the order, resulting in extraneous issues such as late delivery/payment and/or slow fulfilment.
• Sales representatives are providing unapproved discounts or there are consistent disagreements on discounts that are available.

Reduce the Issue

Many of the issues covered in the above section are related to personnel or sales reps, and need to be addressed by management. There are many moving pieces in a supply chain and you want to remove any factors that may be clogging up your pipeline and keeping it from being streamlined.

If these issues are clerical, not intentional, consider automating them! Many companies use Enterprise Resource Planning (ERP) software to automate the entire sales order process. Companies like Kenandy offer an order-to-cash service that eliminates costly data-entry mistakes and reduces overhead, which improves productivity, customer satisfaction, and makes for a faster order-to-cash process over all.

If your issues are with invoice collection, consider your payment options. Is there an online option? The ability to view invoices and pay them online significantly increased the likelihood the customer will pay them on time.

For a list of other factors that may be holding your invoice reception back, check out this article on collecting invoices on time.

Proactivity

As the old adage says, “The best defense is a good offense.” While that might not be true for everything, it certainly applies to your supply chain. Don’t wait for your pipeline to fall apart before you make the changes needed to streamline the process. If you follow the process of going line by line through your supply chain, you can find and eliminate some of the low hanging fruit. But, to really be proactive in the fight for a smooth order to cash process is to invest in the implementation of an ERP system for your company. Optimizing sales processes is a difficult enough task as it is, don’t put your cash flow in jeopardy when it comes to collecting payment.