8 crucial steps in an O2C process
The process begins when a customer places a sales order to when the system generates a final report—the following section breaks down all sub-processes to outline the order-to-cash workflow.
1. Order management
The first step begins when a purchase is confirmed, regardless of the channel it comes through. An automated order management system instantly alerts all the relevant departments. It ensures a timely and accurate fulfillment of the order. You need to organize all new orders appropriately as an error results in problems throughout the process.
2. Credit management
It is prudent to deal with credit management initially to avoid issues at the end of the process. Automating your credit management system streamlines the process. The software should accordingly handle new customers, returning customers, and returning customers who you denied credit previously. Setting credit guidelines will ensure you avoid extending credit to the wrong people.
3. Customer order fulfillment
Inventory management software is vital in customer order fulfillment. Inventory needs real-time updating on the sales side to avoid accepting orders that you can't fulfill, like an out-of-stock item. The order should be in a standardized digital form for easy interpretation and prepared for shipping or a service appointment booked.
4. Customer order shipping
This step involves delivering goods or completing service orders and revolves around product logistics. When shipping items, you can automate some processes, such as sending notifications to the customer and relevant departments. Having warehouse management software helps you track products wherever they are, while a system to track deliveries helps you flag those taking too long so that you can take appropriate measures.
5. Customer invoicing
Customers should receive an invoice unless they pay for the goods at the time of ordering. Automating your invoicing system ensures it generates an invoice automatically. You can easily share the invoice with relevant departments using the software, eliminating delays and inaccuracies that could lead to cash problems. Ensure invoices are in a format easily understood by everyone.
6. Accounts receivable
Automating your accounting system is a great way to ensure flagging of overdue invoices before their due date. This way, the accounts receivable personnel can review them for any errors that may cause the delay in payment. When you identify errors, you can deal with them and send a revised invoice promptly. You thus minimize cash inflow problems for the company.
7. Payment collection
Ensure you have a system in place to notify the accounts receivable department when a customer pays an outstanding invoice. Manual payment processes cause delays and errors. A digital operations system or an enterprise resource planning (ERP) system will automatically update all concerned departments. Your system should flag overdue invoices and also put the accounts on hold.
8. Reporting & data management
High-end software programs can track data across all the steps in the O2C cycle and generate it for you. Company leaders need to analyze this data and see where the process needs improvement. For example, you can measure the days’ sales outstanding (DSO) of your company. A successful and optimized order-to-cash process ensures value, leading to prompt payments. It also frees up resources, which you can use to enhance the customer experience.