Order-to-Cash: The definitive guide to a complex process

8 min read

A seamless order-to-cash (commonly known as OTC or O2C) chain is the most basic operation every company needs to achieve its core business objectives, but that doesn’t make it simple. Managing a simple subscription service can be straightforward, but if you offer a wide range of usage-based billing options and subscription models, inefficiencies and manual data compilation can quickly drag down your order-to-cash process.

There are some excellent platforms and cloud solutions out there, like Oracle NetSuite, that empower businesses with end-to-end solutions for O2C, but it’s incredibly difficult to create a one-size-fits-all product. O2C speaks directly to how customers experience your brand, and it can have a huge impact on a business’s efficiency and bottom line. That’s why every company has to become an expert in their O2C process and support it with software integrations and partnerships that make checkout a snap.

Intimidated? Don’t be. It’s a complex process, but we will explain exactly how it works and what it takes to keep transactions flowing and your business growing.

The impact and importance of order to cash

Unlike a marketing pipeline or nurture campaign, O2C doesn’t leave its mark on the customer experience by creating desire and building value in your products and services. Rather, it’s the process that fulfills your promises when they sign a service agreement or make a purchase. These include things like:

Confirmation: Did you provide them with policy information and a correct receipt?
Payment: Were they charged the right amount in a timely fashion?
Access and downloading: Was the customer able to access, download, and deploy your services promptly and efficiently?
Shipping: If your business involves physical products, was the product shipped quickly, safely, and with proper tracking information?
Support: Can they easily contact you for assistance with cancellations, refunds, troubleshooting, etc.?
Contract amendments: Are changes to contracts clearly communicated, accurately applied, and properly documented in your system?

Remember, your O2C process is a part of the product your customer pays for. If they form a bad impression, it can quickly lead to a damaged reputation, sluggish sales, and stagnant growth for years to come.

Key steps in the order-to-cash process explained

A great O2C process culminates with successful delivery and payment, but getting to the finish line in a digital ecosystem requires an incredible feat of communication and coordination – and it has to run easily. ERPs usually offer excellent solutions for finance teams handling various order-to-cash tasks. But when complex billing and revenue recognition needs extend beyond the ERP’s out-of-the-box capabilities, the platform may require additional enhancements and add-ons to expand its native functionality. These extensions integrate seamlessly within your ERP’s environment, and in some cases, your team won’t even know they’re using a partner’s app.

In general, your Cloud ERP platform of choice will need to take care of the following O2C activities:

Order management. After checkout, the customer’s information must be routed to the appropriate department, including fulfillment, billing, and credit approval, and alerts must be sent for any issues.
Credit management. If customers have applied for credit, your system should confirm their eligibility internally or through your partners and confirm with fulfillment.
Order fulfillment. The system must check inventory availability and allocate it for delivery by your purchase order workflow. If items are back ordered or out of stock, alerts need to be sent to customer service. Ideally, a great checkout page will be linked directly with fulfillment so customers know a product is available before they pay.
Shipping. While your software can’t pack and tape (yet!), it will be responsible for sending shipping confirmations and tracking information to customers and recording it in your system.
Invoicing and accounts receivable. If your business relies on invoices, these should be generated through invoice automation, sent, and logged with accounts receivable to track the payment process.
Collections. While it’s an unpleasant part of doing business, alerts should be automatically sent for delinquent accounts and forwarded to collections as necessary.
Reporting and data management. One of the most beneficial parts of the O2C process is that a great platform can automate reporting and data mining processes to track your success, provide you with market insights, document the customer journey, and help take your business to the next level.

Common order to cash challenges and bottlenecks

Breakdowns in any part of the O2C process can frustrate your team, bog down your workflow, and ultimately lead to customer dissatisfaction and lost revenue. On the upside, that’s why most ERPs, payment, and billing services have gotten pretty good at it. There are reliable solutions for most problems that might arise, and there are only a few key areas where businesses need to be especially vigilant and ready to invest in valuable integrations.

Third-party payment services

Many payment processing platforms like Stripe are designed to work with ERP platforms like NetSuite. These pairings can deliver a lot of functionality for your business and value for your customers. These systems are usually designed for a wide range of use cases across many industries, so there’s often some manual work and platform shuffling every team needs to do to meet their specific needs.

These activities can slow down your O2C timeline and introduce errors to your workflow that burn time and resources – and there are plenty of potential pain points. ACH and credit card payments, reconciling payment data across platforms, refunds, and chargebacks are all potential bottlenecks if platforms aren’t seamlessly integrated with an ERP.

Billing

Manual billing processes can quickly eat into time and resources, and it’s easy to fall behind and make mistakes. Also, with multiple partners and software systems needing to communicate for O2C to be successful, Know Your Customer (KYC) and Know Your Business (KYB) compliance issues can become a huge financial and legal liability.

For instance, recurring billing scenarios involving royalties and fees that change based on customer use can add several layers of complexity to the process. While straightforward on paper, these variations make it difficult to automate billing, comply with accounting standards and regulations, and impact customer data analysis and forecasting.

Reconciliation and compliance

It would be great if every product integrated seamlessly with your ERP, but the traditional solution is for employees to manually record payments and apply deposits, opening the door to costly errors and murky audit trails.

When matching payments with invoices has to be handled manually on an invoice-by-invoice basis, it’s easy for discrepancies to go undetected. These issues produce downstream effects for auditing and compliance, increasing the risk of misallocated funds and slowing down your order-to-cash cycle.

Data accuracy and reporting

Any lags in data systems are a potential operational and reporting liability, and there are many ways these inefficiencies can be introduced to the O2C process. A lack of real-time data because of disconnected systems, bottlenecks in reporting, manual entry and calculation processes, or a lack of the proper tools to transfer data from the ERP to your Business Intelligence platform to interrogate can all develop into significant O2C challenges.

Scalability

Companies scale for many reasons, and significant growth can expose weaknesses in the existing order-to-cash process. Any increase in billing complexity or scope may quickly become resource-heavy, highlight platform limitations, and ultimately lead to delayed invoicing and customer queries.

Optimizing O2C to boost revenue and performance

When things go wrong in the O2C process, profits and your team’s morale suffer. Managing angry customers is hard enough, but when the systems for dealing with errors, inefficiencies, compliance issues and reconciliation are just as painful and bulky, your O2C process can quickly spiral out of control.

Fortunately, there are some excellent solutions to these challenges that make it easy to resolve problems or avoid them in the first place. That saves everyone time, energy and money, and grows your business with happy customers who return for more.

1. Automating billing and invoicing

Subscription services often require complex invoicing processes that rely heavily on slow manual work. Whether it’s invoice creation, contract modifications, customization, or delivery, any opportunity to automate the process can save you time and money.

Smart integrations extend your native ERP’s capabilities to automate all aspects of your invoicing and billing chain. By eliminating spreadsheets and one-by-one invoice adjustments, you can accelerate your entire O2C cycle while reducing costly errors.

ZoneBilling is a great example of the value the perfect tech integration can provide. When New Zealand telecommunications giant Devoli experienced revenue growth from $12 million to $100 million in just 4-years, its legacy billing system was unable to keep up. The partnership with Zone & Co provided Devoli with seamless integration between NetSuite and existing familiar tools that supported current and future scalability needs, reducing the time spent on billing tasks

2. Payments

The same ERP advantages that billing integrations provide can be leveraged to streamline payment processes as well. By maintaining an enterprise-wide data system, Accounts Receivable benefits from automation and error reduction as well.

Another key feature of integrations that extend native ERP functionality is that they can break down data barriers between third-party payment platforms. That minimizes the number of logins your team needs to alternate between to get the information they need and prevents redundancies and mistakes in your O2C cycle.

3. Reconciliation relief

Any time data is siloed or isn’t packaged in a usable format for your ERP and Business Intelligence (BI) platforms, your team will need to compile it manually in those all-too-familiar Excel spreadsheets. On top of being error-prone, these processes become an exponential liability as your business grows and scales.

4. Supply chain visibility

One of the most important analytical views every business needs is its supply chain. This has become increasingly critical in recent years as the repercussions from the pandemic are still rippling through many industries.

By centralizing all of your business’s data in your ERP and deploying integrations that reconcile and replicate it directly in tools like Power BI, you can gain instant insights into supply chain issues that can wreak havoc on your O2C cycle.

Solving the order to cash puzzle

Every business is different, and as much as technology has revolutionized the world of digital commerce, there are still plenty of gaps in O2C processes that represent big competitive advantages – if you can solve them. The fact is, order to cash is often the last thing businesses think about when they go live, but it’s one of the first problems they encounter when they start to scale.

Optimizing your business’s complex order-to-cash cycle to keep pace might mean you need to consider adopting integrations that extend the capabilities of familiar systems and reduce reliance on manual processes. Every business model has unique challenges that impact subscription and usage-based billing at every growth stage. Innovative software solutions that optimize O2C allow you to unlock your business’s maturity potential and deliver returns that scale alongside you every step of the way.

Explore this topic further in our white paper Optimizing Order-to-Cash at Every Growth Stage.