The Order To Cash Process (O2C) - and Ways To Improve This | Corcentric (2022)

The balance of a business’saccounts receivableledger, including aged debt and days sales outstanding (DSO), can provide insight intoinefficienciesin theO2C processwhich can be addressed to improvecash flow.

These inefficiencies tend to come from manual processes, these impact the accounts receivable (AR) team’s ability to handle invoice creation, presentment, and distribution. As a result, an inefficient O2C process will have a negative impact on payment timeframes, potentially driving up DSO and inhibiting cash flow.

The good news is that there are solutions. By automating the entire accounts receivable process, from credit management to invoicing and payment reconciliation, businesses can optimize every step of the O2C process for improved cash flow by bringing money into your organization faster.

What isorder-to-cashand where does this fit in thecash cycle?

Theorder-to-cashprocessencompasses all steps fromwhen a customer order is placed up until the business is paid (the cash). Those steps includeorder managementandorder fulfillment, through tocredit management, theninvoicingand ultimatelypayment collection.

O2Chas an implicit connection to the supply of goods and order fulfilment, therefore driving a need for goodsupply chain managementprocesses to be in place.

Benefits from optimizing theorder-to-cashprocess

The biggest hurdle to accounts receivable productivity is the fact that AR processes are often too complex, with too many disparate financial systems, too little standardization, and too many manual steps. These processes are often compounded by interruptions resulting from issues demanding quick resolution.

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As every business leader knows, free cash flow is the single most important metric to determine the health of their business. The AR department has a uniquely influential role in facilitating cash flow. By shortening the time from purchase to order and invoice delivery, as well as simplifying the payment process, cash flows more readily. Therefore, assessing and adjusting the O2C process is the most obvious place to address cash flow challenges.

In addition to cash flow improvements, the top benefits from optimizing theorder-to-cashprocessinclude the following:

  • Revenue generation ─ a streamlined purchase and fulfilment process, swift, accurateinvoicing,and ease of payment improvecustomer satisfactionand encourage repeat purchasing as well as customer advocacy. These factors can have a positive impact on sales growth.
  • Customer experience ─ customer relationshipscan be won or lost on the experience oforder fulfillment,invoicing,and payments. A reliable O2C system to manage invoicing and fulfilment, in addition to disputes and credit collection, promotes accuracy and timeliness, contributing to improved customer experience.
  • Cost savings ─ Stronger internal controls through an automated O2C process significantly reduces or eliminates errors and makes it easier to support early payment discounts. With business processimprovement, any company can bring down overheads, resulting in lower operational expenses and supporting operational leverage.

Steps taken in theOrder toCashProcesses

1. Order management

Everything starts with an order. A customer places an order viaecommerce, directsales orderprocesses, or other means. Once the order is placed, inventory is checked by theorder processing systemto confirm the goods can be dispatched. Once verified, a delivery timeframe is issued. The customer’s credit facility will be check to determine whether the order was accepted on existing credit terms. The order is then recorded in the sales ledger and the goods are shipped. Finally, automatic re-ordering via theERP system, is triggered in the supply chain to ensure the inventory is replenished for future sales.

2. Credit management

The vast majority of B2B sales are made on credit, allowing time for an invoice to be generated, sent, and paid, without slowing down the fulfilment of each order. But credit must be awarded based on an assessment of each buyer’s ability to pay. Carefully determining credit at this early stage prevents payment risks when invoices are due.

3. Customerinvoicingsystem

Customers are invoiced for each order to request payment, within a specified timeframe, for the goods they have purchased. The bestcustomerinvoicingsystemsautomatically generate and deliver invoices to customers when they purchase. However,invoicingautomationneeds to take into account a large number of nuances and variables, including invoice format, delivery mechanism and media, recipient, approval process, associated documentation and many other factors.

4. Accounts receivable

Once a sale is made and goods are shipped, theaccounts receivableprocess kicks in. This encompasses invoice generation and delivery, tracking and reconciliation of payments against the ledger.

(Video) Webinar: Making Accounts Receivable Automation Work for You

Savvy accounts receivableteams willautomatethe sending of payment reminders, or statements, before invoices are due. It is the responsibility of theaccounts receivableteam to investigate and resolveinvoicingerrors, reissuing invoices to the correct amount if errors have occurred.

5. Payment collection

The process forcustomer paymentsshould be made clear at the time of purchase and in the invoice (or accompanying documentation).Payment collectionthen either occurs through customers making online payments, bank transfers, or submitting payments in some other format. A purchase order number is a typical tracking reference that ensures each payment is correctly matched to the corresponding order.Outstanding invoicesare chased directly until a predefined point, at which time they are either written off as bad debt or passed to a third-party collections agency.

6. Data management

Across theO2C process, gooddata managementis key. Theorder managementsystemneeds to connect, inreal time, toinventory managementvia anenterprise resource planning(or ERP) system. In this way, the organization can work across systems to determine stock levels and fulfil orders or trigger reorders.

Theinvoicingsystemneeds to accept a trigger to create an invoice when orders are fulfilled, the system then pulls in data about the order, checking the customer’s credit limits and agreed payment terms, before generating and delivering an invoice to the correct contact.

Thepayment collectionsprocess then needs to link back to the purchase ledger to ensure payments are reconciled against the correct order. Each and every step can, and should, be automated to improve efficiency and accuracy.

Optimizeorder-to-cashwithautomation

A comprehensive approach to optimizing the O2C process will combine technology, consultative services and financial services. Many organizations leverage technology because it can automate customer credit decisioning or AR and Treasury processes within the O2C cycle. Automation reduces or eliminates manual and paper-based processes. The attendant cost savings and error reduction usually present a positive ROI. AutomatingtheO2C processbrings a wealth of benefits, including the following:

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Time Savings: Invoice creation and delivery can be very manual processes, consuming valuable skilled staff hours.By automatingprint and postal delivery, or the emailing of invoices and delivery of follow-up communications to chase payments, the AR team can focus on more business-oriented issues.Automationcan even take output from anERP systemand connect this directly with buyers’ accounts payableinvoicingportals – bypassing the need to manual re-key or copy-paste invoices into these.

ImprovedCash Flow:Automationdoesn’t just save process time, it preventsbottlenecksin invoice delivery, payment processing, and reconciliation. These factors reduce friction in bringing cash into the business, thereby improvingcash flow.

Improved Accuracy:Automationhas a positive impact on accuracy across the wholeO2C process. When machine systems talk to each other, by direct data transfer, there’s no risk of copy-paste or other human errors occurring.

Cost Reduction:The time savings from processautomation, as well as reduction in queries and helpdesk calls, can be so significant they often make investments in aspects of O2Cautomation, such asARautomation, pay for themselves within a few months.

ImproveCustomer Experience:Customer relationshipsbenefit from the improvementsautomationbring to process consistency, fulfilment reliability, brand perception and ease of payment.

GainReal-timeVisibility:Automationoforder-to-cashprocessesmeans that each stage is handled digitally, therefore easily tracked and presented at a glance via management information dashboards or other methods.

Simplify Reporting and Audits: By automatingtheO2C process, all actions and data are available for grouping and analysing as reports or as audit trails at the touch of a button.

Consistency in theO2C Cycle

Consistency across theorder-to-cashprocessensures predictability of outcomes and presents customers with a positive brand experience. Here are some of the mainworkflowsthat need to be followed and checked on a regular basis, or ideally automated, to maximise consistency.

  • Order management: Develop a consistent approach to checking stock, fulfillingsalesordersand reordering to replenish stock.
  • Credit management: Maintain a consistent approach to determining credit worthiness, setting payment terms, and credit limits.
  • Invoicingworkflow: Create and deliver invoices in a consistent layout, with appropriate branding, within as a short a time as possible.
  • Payment collection: A range of payment options, ideally linked directly from the invoice and with a consistent payment process consistent, reduces problems that may delaycash flow.
  • Late payment reminders: A consistent approach to reminding customers that their invoice is due for payment (perhaps two weeks ahead of the payment deadline), and then sending reminders/dunnings at set timeframes for late payments, will helpcash inflowand minimise payment delays.

Promotingcustomer satisfactionand business success

When fully optimized through automation, theorder-to-cashprocess can have a positive impact oncash flowandcustomer satisfaction. While tech solutions can bring benefits to your organization, it isn’t enough to bring your O2C operations to where you want it to be. Without providing financial management and consultative services, an automation-only approach cannot deliver the results that you need with the speed demanded by the current financial climate.

At Corcentric, we help clients optimize all aspects of theO2C process, such asinvoicing,accounts receivable,and payments. Our experience has shown us thathigh-techworks best when the deployment ishigh-touch, so all of our order-to-cash software solutions are delivered as managed services. Get in touch directly to find out how we can help optimize yourcash cyclethroughautomationoforder tocashprocesses.

FAQs

The Order To Cash Process (O2C) - and Ways To Improve This | Corcentric? ›

The order-to-cash process encompasses all steps from when a customer order is placed up until the business is paid (the cash). Those steps include order management and order fulfillment, through to credit management, then invoicing and ultimately payment collection.

How can I improve my O2C process? ›

How can I improve my O2C process?

What is the process of O2C process flow? ›

What is the process of O2C process flow?

What are the challenges of an order-to-cash process? ›

What are the challenges of an order-to-cash process?

Why O2C process is important? ›

Why O2C process is important?

What O2C means? ›

What O2C means?

What is cash application in O2C? ›

What is cash application in O2C?

What is O2C process in SAP? ›

What is O2C process in SAP?

What is OTC collection? ›

What is OTC collection?

Who are the stakeholders in O2C? ›

Who are the stakeholders in O2C?

What is order-to-cash example? ›

What is order-to-cash example?

What are the stages of OTC cycle list them in order? ›

What are the stages of OTC cycle list them in order?

What is OTC and P2P in SAP? ›

What is OTC and P2P in SAP?

What is OTC sales order? ›

What is OTC sales order?

What is O2C process in Oracle? ›

What is O2C process in Oracle?

What is P2P cycle and O2C cycle? ›

What is P2P cycle and O2C cycle?

What is P2P O2C and R2R? ›

What is P2P O2C and R2R?

What is the difference between PTP & OTC? ›

What is the difference between PTP & OTC?

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How do you order pick release management?

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What is o2c cycle in Oracle Apps r12?

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What are the types of sales order in Oracle Apps?

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What is 3 way invoice matching?

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Accelerate your invoice approval process through automation to streamline payments and optimize cash flow.

Not only does automating the invoice approval workflow accelerate validation and approvals, reduce manual errors (and critical cash flow), it gives AP department teams and the CFO greater insights into overall invoicing, accounting data, and spend for better forecasting and strategic decision making.. Approver workflows mean invoices are routed to exactly the right person quickly Data visibility and consistency across company systems provides process transparency and decision-making insights Integration with ERP and accounting / finance systems ensures that invoices are applied to the correct accounts and budgets Manual errors and fraud potential are eliminated, and exceptions are minimized Early payment discount opportunities are maximized Processing costs and time are minimized. Manual invoice approval process starts when an organization receives an invoice from a vendor or supplier AP team member manually inputs the invoice data into the company ERP system or accounting program, which requires significant time commitment The invoice is then sent to a designated approver for review, and is either approved or queried If approved, the invoice is sent for payment If queried, the invoice is sent back for further review and processing When invoice details are manually verified and approved, it is then sent to accounting for bookkeeping and future audits. A paper-based invoice process with manual data entry has a number of drawbacks, chief among those being a slow invoice approval process, human errors, bottlenecks in processing, delayed and/or duplicate payments, and a cumbersome audit trail.. Cost per invoice: The price for manual invoicing includes the overall cost per invoice, which can be six times higher than that of automated systems.. By implementing automated invoice approval as part of a larger AP automation effort, or even a broader Procurement digital transformation, you can eliminate the hassles and risks of manual invoice processes that cost companies massive amounts of time, money, and lost business opportunities.. By leveraging an automated invoice approval process as part of an overall invoice automation or procurement software solution, according to the Ardent Partners Accounts Payable Metrics that Matter in 2020 report, Best-in-Class payable departments are able to achieve:. 6x Lower Invoice Processing Cost 3x Faster Invoice Processing Time 57% Lower Invoice Exception Rate. Cor360 Approval Workflow accelerates invoice processing by automatically routing every invoice electronically to the correct approver, significantly cutting the often massive delays of manual and paper-based processes.

Corcentric, a leading global provider of payments, procurement, accounts payable, and accounts receivable solutions to enterprise and middle-market companies, today announced that its Founder, CEO, and Chairman Doug W. Clark, President and COO Matt Clark, and CFO Tom Sabol will present at the William Blair Growth Stock Conference.

Net loss decreased to $1.3 million from a net loss of $6.8 million in the prior year period.. Reconciliations of the Non-GAAP financial measures provided in this press release to their most directly comparable GAAP financial measures are provided in the financial tables included at the end of this press release.. As a reminder, in December 2021 Corcentric announced its plans to become a publicly-listed company through a business combination with North Mountain Merger Corp. (NASDAQ: NMMC) (“NMMC” or “North Mountain”), a publicly traded special purpose acquisition company.. Corcentric’s 2022 outlook consists of $145 million of payments, software and advisory revenue and adjusted EBITDA of $42 million (excluding estimated public company costs of $4.8 million).. These forward-looking statements include, but are not limited to, statements regarding future events, the Transaction, the estimated or anticipated future results and benefits of the combined company following the Transaction, including the likelihood and ability of the parties to successfully consummate the Transaction, future opportunities for the combined company (including, but not limited to, actual revenue generated from new or existing customer contracts), and other statements that are not historical facts.. These risks and uncertainties include, but are not limited to, ability to meet the closing conditions to the Transaction, including approval by stockholders of North Mountain and Corcentric on the expected terms and schedule and the risk that regulatory approvals required for the Transaction are not obtained or are obtained subject to conditions that are not anticipated; delay in closing the Transaction; failure to realize the benefits expected from the proposed Transaction; a decline in the price of our securities following the Transaction if it fails to meet the expectations of investors or securities analysts; the amount of redemption requests made by North Mountain’s public stockholders; the ability of North Mountain or the combined company to issue equity or equity-linked securities in connection with the Transaction or in the future; the effects of pending and future legislation; risks related to disruption of management time from ongoing business operations due to the proposed Transaction; business disruption following the Transaction; risks related to the impact of the COVID-19 pandemic on the financial condition and results of operations of North Mountain and Corcentric; risks related to North Mountain’s or Corcentric’s indebtedness; other consequences associated with mergers, acquisitions, and divestitures and legislative and regulatory actions and reforms; Corcentric’s ability to maintain its current rate of growth; adjusting Corcentric’s cost structure to quickly reflect changes in revenues; maintenance and renewal of customer contracts and subscriptions; competition in the software and payments solutions industries; Corcentric’s ability to raise additional capital; reliance on Corcentric’s relationships with service providers and suppliers; the successful integration of potential targets, products, or technologies; Corcentric’s ability to improve its operational, financial, and management controls; Corcentric’s failure to offer high-quality customer support; Corcentric’s ability to maintain its revenues and margins while offering discounts for its private commerce network buyers and suppliers; Corcentric’s failure to maintain and enhance awareness of its brand; Corcentric’s failure to maintain contracts with private commerce network solutions buyers and suppliers; increased costs associated with being a public company; the unpredictable sales cycles of Corcentric’s end markets; risks associated with Corcentric’s brokerage activities as sellers of capital equipment; cybersecurity incidents; ability to prevent fraudulent activities by Corcentric’s customers, employees, or other third parties; potential interruptions or delays in third-party services; protection of proprietary rights; intellectual property infringement, data protection, and other losses; compliance with federal, state, and local laws as well as statutory and regulatory requirements; risks of implementing controls and procedures required for public companies following the Transaction; and the ability of Corcentric or the combined Company to issue equity or equity-linked securities with the proposed Transaction or in the future; and those factors discussed in North Mountain’s Form 10-K for the year ended December 31, 2021, under Risk Factors in Part I, Item 1A and other documents of North Mountain filed, or to be filed, with the SEC.. There may be additional risks that North Mountain or Corcentric presently do not know or that North Mountain or Corcentric currently believe are immaterial that could also cause actual results to differ from those contained in the forward-looking statements.. In addition, forward-looking statements provide North Mountain’s and Corcentric’s expectations, plans, or forecasts of future events and views as of the date of this press release.. Non-GAAP Financial Measures and Certain Key Operating Metrics Some of the financial information contained in this press release has not been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”).. Corcentric is not providing a reconciliation of its projected non-GAAP adjusted gross profit, non-GAAP adjusted gross margin, or non-GAAP adjusted EBITDA for 2022 to the most directly comparable measure prepared in accordance with GAAP because such reconciliations are not meaningful or available without unreasonable effort as certain items are excluded from these non-GAAP measures, such as depreciation and amortization allocated to costs of revenue and charges related to stock-based compensation expenses, which cannot be reasonably calculated or predicted.. Monetized Transaction Volume (“MTV”) is the dollar value of customer payment transactions that we process through our payment network and is a key driver of our payments revenue.. Customers obtained through acquisition are not included in the calculation until revenues generated from them are comparable in both the current and prior periods.. In addition, the documents filed by North Mountain may be obtained free of charge from North Mountain at www.nmmergercorp.com.. Participants in the Solicitation North Mountain, North Mountain’s sponsor, Corcentric and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of North Mountain, in connection with the proposed Transaction.

Payments, Software, and Advisory Revenue Increased 20.5% Year Over Year...

Net loss decreased to $1.3 million from a net loss of $6.8 million in the prior year period.. Reconciliations of the Non-GAAP financial measures provided in this press release to their most directly comparable GAAP financial measures are provided in the financial tables included at the end of this press release.. These forward-looking statements include, but are not limited to, statements regarding future events, the Transaction, the estimated or anticipated future results and benefits of the combined company following the Transaction, including the likelihood and ability of the parties to successfully consummate the Transaction, future opportunities for the combined company (including, but not limited to, actual revenue generated from new or existing customer contracts), and other statements that are not historical facts.. These statements are based on the current expectations of North Mountain’s and Corcentric’s management and are not predictions of actual performance.. These risks and uncertainties include, but are not limited to, ability to meet the closing conditions to the Transaction, including approval by stockholders of North Mountain and Corcentric on the expected terms and schedule and the risk that regulatory approvals required for the Transaction are not obtained or are obtained subject to conditions that are not anticipated; delay in closing the Transaction; failure to realize the benefits expected from the proposed Transaction; a decline in the price of our securities following the Transaction if it fails to meet the expectations of investors or securities analysts; the amount of redemption requests made by North Mountain’s public stockholders; the ability of North Mountain or the combined company to issue equity or equity-linked securities in connection with the Transaction or in the future; the effects of pending and future legislation; risks related to disruption of management time from ongoing business operations due to the proposed Transaction; business disruption following the Transaction; risks related to the impact of the COVID-19 pandemic on the financial condition and results of operations of North Mountain and Corcentric; risks related to North Mountain’s or Corcentric’s indebtedness; other consequences associated with mergers, acquisitions, and divestitures and legislative and regulatory actions and reforms; Corcentric’s ability to maintain its current rate of growth; adjusting Corcentric’s cost structure to quickly reflect changes in revenues; maintenance and renewal of customer contracts and subscriptions; competition in the software and payments solutions industries; Corcentric’s ability to raise additional capital; reliance on Corcentric’s relationships with service providers and suppliers; the successful integration of potential targets, products, or technologies; Corcentric’s ability to improve its operational, financial, and management controls; Corcentric’s failure to offer high-quality customer support; Corcentric’s ability to maintain its revenues and margins while offering discounts for its private commerce network buyers and suppliers; Corcentric’s failure to maintain and enhance awareness of its brand; Corcentric’s failure to maintain contracts with private commerce network solutions buyers and suppliers; increased costs associated with being a public company; the unpredictable sales cycles of Corcentric’s end markets; risks associated with Corcentric’s brokerage activities as sellers of capital equipment; cybersecurity incidents; ability to prevent fraudulent activities by Corcentric’s customers, employees, or other third parties; potential interruptions or delays in third-party services; protection of proprietary rights; intellectual property infringement, data protection, and other losses; compliance with federal, state, and local laws as well as statutory and regulatory requirements; risks of implementing controls and procedures required for public companies following the Transaction; and the ability of Corcentric or the combined Company to issue equity or equity-linked securities with the proposed Transaction or in the future; and those factors discussed in North Mountain’s Form 10-K for the year ended December 31, 2021, under Risk Factors in Part I, Item 1A and other documents of North Mountain filed, or to be filed, with the SEC.. There may be additional risks that North Mountain or Corcentric presently do not know or that North Mountain or Corcentric currently believe are immaterial that could also cause actual results to differ from those contained in the forward-looking statements.. Non-GAAP Financial Measures and Certain Key Operating Metrics Some of the financial information contained in this press release has not been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”).. Corcentric believes that the use of these non-GAAP financial measures provides an additional tool for management and investors to use in evaluating Corcentric’s actual and projected financial condition and operating results and trends in and in comparing Corcentric’s financial measures with other similar companies, many of which present similar non-GAAP financial measures to investors.. Corcentric is not providing a reconciliation of its projected non-GAAP adjusted gross profit, non-GAAP adjusted gross margin, or non-GAAP adjusted EBITDA for 2022 to the most directly comparable measure prepared in accordance with GAAP because such reconciliations are not meaningful or available without unreasonable effort as certain items are excluded from these non-GAAP measures, such as depreciation and amortization allocated to costs of revenue and charges related to stock-based compensation expenses, which cannot be reasonably calculated or predicted.. Customers obtained through acquisition are not included in the calculation until revenues generated from them are comparable in both the current and prior periods.. In addition, the documents filed by North Mountain may be obtained free of charge from North Mountain at www.nmmergercorp.com.. Participants in the Solicitation North Mountain, North Mountain’s sponsor, Corcentric and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of North Mountain, in connection with the proposed Transaction.. Payment , Software & AdvisoryEquipment SalesTotalThree months endedThree months endedThree months endedMarch 31,March 31,March 31, (in thousands) 202220212022202120222021 Revenue$30,125$25,002$10,706$11,470$40,831$36,472Direct costs of revenues(10,041)(9,176)(8,446)(10,797)(18,487)(19,973)Depreciation and amortization allocated to costs of revenue(4,726)(4,264)--(4,726)(4,264)Gross profit15,35811,5622,26067317,61812,235Depreciation and amortization4,7264,264--4,7264,264Stock-based compensation expense included in cost of revenues8372--8372Adjusted gross profit (Non-GAAP)$20,167$15,898$2,260$673$22,427$16,571Gross margin51.0%46.2%21.1%5.9%43.1%33.5%Adjusted gross margin (Non-GAAP)66.9%63.6%21.1%5.9%54.9%45.4% Reconciliation of GAAP to Non-GAAP Financial Information(unaudited ). 2 For the three months ended March 31, 2021, represents transaction costs associated with the Business Combination and charges associated with severance.

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