Order-to-cash Excellence — What is it?

 In Best Practices, Inventory Management, Order Processing

The order-to-cash cycle is critical to success.

When we reference the order-to-cash cycle and achieving O2C excellence, what are we talking about? Well, to summarize, we’re talking about how you make money within your distribution business. How do you generate an order, and how is that order fulfilled? What processes do you have in place to manage replenishment? Is your shipping plan trustworthy? Will invoices be generated correctly, and sent to the right customers?

Don’t let that list of questions overwhelm you! There’s certainly a lot that goes into a healthy order-to-cash cycle, but it all boils down to five key stages:

Selling & Ordering | Warehousing & Fulfillment | Replenishment

Shipping & Delivery | Invoicing & Collection

Once you grasp the importance of each stage and understand the risks and rewards inherent in each, you understand the order-to-cash cycle. So let’s dive in.

Selling & Ordering

Arguably the most exciting stage of the O2C cycle, selling and ordering includes everything from customer service to order workflow. As you work to increase your overall sales volume and bring in more cash, the selling and ordering stage of your O2C cycle is hard at work in the background.

Let’s focus on customer service for a moment. Everyone knows that it’s more cost effective to retain a current customer than it is to find a new one — make sure you are prepared to wow your customers with speed of service and attention to detail. If maintaining customer records or referencing past orders while a customer is on the phone is a difficult or clunky process, that’s a problem with your selling and ordering strategy that needs to be addressed.

Sales document workflow is another big focus of the selling and ordering stage. You want your orders to zip through your business quickly. That means that you’ve got to focus on your workflow. Hone it until it is perfect, and build in contingency plans. And if your ERP software prohibits this flexibility when creating sales order workflows, look to upgrade to a solution that fits your needs and allows your order-to-cash cycle to charge full speed ahead.

Warehousing & Fulfillment

It’s not enough, of course, to sell an item — you’ve got to deliver on that promise.

Warehousing and fulfillment can be the most chaotic stage of the cycle, if not properly managed. When you’re dealing with a large amount of varied inventory, organization can get out of hand quickly. Not to mention variables such as barcoding, multi-bin strategies, or picking methods. There’s a lot that goes into taming a busy warehouse, but thankfully, there are a lot of resources out there that can help you do just that.

Once a sales order makes it to your warehouse, how quickly is it fulfilled? How many papers need to be printed, and do you have checks and balances in place to prevent a miss-pick? Did you know that, with the right software as your guide, it’s possible to achieve 100% picking accuracy? If optimized properly, your warehouse can become the star of your order-to-cash cycle, laying a foundation of success for every other part of your operational timeline.

Replenishment

You’ve sold your goods. Time to restock those shelves.

If the term “vendor management” gives you an instant headache, chances are that you’ve got problems in the replenishment stage of your order-to-cash cycle. If reorder points are a mystery, or if restocking is a tedious, error-riddled task that everyone in the warehouse dreads, those are additional signs that your replenishment solution needs a little extra attention.

Proper replenishment practices allow you to restock with growth in mind, rather than scramble to simply keep up. There’s some math involved, yes, but the right tools at your side will simplify those calculations and streamline your replenishment operations to the point where they essentially run themselves. This frees up your time and attention to focus on those big-picture items that will propel your business forward.

Shipping & Delivery

You’ve sold the item, fulfilled the order, and your plan to restock that item is firmly in place. This brings us to the next big stage in the order-to-cash cycle: shipping and delivery.

The Shipping and delivery stage rivals warehousing and fulfillment for logistical nightmare potential. Ensuring that orders are packed correctly, loaded correctly, and headed to the right destination in a timely fashion can be so overwhelming that some folks resort to third- or even fourth-party logistics to handle it all. But that doesn’t have to be the case!

Optimize your shipping and delivery strategy to fit nicely within your overall O2C cycle to turn those nightmares into satisfying opportunities for growth. Innovations such as dynamic dispatch capabilities and automated label printing will streamline your shipping and delivery practices. They’ll also contribute in a big way to your company’s order-to-cash excellence.

Invoicing & Collection

We’ve reached the last stage in the order-to-cash cycle, but it’s a big one. It’s time to get paid!

The payment processing function of your invoicing and collection strategy is susceptible to pain points, but there are answers to those common frustrations. Finding the right integration partners, whether that’s for your payment processing solution or your overall financial management software, is critical to success. Be wise as you evaluate your options. After all, your choices affect your O2C cycle, and your profitability, in a big way.

Data Unites the Order-to-Cash Cycle Stages

Through it all, integrated data powers your acceleration through your business’ order-to-cash cycle. Each stage of the cycle is meaningless without the data that reveals what’s going on with your investments. After all, data is the fuel that turns hard work and strategic process improvements into cold hard cash.

Now that you understand what the order-to-cash cycle is, take our diagnostic to discover specific areas for improvement within your business. Click the banner below to navigate to our online tool. Through a series of simple questions, we’ll uncover ways that you can immediately streamline your operations and supercharge your company’s performance and leave your distribution pain points in the dust.

Take the order-to-cash diagnostic.

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