Blog Post
For a business to be successful, it needs to manage its processes well, and few processes are as vital as order-to-cash (O2C or OTC) and procure-to-pay (P2P). But what does successful management mean for these practices? Many businesses have the steps of these processes in place, but to get ahead, they need to be integrated. The best way to do this is through automation, which eliminates inefficiencies in both order-to-cash and procure-to-pay processes. Let’s explore the difference that automation can make in these two crucial processes.
What is Order-to-Cash vs Procure-to-Pay?
The order-to-cash process involves receiving and fulfilling customer orders, invoicing, and collecting payment, focusing on revenue generation. The procure-to-pay process manages the purchasing of goods or services, receipt of items, and payment to suppliers, focusing on managing expenses. These two processes are distinct but mirror images of each other. Order-to-cash is about selling and covers the end-to-end customer ordering and fulfillment process, ensuring customers get what they ordered. Procure-to-pay involves internal procurement, buying the materials, products, or services the business needs.
Automation is crucial for both processes to streamline operations, reduce errors, improve efficiency, and provide real-time insights. By leveraging automated systems, organizations can save costs, improve accuracy, and enable faster decision-making.
What is Order-to-Cash?
The order-to-cash process encompasses several key components. These include receiving and fulfilling customer orders, ensuring timely payment, and shaping customer relationships.
Optimizing order-to-cash is crucial for B2B businesses due to its impact on revenue generation. Efficient processes lead to quicker cash inflows and improved financial health. Timely order processing and accurate fulfillment increase customer satisfaction (CSAT), enhancing the overall customer experience. Additionally, proper order management reduces the risk of shipping incorrect products or billing inaccuracies, thus improving risk management. An accurate and timely recording of sales transactions within the order-to-cash cycle is essential for financial reporting.
How Does Manual Order-to-Cash Work?
Manual O2C is a demanding process with several time-sensitive steps. First, customers place their order and start the transaction. The business checks inventory and processes the order, then fulfills it to meet customer needs. The order is packed and shipped, and then the invoice is generated. Payment is quickly collected and recorded, which must be done with incredible precision and accuracy. This need for accuracy adds time and creates inefficiencies, as well as risks errors. Errors will impact customer satisfaction and can lead to compliance issues with financial reporting.
What are the Benefits of Automating Order-to-Cash?
Automated O2C offers many improvements over the manual process. Automation eliminates bottlenecks often occurring in manual systems, expediting the entire payment cycle. This brings about quicker cash inflow, which strengthens financial stability and creates the flexibility needed for strategic investments and growth initiatives.
Automation enhances visibility across the order-to-cash process by providing real-time insights into the status of orders and payments. Automated systems can track and analyze data at every stage, allowing businesses to promptly identify any issues
Accuracy is another key benefit of automated O2C. Automation minimizes the risk of errors inherent in traditional, manual processes. Automated communication ensures that information is transmitted accurately and immediately, improving the reliability of the entire process and enhancing the customer experience.
To see automated O2C in action, explore how Rexel Canada used Conexiom to automate order entry, eliminate errors and rework, and allow their sales team to focus on providing great customer experiences.
What is Procure-to-Pay?
Procure-to-pay is the process of sourcing, purchasing, and paying for goods and services. It typically involves handling documents such as invoices, purchase orders, order acknowledgments, and advanced shipping notices.
P2P enables effective cost management by facilitating savings through improved supplier negotiation, enhanced spend visibility, and reduced procurement cycle times. These processes also ensure compliance with company policies and regulatory requirements. P2P plays a pivotal role in nurturing strong and cost-effective supplier relationships. By fostering collaboration and communication with suppliers, businesses can build resilient supply chains, optimize sourcing strategies, and drive innovation. P2P is also a key part of effective cash flow management and enhanced financial stability.
How Does Manual Procure-to-Pay Work?
The manual procure-to-pay cycle has several stages, which must be coordinated between procurement and accounts payable. First, the procurement team must identify what type of items and in what quantity, quality, and costs are required. Then, a purchase requisition is created, which must then be approved. Creation of purchase orders and supplier evaluation follows, and then products must be received and matched to the purchase orders. Invoices must be received, validated, and authorized before payment processing. Much like the O2C process, accuracy is crucial, and the risk of errors and inefficiencies is high. Errors in this process can have a major negative impact on procurement, cost control, and supplier relationships.
What are the Benefits of Automating Procure-to-Pay?
Manual P2P is costly, error-prone, and time-consuming. It involves calling, emailing, or even faxing orders that must be manually entered. However, these inefficiencies can be eliminated by automating the process.
Automating P2P streamlines procurement by facilitating faster requisitions and approvals, reducing cycle times, and enhancing overall operational agility. Automation also reduces invoice processing costs by eliminating manual tasks and streamlining workflows. This results in direct savings from reduced labor costs and minimizes the risk of errors associated with manual data entry. Finally, automation increases visibility across P2P by providing real-time tracking and transparency into procurement activities.
Automating P2P is a smart step for any business to take. When Werner Electric Supply used Conexiom to automate procure-to-pay, the company improved order cycle time, reduced errors, and achieved an average time saving of approximately 6,263 hours per year.
Automate Order-to-Cash and Procure-to-Pay With Conexiom
Conexiom’s advanced cloud-based platform offers a comprehensive solution for automating order-to-cash and procure-to-pay. Conexiom transforms unstructured business data into structured, actionable information through AI and machine learning.
Our solution processes complex documents with 100% accuracy and streamlines P2P and O2C processes by automating all trade documents. Conexiom easily integrates with ERP and customer service systems. This ensures timely and accurate delivery of goods and maintains robust supplier networks.
Ultimately, Conexiom increases efficiency, enhances the customer experience, and reduces business costs. To find out how Conexiom can automate your business’ O2C and P2P processes, explore our sales management software system.