The goal of order-to-cash (O2C) is to make it easy for your sales team to convert a customer’s quote into cash as efficiently as possible. With all of the technology available to finance departments today, companies have been able to manage their O2C process more effectively over the last decade.

In this order-to-cash guide, we’ll cover:

• What is order-to-cash (O2C)?
• The difference between order-to-cash and quote-to-cash
• The different stages of the order-to-cash process
• Common problems in the order-to-cash process

What is order-to-cash?

Order-to-cash (O2C) is a critical business process. It’s the bridge between a customer’s order and actual cash collected by a business. This process manages customer quotes, orders, and invoices – the system tracks sales from beginning to end. 

In the past, businesses relied on paper documents and manual data entry, and this old way of approaching O2C led to inefficiencies and errors. Without a streamlined O2C process, how will your business know how much money is owed, when you’ll receive payments, and if customers are paying invoices on time?

What’s the difference between order-to-cash and quote-to-cash?

Order-to-cash and quote-to-cash are closely related business processes, but they cover different parts of the sales cycle. Order-to-cash involves everything that turns a customer’s order into cash. Think of O2C as the phase for order fulfillment and payment collection. Quote-to-cash, on the other hand, focuses on all the processes that turn a customer quote into cash.

In terms of processes involved, O2C involves order entry, order fulfillment, invoicing, accounts receivable, payment, and cash application. Q2C includes quoting, negotiation, contract or agreement creation, order placement, fulfillment, invoicing, and payment. 

Another major difference between order-to-cash and quote-to-cash is that the contract management lifecycle occurs within the Q2C process. Everything from managing contracts, creating them, negotiating terms, and ensuring you get paid happens outside of order-to-cash.  

Steps of the order-to-cash process

Orders

How does your company process orders? It could be via a CRM system with a CPQ, with direct sales reps, through an online storefront, a self-service portal, a third-party marketplace, or a partner network. The order should include all relevant details about the service, such as pricing, delivery date, and terms.

Related: Guide to order management

Payment and collections

Do you have systems in place that can handle any global currency? Ensuring you can fill orders everywhere is essential for the business. No one wants their brand to be left in the cold regarding something as basic as money conversion. 

Remember, your company’s taxes are also a critical part of the brand’s evolution. With regularly scheduled transactions, you must keep tax rates current for customers and offers based on address validation, changing rules, and regulations.

Billing

The challenge of accurate billing is invoicing across channels, unifying data, and consolidating invoices – no matter how small (physical goods, one-time charges, services, and subscriptions) —while managing any incurring taxes. 

And then there’s the transactional data the finance team needs. This is why adopting a solution that works – is critical for continued success down the road – otherwise, one small error can cost the company big.

Revenue recognition

With growth comes billing and invoicing challenges, but also recognizing revenue. You need to monetize offerings without running into barriers – the entire monetization process should support leveling upward and not turn into a rabbit hole of trying to adapt older strategies that are time-consuming and costly.

Common order-to-cash problems

With so many moving parts, the O2C process often comes with a few issues that can slow your sales team down. 

Some of the most common problems include:

Inaccurate data

If the data inputted into your order-to-cash system is inaccurate, it will cause delays and errors, which could cost you money.

Lack of visibility

If you can’t see what’s happening at each stage of the order-to-cash process, then you’re unlikely to be able to identify and fix any issues that arise. This lack of visibility can also lead to customer frustration if they’re not updated on their order status in a timely way. 

Manual processes

If your order-to-cash process includes a lot of manual work, like data entry or creating invoices one by one, it’s likely to be error-prone and time-consuming. Not only that, but it can also lead to missed opportunities for upselling or cross-selling.

Pricing complexity

Complex pricing is normal. Companies offer a combination of subscriptions, consumption-based offers, hardware products, professional services, bundles, and more. It’s critical to launch these pricing strategies to meet evolving customer expectations while also automating the billing operations implications, such as rating and invoicing.

Lack of integration

If your order-to-cash process is integrated with your business’s other software you can avoid reporting inconsistencies, data duplication, and other inefficiencies. For best results, you’ll want a system that integrates with every part of your sales process, from your CRM to your back-end financial systems. 

What to look for in a platform to support order-to-cash

You need the right platform to support the entire order-to-cash process. Here’s what to consider. 

Are you introducing new revenue streams?

You need to launch any pricing model out of the box — from subscription to consumption to one-time transactions. Every company is innovating to stay competitive, looking for new ways to price and package digital services, hardware, bundles, and promotional offers. Business leaders need flexibility, and a central place to monetize a variety of revenue streams.

Does your tech allow your business to go to market with agility and flexibility?

The market moves fast, and customer demands are constantly changing. To respond, companies need to go-to-market with new offerings and deploy new pricing, new packaging, and new promos in hours–not months. Rigid systems and legacy integrations are holding companies back.

How does the platform keep up with customer demands?

Customer needs differ and are constantly changing. Companies need to deliver dynamic experiences based on customers’ preferences and actions across a web of systems, like provisioning, comms, etc. 

Every application ecosystem is different. Companies have invested time and effort to build their ecosystems, and reducing the number of custom integrations they need to maintain is essential. 

Technical leaders and developers want new applications that easily integrate with existing ones using robust SDKs, APIs, and connectors. You’ll ideally need pre-built connectors and APIs that help you easily integrate with a variety of applications, such as a general ledger, data warehouses, taxation systems, payment gateways, and more.

See how your business can improve quotes, speed up order processing, make it easier for customers to pay their invoices, and even identify opportunities to sell additional services. Discover how Zuora’s centralized platform can help automate not only your order-to-cash process but all your subscription order-to-revenue operations.