A Step-by-Step Guide to the Order to Cash Process

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The order to cash process (also known as O2C or OTC) is the process every customer order progresses through. It refers to an order’s journey from the moment it’s placed through to the day you receive payment from the customer. 

This process is key to your business’ success, as the experience your customers have placing and receiving orders can affect the relationship they have with your business. So here’s what you need to know about the stages of the O2C process, and how to optimise it.

The Order to Cash Process in 4 Simple Steps

Step #1:  A Customer Places an Order

When a customer places an order with you, this starts the order to cash process. The customer sends a purchase order, which should detail the type of product they’re ordering, the quantity, the price and the delivery details. 

Step #2: The Business Fulfils the Order

Once you’ve received and accepted the purchase order, you’ll send a sales order to the customer. A sales order is similar to the purchase order and contains much of the same information. However, it’s a confirmation of the order rather than a request. 

You can then fulfil the order, by manufacturing or purchasing stock, or carrying out a service. You should aim to complete the order as soon as possible after receiving the purchase order. This prevents delivery delays and customer complaints. Once the order is ready, you can deliver it to the customer. 

Step #3: The Customer Receives the Invoice

Once your customer has received their order, you send them an invoice (if they didn’t pay when they placed the order). The invoice will request payment, so you should send this right after the customer has received their order — or even when the order is delivered. The sooner invoices are submitted, the sooner customers can pay — and fast-paying customers prevent cash flow issues from arising. 

Step #4:  The Customer Pays the Invoice

The last stage of the O2C process is customer payment. Reliable customers should pay invoices soon — if not immediately — after receipt. Once you’ve received payment, you should record this in your business’ general ledger. 

How to Optimise the Order to Cash Process

Optimising your order to cash process can improve your business’ cash flow and the efficiency of your operations. So here are some of the ways you can improve the O2C stages. 

Identify the Troublesome Stage

Businesses often find it’s a certain stage of the O2C process that holds them up financially. So if you’re experiencing delays at a certain point in the process, it’s a good idea to identify the stage causing the trouble. Then you can work on improving that stage to optimise the process.

Consider Using Business Finance to Fund Stages of the O2C Process

If parts of the O2C process are being held up because of your business’ cash flow, a business finance solution can help speed things along.

For example, if you receive a large order but don’t have the funds to cover the order costs, purchase order finance allows you to take on orders of all sizes. Or invoice finance can relieve the financial strain of late-paying customers. 

Offer Multiple Payment Options

Many businesses experience most of their O2C issues in the last step: receiving payment from the customer. There are a few reasons why customers make late payments. Two of the most common reasons are:

#1: The customer has a lot of invoices to pay and yours has become buried in their “to do” list. In this case, a friendly follow up email or letter can remind them. 

#2: The customer is experiencing financial difficulty or cash flow issues, in which case offering multiple payment options could be the perfect solution. 

More payment solutions can make it more convenient for your customers to make a payment. One payment option you could consider is customer finance. By allowing your customers to pay in monthly instalments, payments become more affordable — so customers are more likely to pay on time. Just because your customers spread their payments, doesn’t mean you’ll receive fragmented payment. You can work with a finance provider who will pay you the full amount upfront, while they collect the instalments. 

Convertibill can help you create a smooth and efficient order to cash process. With our finance solutions, cash flow won’t stand between you and your customers. Contact us today to find out more about how we can help. 

Long Term Leases And How They Can Help Your Business

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Long Term leases Infographic for convertibill finance

Offering your customers more payment options can increase your sales and customer satisfaction levels. And if you sell large or expensive products like equipment or heavy machinery, you might be able to boost your business by offering long term leases. 

Here’s everything you need to know about long term lease agreements — including what they are, who should offer them, and how to provide leases without causing your business financial strain. 

What Is a Long Term Lease?

A lease agreement is a contract between a business and a customer. It allows the customer to use an asset for a set amount of time in exchange for periodic payments made to the business (the asset owner). 

A long term lease is a lease that lasts for longer than a year. It could last one year, five years, ten years or anywhere in between. Vehicles and equipment are examples of assets you can lease with a long term agreement. 

Depending on the agreement, at the end of the lease period, customers will usually return the asset to the business. But they may also have the option to purchase or upgrade. 

Should You Offer Long Term Leases to Your Customers?

The Equipment Leasing and Finance Association estimates at least 80% of businesses lease some of their equipment. So if your business sells commercial equipment or machinery, you could consider offering long term leases to your customers. 

Leasing isn’t usually worth it for smaller items with more affordable price tags. However, consumers and businesses alike are often drawn to lease larger, more expensive items. 

Benefits of Long Term Leases

Offering long term leases on your assets can be hugely beneficial, not just for your customers but also for your business. Here are some of the main benefits that come with offering long term leases. 

Increase Your Sales

Customers often back out of purchases at the last minute because they’re worried about the expense. But if they have the option to lease as well as buy equipment or assets, the cost is no longer as daunting. 

Lease agreements involve regular (usually monthly) payments of a set amount. These instalments are more affordable for most businesses than one large upfront cost. And affordability is attractive to any customer. 

Leasing options can capture those sales that might otherwise have drifted away from your business at the last minute. 

Customer retention

At the end of lease agreements, you can give customers the option to purchase or upgrade the asset they’ve been leasing. This offer can be a tempting one and just what you need to capture repeat business. 

Gain a Competitive Edge

It’s not every business that offers its customers long term leases. So if you do decide to start offering leases, you’ll quickly find you’ve gained a competitive edge over your competitors. With more payment options, customers are more likely to choose your business over other suppliers — they won’t feel the need to shop around for a better deal. 

Improve Customer Satisfaction

By offering long term leases, you’re opening up new opportunities for your customers they otherwise couldn’t afford. With leasing, state of the art equipment becomes accessible to a wide range of businesses. And by helping your customers’ businesses thrive, you’ll improve your customer satisfaction levels and increase your chances of positive reviews and recommendations. 

How to Offer Long Term Leases

If you’re considering offering long term leases to your customers, you might come across one main obstacle: cash flow. Providing customers with an asset before receiving the full payment can leave you short on cash. So if you want to offer leases to your customers, it’s best to work with a finance provider. 

Working with a finance provider means you’ll receive the full lease amount upfront while your provider will receive the monthly instalments. 

Convertibill can provide the finance you need to offer long term leases to your customers. Request a quote online today to start reaping the benefits of leases.