Customer Service Dashboard

What is order-to-cash?

Order-to-cash details the process of receiving and fulfilling customer purchases including finalizing orders, managing invoices, and securing payment.

From the moment a customer places an order, a vital and complex set of processes are kicked off that have the potential to impact your entire organization. As the purchase progresses from the initial order toward final payment processing, it becomes crucial to have clear and well-defined steps in place throughout the entire lifecycle so that businesses can deliver consistent value to their customers and ensure that payment is received on time. This is where the concept of order-to-cash comes into play.

Order-to-cash (often abbreviated as OTC or O2C), encompasses the end-to-end process that starts with the customer order and concludes with the collection of payment and any follow-up reporting. It includes a series of interconnected activities such as order management, credit management, inventory management, order fulfillment, invoicing, accounts receivable management, and finally, managing payments, collections, and reporting. Efficiently managing the order-to-cash cycle is essential for businesses as it directly impacts cash flow, customer satisfaction, and overall profitability.

By ensuring seamless coordination and integration of various departments involved in the process, organizations can optimize their operations and enhance customer experiences.

Order-to-cash is commonly discussed in conjunction with a similar but distinct set of processes known as quote-to-cash (QTC or Q2C). While both terms are interconnected and share a common goal of streamlining revenue generation, they encompass specific stages and activities within the sales cycle.

Quote-to-cash (QTC) begins with a comprehensive quoting process that spans from the initial stages of configuring an offering to meet a customer's specific needs, to creating and presenting a quote, to negotiating final pricing and terms. This front-end process, often facilitated by configure-price-quote (CPQ) solutions, includes activities that occur before a customer submits their order. QTC then extends all the way through order processing and fulfillment, invoicing, payment, and reporting, covering the full lifecycle of the purchase.

In comparison, order-to-cash is focused specifically on the stages involved in processing customer orders and securing payment. It involves activities such as order management, order fulfillment, billing, payment processing, and reporting. OTC is primarily concerned with efficiently managing the orders themselves and ensuring a smooth flow from order placement to the receipt of payment. Unlike QTC, OTC does not include the CPQ processes or contract lifecycle management, which are part of the pre-order stages. It does, however, include order fulfillment and back-end ERP processes (such as invoicing and recording revenue).

In other words, QTC comprises the purchase lifecycle starting with the quote, while OTC details the processes that occur after the customer places an order.

Customer Help Center

Think beyond traditional CRM

Discover the advantages of end-to-end solutions for seamless quality customer experiences that go beyond traditional CRM capabilities.

To the outside observer it may not appear as though much happens between submitting an order and collecting payment. But the truth is there are eight phases that must be concluded before a sale can be considered complete. These phases are:
Graphic outlining the order-to-cash phases.
  • Order initiation
    The OTC process begins with order initiation, where a customer places and confirms their order—which can occur through various channels such as online platforms, sales representatives, or customer service teams. This phase involves capturing the order details accurately, including product specifications, quantities, and delivery requirements. Electronic order capture streamlines this task automating order capture and ensuring that all the relevant information is included before pushing it to the next phase.
  • Order processing
    The order processing phase involves verifying the order information, checking product availability, and determining pricing and discounts. In the context of B2B, this phase often involves handling complex commercial orders that may consist of hundreds of line items comprising various products and services, fulfilled by multiple warehouses or vendors. Businesses will generally break down these large orders into individual line items in a process called decomposition, specifying each product or service required. Order processing also includes order confirmation, where customers are provided with order status updates and estimated delivery timelines.
  • Credit management
    Credit management involves evaluating customer creditworthiness prior to and during order processing, including setting credit limits and performing credit checks. The purpose of credit management is to ensure that the customer has the necessary credit or other payment terms in place before their orders can move forward to the fulfillment phase. This phase only applies to businesses that make sales on credit and thus need to account for additional customer financial risk
  • Order fulfillment
    After order processing and any necessary credit checks are complete, the order moves into the fulfillment phase. For some types of orders this step involves picking, packing, and shipping the ordered items based on the specified delivery instructions, while other, more-complex orders require orchestration. Order orchestration involves detailed workflows for coordinating and managing tasks and resources to fulfill customer orders. This ensures synchronized execution of steps to meet the customer's requirements and delivery expectations. Order fulfillment ensures that the products are prepared for shipment accurately and promptly.

    Depending on the nature of the business, this step may involve coordinating with logistics partners for timely and secure delivery. In cases where installation or setup is required, the necessary arrangements (such as scheduling field service resources and managing complex software installation projects) are made during the shipment stage. This also includes notifying the customer and providing them with order tracking details.
  • Invoicing
    After the order is fulfilled or made ready to ship, an invoice needs to be generated. Invoicing serves as a formal request for payment from the customer and must be completed before payment can be received. Invoices identify the products or services provided, and detail pricing, taxes, and any applicable discounts attached to the order.
  • Accounts receivable management
    Managing accounts receivable involves tracking and monitoring customer payments, updating payment records, and managing outstanding balances. Effective accounts receivable management helps organizations maintain a healthy cash flow by allowing them to more effectively track invoices, create reminders, identify outstanding balances, and more.
  • Payment collections
    In the payment collections phase of OTC, the primary focus is on securing payments from customers. This entails utilizing diverse payment methods, including credit card transactions, electronic fund transfers, and traditional checks. This phase is also where companies manage discounts and disputes. In payments where a customer takes an unexpected discount, it must be reconciled, and in cases where payments become overdue, it becomes the responsibility of the accounts receivable and collections departments to take necessary actions to address the issue promptly and legally.
  • Reporting
    Finally, reporting provides valuable insights into order volumes, sales performance, outstanding payments, and other key metrics. Strong reporting mechanisms enable organizations to analyze and optimize their order-to-cash cycle, identify bottlenecks, and make informed business decisions.

There are few things as central to business success as effective/efficient order fulfillment and invoicing. It’s not just the ability to do it—it’s the ability to do it well. As such, order-to-cash is a critical process, allowing organizations to create a clear framework for receiving revenue from customer orders. More specifically, order-to-cash assists with the following functions:

Generating revenue

Efficient OTC processes ensure timely and accurate order fulfillment and invoicing, minimizing delays in receiving payments and maximizing cash flow. By swiftly converting customer orders into revenue, organizations can enhance their financial health and drive business growth.

Reducing customer effort

Streamlining the buying process for customers by minimizing order-to-fulfillment time, reducing the need for customer support intervention, and minimizing errors in orders and invoices all contribute to reduced customer effort and improved customer satisfaction. Meeting customer expectations promptly and accurately helps build trust and loyalty.

Enabling effective cash flow management

An optimized OTC process minimizes delays in receiving payments and optimizes accounts receivable management. By ensuring orders are confirmed swiftly and fulfilled correctly, invoices are promptly issued, payments are accurately recorded, and outstanding balances are efficiently tracked, organizations can effectively manage their cash flow and minimize revenue leakage (which describes situations in which purchases are canceled, items are returned, orders are not invoiced, invalid deductions are taken, or orders otherwise fail).

Reducing costs

Streamlined OTC processes can significantly reduce labor costs by automating repetitive tasks, mitigating errors, and eliminating redundant activities. Effective OTC also minimizes the risk of costly disputes and issues related to non-payment. By optimizing operational efficiency, organizations can achieve improved cost savings while maintaining high-quality customer service.

Enhancing financial visibility

A well-executed OTC process allows organizations to track sales, order fulfillment, receivables, and cash inflows more accurately. This enhanced financial visibility provides valuable insights into company revenue streams, customer payment patterns, and overall financial performance, facilitating informed decision-making.

Increasing efficiency and scalability

Automating key tasks and eliminating bottlenecks in OTC processes empower businesses to handle increasing order volumes with fewer staff while still maintaining accuracy and customer service standards. This scalability ensures that organizations can effectively meet growing demand without compromising operational efficiency.

OTC processes, while crucial for business success, are not without their challenges. Overcoming these challenges is essential for organizations to optimize their OTC cycle and ensure seamless operations. Common issues and inefficiencies that may stand in the way of effective OTC include:

Siloed systems, people, and data

Lack of integration between various OTC systems, such as order management software, enterprise resource planning (ERP), billing platforms, and custom solutions, can hinder the smooth flow of data and information within the OTC process, leading to inefficiencies and errors. Siloed systems hinder the smooth flow of information, making it difficult to access accurate and up-to-date data across the OTC lifecycle. As such, working within a single, centralized platform is often essential to establishing seamless integrations between systems to enable efficient data exchange and end-to-end visibility.

High customer expectations

Today's customers demand a lot when it comes to order fulfillment, expecting fast, accurate, and personalized experiences. Meeting these expectations requires organizations to streamline their OTC process and minimize delays in order processing, fulfillment, and invoicing. Failure to meet customer expectations can result in customer dissatisfaction, product or service abandonment, and potential revenue loss.

Lack of visibility

Limited transparency into the OTC lifecycle can make it challenging to track orders, monitor fulfillment and invoicing progress, and identify bottlenecks or issues. Organizations need real-time insights and comprehensive reporting to understand the status of each order and invoice, identify potential roadblocks, and proactively address them. Without visibility, it becomes difficult to optimize OTC processes, monitor OTC operational key performance indicators (KPIs), and enhance operational efficiency.

Manual, error-prone activities

Reliance on manual tasks and paper-based processes within the OTC cycle can introduce errors and inefficiencies. Manual data entry, order processing, invoice generation, and payment reconciliation increase the risk of mistakes and delays that may resonate throughout the purchase lifecycle. These errors not only impact customer satisfaction but can also lead to revenue leakage and strained relationships with customers and suppliers.

Complex pricing and order fulfillment

Pricing and order fulfillment can be extremely complicated, especially in industries with multiple product variants, customizations, or complex pricing structures. Managing and communicating accurate pricing information and coordinating fulfillment activities across different product lines or service offerings pose challenges in OTC, and inaccurate pricing or fulfillment can result in order errors, slow fulfillment, customer disputes, and revenue loss—especially when combined with manual fulfillment processes.

With so much riding on effective order-to-cash processes, it is imperative for organizations to have strategies in place to counter the issues identified above. Overcoming the challenges associated with the OTC process necessitates innovative solutions that streamline operations, enhance visibility, and improve efficiency, while meeting customers’ expectations. Organizations have used several approaches to tackle these challenges, but each has its limits:

Custom coded solutions

Custom coding involves developing software solutions tailored to specific business requirements and integration needs. This approach helps organizations overcome integration challenges by building custom applications and interfaces between different systems and facilitating seamless data flow. Custom coding allows for greater flexibility but can be complex, time-consuming, and costly to develop and maintain.

As technology advances, organizations are also exploring low-code and no-code platforms that offer faster and more agile development options, reducing reliance on traditional custom coding approaches.

Order-to-cash suites and point solutions

Order-to-cash suites and point solutions are designed specifically to address the challenges and complexities of the OTC process. These solutions integrate various stages of the OTC lifecycle, providing centralized visibility, help in automating workflows, and enhanced collaboration among different departments. They also generally offer analytics and reporting capabilities, providing valuable insights into key metrics and performance indicators. That said, OTC suites are often plagued by visibility gaps, with workflow tools that may overlook some parts of the OTC process. Typically, these suites are strong tools for order management or invoicing but may fall short in other areas.

Human middleware

Human middleware refers to manual interventions and processes that bridge the gaps between disparate systems and enable data flow. While not an ideal solution, including an extra layer of human oversight can help some organizations overcome integration challenges by manually transferring data between systems.

However, this approach is time-consuming and error-prone, and limits scalability. To address this, organizations are increasingly adopting automation tools and technologies to replace manual interventions and reduce reliance on human middleware in OTC and other processes.

To optimize order-to-cash processes and drive operational efficiency, organizations must adopt best practices that help address pain points, streamline workflows, and enhance customer experiences. Here are several key best practices to consider:

  • Analyze each step in the process
    Begin by thoroughly analyzing each step within the OTC process to identify bottlenecks, inefficiencies, and areas for improvement. This analysis helps pinpoint specific pain points and guides the implementation of targeted solutions.
  • Prioritize areas with high ROI
    Focus on areas where process improvements offer the highest return on investment in exchange for the least effort and cost. Prioritize initiatives that will have the most significant impact on operational efficiency, cost reduction, revenue leakage, customer satisfaction, and cash flow optimization.
  • Automate processes
    Automation plays a crucial role in optimizing the OTC process. Identify manual and repetitive tasks that can be automated, such as order intake, order processing, order orchestration, invoicing, deductions management, and payment collections. Automating these tasks reduces errors, accelerates processing times, reduces revenue leakage, and improves overall productivity. Any area where you can apply automation is an area where you have the potential to decrease timelines, improve accuracy, and eliminate bottlenecks, so be liberal in your use of automation.
  • Integrate operations and data
    Integrate operations and data across siloed systems of record. Tearing down data silos promotes smooth information flow across systems, people, and departments. Done correctly, Integration improves visibility, reduces the risks associated with manual data entry, and enhances accuracy throughout the OTC process.
  • Simplify experiences for customers and agents
    Streamline the buying experience for customers by minimizing complexities and reducing friction points. Implement user-friendly interfaces, intuitive self-service portals, and clear communication channels to simplify interactions for both customers and agents. A seamless experience enhances satisfaction and loyalty with those who choose to do business with you, while also ensuring that those who do business for you are getting the most out of the tools you provide.
  • Provide end-to-end visibility
    Establish end-to-end visibility across the OTC process, allowing stakeholders to track and monitor orders, payments, and fulfillment status in real-time. Comprehensive visibility helps identify potential issues, address bottlenecks, and intelligently manage exceptions.
  • Listen to feedback
    Those who are most directly involved in the OTC process are likely to have the most relevant insights into its effectiveness, which is why you should actively seek out and listen to feedback from both customers and employees. Leverage customer insights and feedback to refine processes, improve customer experiences, and meet evolving needs. Likewise, gather input from employees who directly engage with the OTC process, as they can supply you with suggestions for process enhancements.
Man reading pricing on mobile device

Pricing for ServiceNow Customer Service Management

Get ServiceNow Customer Management pricing here. Connect customer service with other teams to resolve issues quickly and proactively.

Custom coded solutions

The order-to-cash process is a critical element of business operations that directly impacts revenue generation, customer satisfaction, and overall financial performance. Establishing an effective approach to OTC is crucial for organizations to optimize efficiency, minimize errors, and enhance customer experiences. But OTC can also be a complex and difficult beast to master; the right tools and technologies play a significant role in enabling organizations to achieve effective order-to-cash solutions.

ServiceNow, the leader in customer service management, provides a single system of engagement and action across the end-to-end OTC process. Order Management automates and optimizes order intake as well as order decomposition and orchestration. With ServiceNow Automation Engine, manual processes across the OTC lifecycle can be automated and streamlined, reducing errors and accelerating order-to-cash. Customer Service Management (CSM) provides the necessary interaction and service components, offering customers a centralized hub for accessing OTC information and taking appropriate actions. Field Service Management and Project Portfolio Management enable complex installation projects to be managed with complete visibility.

These products provide a fully centralized and integrated OTC solution.

Unlock the full potential of Order-to-Cash; contact ServiceNow today to get started.

Make customer service flow

Results-driven solutions to help your company reach its full potential.
Loading spinner