Functionality Deep Dive: Optimizing NetSuite Order to Cash Process

Functionality Deep Dive: Optimizing NetSuite Order to Cash Process
Published:
May 18, 2023
Categories:
NetSuite

NetSuite is an essential tool for businesses of all sizes. It offers a wide range of functions and enables organizations to streamline their operations, simplify processes, and increase efficiency. One of the most critical processes that Oracle NetSuite optimizes is the Order to Cash process.

What is OTC? (The Order to Cash Process)

The Order to Cash Process, also known as O2C or OTC, is the set of business processes that companies use to sell goods and services, receive payments and deposits, and manage their accounts receivable. It is a critical process for any business that wants to ensure that it gets paid for the goods or services it delivers.

At its core, the order to cash process is all about managing the flow of information and money between a company and its customers. This process starts with the customer placing an order and ends with the company receiving payment for that order. In between, there are several key steps that must be managed carefully to ensure that the process is efficient and effective.

Key Components of the Order to Cash Procs

The Order to Cash process is a critical part of an organization's operations and

directly impacts its cash flow and customer satisfaction levels. To ensure its efficiency, it's vital to regularly review and optimize each of its components. A seamless, well-managed O2C process not only ensures smoother operations but also enhances customer experience, builds trust, and drives business growth.

Order Entry

The order entry phase is the beginning of the Order to Cash (O2C) process. It involves the customer placing an order for a specific product or service. In this phase, it is crucial to ensure accuracy and speed in recording the customer's order details. This includes the product or service ordered, quantity, price, customer details, delivery address, and agreed-upon payment terms. Automated systems and digital platforms can significantly enhance the efficiency of this process by reducing manual entry errors and accelerating the overall process.

Order Fulfillment

Once the order has been correctly entered and confirmed, the next step is order fulfillment. This involves several sub-steps, starting from picking the correct items from inventory, packaging them safely for transportation, and dispatching them for delivery to the customer. Each of these steps should align with the organization's delivery time policies. The use of warehouse management systems and logistics tracking tools can significantly improve the efficiency of this phase.

Invoicing

Following the fulfillment and dispatch of the ordered goods or services, an invoice is typically generated. This invoice should detail the products or services delivered, their respective prices, total amount due, and other critical information such as the customer's purchase order number, order date, and the person or department that placed the order. Accuracy in invoicing is critical as it sets the stage for payment. Errors in invoicing can lead to disputes, delayed payments, or even loss of customer trust.

Payment Receipt

Upon receipt of the invoice, the customer is expected to make the payment within the agreed-upon terms. Recording the payment against the appropriate invoice is critical for accounting and financial reporting. It's important to include all necessary remittance details and ensure that the payment is correctly applied to close out the invoice. Payment receipt processes are often automated today, with software handling the matching of payments to invoices and reconciliation of accounts.

Collections Management:

Despite the best efforts throughout the order to cash process, there might be instances where a customer fails to make the payment within the stipulated time. In such cases, the collections management process should be initiated as quickly as possible. This involves a series of structured follow-ups with the customer, which could be through emails, calls, or letters, reminding them of their payment obligation. This process should be handled with care, maintaining a balance between assertiveness and respect, to ensure customer relationships are not strained. A good Order to Cash system, like NetSuite offers further automation to manage the collections process, such as automated Dunning notifications when an invoice remains open beyond its due date.

NetSuite Small Business Edition Guide Download
NetSuite Small Business Edition Guide DownloadDownload the Ultimate Guide to Oracle NetSuite
Learn why NetSuite is the #1 Cloud ERP for Small and Mid Size Businesses Focused on Unlocking Growth.
Download the Guide

Benefits of Streamlining the Order to Cash Process

Streamlining the order to cash process can have profound effects on your business, from increasing efficiency and reducing costs to improving customer satisfaction and cash flow. Let's explore the benefits more in-depth.

Increased Efficiency and Reduced Costs

Firstly, by automating manual tasks and eradicating bottlenecks in your Order to Cash (O2C) process, you can significantly reduce the time and resources needed to complete each transaction. Not only does this drive efficiency, but it also minimizes operational costs. Automation in this context translates to less human error, decreased resource allocation, and faster transaction processing.

Centralized Processes and Information

Implementing a single, unified system like the NetSuite accounting solution  for managing all key Accounts Receivable (AR) processes can drastically streamline transaction flows. It offers a centralized repository for all critical information, simplifying data retrieval and order processing for your team. This can significantly reduce any delays in the order entry phase, leading to much faster order fulfillment.

Improved Fulfillment Times and Customer Satisfaction

Removing unnecessary lags in the order entry phase, often caused by administrative tasks, can lead to faster fulfillment times. This improvement directly enhances customer satisfaction as customers receive their orders without undue delay. Satisfied customers are likely to become repeat customers, and they may even refer your business to others, bolstering your customer base.

Improved Cash Flow

Faster processing times, driven by automation, can lead to improved cash flow - an aspect particularly crucial for small businesses. With prompt invoicing and payment collection, your business can ensure a steady inflow of cash, maintaining a healthy cash flow.

Download Our ERP Requirements Planning Tool
Access everything you need to manage your ERP evaluation, including project team details, create module requirements documentation, and track feature-level needs across all departments from, CRM, Accounting, Inventory, Manufacturing, Project Management, HR, Reporting and Analytics and more.
Download Here!

A Step by Step Guide to Evaluating Your Current Order to Cash Process

Before you can optimize your Order to Cash (O2C) process, understanding your current process is crucial. Here's a step-by-step guide on how to evaluate your existing O2C process.

Identify Your Current Process

Start by pinpointing the specific steps involved in your O2C process. While we've outlined some common steps accounting teams typically follow, every business is unique. Therefore, understanding the particularities of your team's process is crucial. Map out your process to identify any potential inefficiencies or bottlenecks.

Adopt a Holistic Approach

When evaluating your current process, it's important to adopt a holistic approach. This includes considering not just the steps in the O2C process but also the people and systems involved. For instance, assess whether you have the right personnel to manage the process. Are there any training gaps that need filling? What systems or data are required to create orders, and is this information readily accessible?

Identifying Inefficiencies and Bottlenecks

After understanding your current O2C process, the next step is to identify inefficiencies and bottlenecks. Inefficiencies may include manual data entry, redundant processes, slow approvals, or any other factors slowing down processing times. Bottlenecks, often resulting from a lack of automation, can cause delays and need to be addressed.

One effective way to identify inefficiencies and bottlenecks is through data analysis. Examine the time it takes to complete each step in the process, and identify any outliers. These outliers could be signs of a bottleneck or inefficiency needing resolution.

Best Practices for Optimizing the Order to Cash Process

Optimizing your Order to Cash (O2C) process is pivotal to enhancing business performance, saving time and money, and reducing potential errors or delays. Implementing certain best practices, such as automation, implementing approval workflows, and enhancing data visibility and reporting, can streamline this crucial business operation.

Automation: Streamlining Key Steps in the Process

Automation is a powerful tool to enhance efficiency and reduce errors. Implementing automated features in the O2C process, such as validation, invoice generation, document creation, and payment reminders, can lead to significant time savings and improved accuracy.

Automating Invoice Generation and Validation

For instance, automating the invoice generation process ensures timely and accurate creation of invoices, reducing the time it takes to receive payments, thus improving cash flow. Similarly, automating the validation process ensures orders are processed accurately and efficiently, eliminating potential bottlenecks and delays.

Approval Workflows: Structured Execution of Orders

Implementing effective approval workflows can bring structure and efficiency to your O2C process. These workflows are designed to capture all the necessary steps and approvals required for processing an order, streamlining processes, and eliminating unnecessary communication.

Importance of Order Processing Approval Workflow

An approval workflow for order processing ensures all necessary approvals are obtained before an order is processed. This can significantly reduce errors and delays in the O2C process. In addition, approval workflows can ensure orders are processed promptly, improving customer satisfaction.

Enhanced Data Visibility and Reporting: Informed Decision Making

Visibility and reporting play a pivotal role in the optimization of the O2C process. Powerful reporting capabilities, like those offered by NetSuite, provide insights into business operations, enabling trend identification and cash flow forecasting.

Analyzing Data for Process Improvement

By analyzing data related to the O2C process, companies can identify bottlenecks and areas needing improvement. This insight can inform strategies to streamline the process and reduce processing times. Additionally, cash flow forecasting can aid in better financial management and informed business decision-making.

Leveraging NetSuite Features for Order to Cash Optimization

NetSuite offers multiple tools and key features that make it easier to streamline the entire order to cash process. These features include advanced order management, streamlined billing and invoicing, and improved collections and dunning management.

Utilizing NetSuite's Advanced Order Management

NetSuite's advanced order management system simplifies order entry and fulfillment, helping to streamline the entire process from start to finish. This feature allows the creation of multiple orders with automated approval and backorder handling, ensuring that your process works according to customer and business expectations. It also includes essential features such as reporting, tracking, and compliance handling.

Streamlining Billing and Invoicing with NetSuite

NetSuite makes it easier to manage billing and invoicing through automated processes, thereby minimizing the time and resources required. These features make it easy to manage the entire billing cycle, including the creation and delivery of invoices, payment processing, and payment reminders.

Improving Collections and Dunning Management

Collections and dunning are often complex and time-consuming processes that require a significant amount of administrative effort. NetSuite addresses this issue by automating these processes, enabling companies to manage collections with minimal manual effort. NetSuite also helps companies manage collections by providing a complete view of customer account activity and detailed information on their debt with the company.

Measuring the Impact of Optimization on Your Business

The ultimate goal of optimizing your order to cash process is to improve your business's performance. It's important to measure the progress of any changes you implement through key performance indicators (KPIs). KPIs help you determine whether changes to the process are making a positive impact.

Key Performance Indicators to Track

Key performance indicators that can be tracked include, but are not limited to

  • accounts receivable turnover
  • days sales outstanding
  • credit memos processed
  • refunds issued
  • disputes resolved.

These KPIs enable you to track your progress and measure the impact of your changes effectively. You can use this data to drive continuous improvements in your order to cash process and build a more efficient and profitable business.

Conclusion

Optimizing the order to cash process has significant positive effects on the overall performance of a business. By following the steps outlined in this article and leveraging NetSuite's features, companies can reduce processing times, improve accuracy and visibility, and increase profits. It’s critical to evaluate your current order to cash process, identify bottlenecks, and implement best practices to make the most of the process. Regularly measuring KPIs and analyzing the impact of improvements made is essential in keeping track of your process and achieving optimal improvements for your business.

About the Author

Zabe is a hands-on company Founder and President with expertise across multiple verticals to include business development, operations, distribution, finance, logistics, manufacturing, and the eCommerce industry.

With over 20 years of experience in the industry, Zabe works to support growing businesses by helping integrate digital and software solutions to optimize their operations and save them money. Together, we help companies manage core business processes with a single, fully integrated system covering Enterprise Resource Planning (ERP), financials, Client Relationship Management (CRM), procurement, warehousing, eCommerce, inventory, third-party logistics (3PL), and much more.

Areas of Expertise:

NetSuite

Workflow Automation

Client Relationship Management (CRM)

Enterprise Resource Planning (ERP)

Accounting and Finance

Manufacturing Operations

Wholesale Distribution

Global Supply Chain

3PL Management

Ecommerce Integrations

Join Our Insider List

All the latest NetSuite News, Articles and Advice Straight to Your Inbox

NetSuite Newsletter Tick
Monthly Digest of NetSuite News
NetSuite Newsletter Tick
Latest Features and Module Upgrades
NetSuite Newsletter Tick
Practicle Advice to Get the Most Out of NetSuite

Latest Blogposts