Order to cash, or OTC or O2C for short, is the term used to describe the entire purchasing process in a company – i.e. from the order to the receipt of payment. What initially sounds like business basics has a massive impact on business processes, especially in the subscription economy, for example in app-based services in the mobility sector. In this article, we will take a closer look at what exactly is meant by “order to cash” and what OTC means for the Subscription Economy.
What is Order to Cash?
Literally, “order to cash” means “from order to payment“. This includes all processes in order and payment management. In addition to the main process, many subordinate processes are also located here.
While the term “order to cash” initially only describes the complete purchasing process, from the order to the payment notification, modern and digital companies are actually concerned with the intelligent automation of these processes. The potential savings in time and effort are enormous and are often underestimated by companies in the “old economy”. Yet an ERP system, such as SAP ERP, offers the opportunity to completely digitize and automate the order to cash process (O2C process). The order-to-cash processes are supported by SAP’s Sales & Distribution module.
Order to Cash: billwerk offers automated software solution
The order and payment automation system includes the following four process steps:
In the first step of the process chain, all activities that lead to a business initiation are automated. This begins with the first contact, leads to the inquiry and finally to an offer, possibly a delivery offer and a contract.
Only once the customer accepts the quotation or delivery plan and signs the contract does a customer order come into being. The customer can then easily make changes to data, plans, upgrades and downgrades in the Customer Selfservice Center.
Once the sales order is created in the system, delivery follows by means of shipping, transfer order or, to stay in the digital economy, digital transfer (also called goods issue).
After the customer receives the goods or services, the Billwerk+ system automatically sends the invoice and takes care of the receivables process and deposits the monetary changes in the inventory account – both on the customer and company side.
Order to cash process and subscription economy
In recent years, consumer preferences have changed. Property and things have been traded for freedom and value in many areas. And as a result, businesses are adapting by making the shift from selling products to offering subscription services. There are many companies that want to make this leap. Yet they underestimate how different the order to cash process is for a subscription business.
In addition to traditional process steps, such as pricing and packaging or sending invoices and receivables management, companies in the subscription economy manage an entirely new, recurring customer lifecycle. That is, customers are constantly making changes to their subscriptions. So the only solution for a functioning order-to-cash process is to digitize and automate it (keyword Recurring Payments).
A dream team: Order to cash and mobility
The future of mobility will be seamless. This will mean that transportation concepts will have to be created and offered holistically. First and foremost, travelers want to get from A to B in comfort. Which means of transport they use is of secondary importance, as long as they don’t have to own it. However, not only the passenger transport itself should be pleasant. The entire ordering process, from the customer’s connection search via app, to the purchase of the ticket, to the final settlement, should be convenient.
In this respect, transportation companies and customers ultimately take the same approach: only if the literally complete user journey is convenient, suitable for everyday use, and cost-effective will the topic of “Mobility-as-a-Service” continue to gain acceptance.
Conclusion: Only automated in the future
A standardized ordering process becomes future-proof. While order to cash itself is not rocket science, automation poses new challenges for traditional commodity companies. The completely digitized OTC can be described as an integral part of the corporate culture, especially for companies in the subscription and mobility economy. The order to cash processes of the future, regardless of the industry, must therefore always be thought of from two ends: They must reduce time and effort to a minimum on both the customer and supplier side.