- As customers we experience various company’s order to cash process (OTC) whenever we buy something. Which company do you believe has a ‘great’ OTC process? Why?
- Which portion of the Order to Cash (OTC) process do they see as the most vulnerable to theft, fraud or failure of some kind? Explain.
- Who in a company should be responsible for the controls of that company’s Order to Cash (OTC) Process? Why?
- What key (1-2) competencies does the person responsible in a company for the Order to Cash (OTC) need to have? Why?
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Sean Patrick Walsh says
1. As customers we experience various company’s order to cash process (OTC) whenever we buy something. Which company do you believe has a ‘great’ OTC process? Why?
I prefer any website I can use Paypal for payment personally, but for sake of argument I will say Ebay for example since they allow Paypal payment. Ebay makes it very easy for me to search for and find a product I am looking for, and even offers a convenient layout to compare prices and vendor ratings. Ebay also works great because I can make a purchase after finding a product I want, avoid paying sales tax, and potentially avoid paying any shipping fees. The fact that Ebay links my information to my login, and I can easily use Paypal through my login, I am not burdened with entering my contact, shipping, and payment information with each purchase. The reason I prefer Paypal is because Paypal offers great protections to me as a consumer for online purchases. Paypal protects my detailed purchasing information from online fraud by reimbursement of any fraudulent activity or from misleading transactions with online vendors. The ease of the streamlined system for me to make a purchase, pay for my purchase, track, receive, and, if needed, return my purchase, makes Ebay’s O2C process great in my opinion.
Seunghyun (Daniel) Min says
Sean,
I also like Paypal’s smooth streamline of its process. My first experience of using Paypal was years ago when I was in Korea. I think Paypal was the first platform that I used for my online payment. However, I still recalled it was very simple to use, and every step was straightforward. As you mentioned, I also believe Paypal is one of very secure online transaction payments.
Yulun Song says
Sean, thank you for sharing! Ebay is a very good platform for shopping! It also provides great customer service to its customers. Many large companies, like Bestbuy and Newegg, they also have shops on ebay and also provide same customer services, making shopping online easier and trustful. I use Ebay and Amazon a lot because they provide a safe shopping experience for me. Paypal is a trustful a payment method to customers, and many customers are protected by Paypal.
Sean Patrick Walsh says
Yulon, I was not aware that BestBuy and Newegg also sold on Ebay. I buy a lot of books online because I am constantly reading, so I had noticed Barnes & Noble sold books on Ebay. That was the only brick and mortar big name seller I had noticed selling on there. Now that you mention those two other companies I wonder if it is actual an ideal distribution method for other retailers to use. Online selling sites like Amazon and Ebay already have a platform up and running with millions of buyers associated daily, and that would give other sellers access to to those buyers through a selling platform that those businesses didn’t have to foot the bill to develop and put into production. With the platform in place too, many functions of the O2C are already being conducted by the selling platform which helps mitigate some of the risk of fraud for those individual companies that choose to sell through those sites. I’m glad you mentioned this because it really got me thinking more about that type of marketing and distribution strategy, and the savings in risk and cost associated with the added reach to all the new customers!
Joshua Tarlow says
I actually really like PayPal too. Took me a while to appreciate it and only really used it for Ebay purchases until the past couple years. For one, it’s definitely more convenient than having to reenter a credit if there is a PayPal link on the site. And it does seem to be one of the more secure platforms from what I’ve read. They do have good controls in place when buying something on Ebay. For newer sellers, there’s a waiting period from when the payment is sent and is received by the seller. That way there is adequate time for the item to ship and any problems to be reported. Definitely would make it more difficult for a seller to commit fraud. But still, not perfect.
Yulun Song says
1. As customers we experience various company’s order to cash process (OTC) whenever we buy something. Which company do you believe has a ‘great’ OTC process? Why?
As a loyal customer of Amazon, I think it has a great OTC process based on my 4+ years’ experience. For example, when I add a product to my shopping cart and check out, Amazon process the order by following steps:
a) the quantity available for the listing is subtracted from the quantity in Manage Inventory. If there was a quantity of one at the time the order was placed, the listing will be removed from Amazon offer page and appear in Manage inventory with a quantity of zero while the order is being processed. Amazon holds all orders for 30 minutes, which gives us an opportunity to cancel orders. The canceled orders will appear in Manage Orders as canceled and will be grayed out.
b) Amazon verifies the payments of order:
Unshipped–payment verification is successful
Pending–payment verification is initially unsuccessful or extended.
Canceled–an order gets canceled if payments authorization does not succeed or in cases of fraud.
c) When payment is verified, Amazon does:
Changes the status to unshipped
Sends an order confirmation to the buyer with the estimated delivery date
Sends an order notification
If an order is delayed because of Amazon’s processes, it will provide the buyer with a new delivery date based on the date the order is released from Pending status
d) Once an order is in unshipped status, the buyer must either fulfill or cancel the order
Source from: https://www.amazon.com/gp/help/customer/display.html?nodeId=200168990
Mansi Paun says
Well put, Yulun. I too am impressed with Amazon’s Order to Cash process. However, I would like to add a few points here which are integral to an O2C process –
~ Managing customer Master data – Since the buyers are required to furnish their contact details/delivery address or verify the delivery address while placing an order, it would be rare that the order is created with incorrect delivery address. If somehow the address entered is incorrect, there is an option to change the delivery address by contacting their customer care
~Refund process – Amazon’s refund process is streamlined too. The customer can request a refund by initiating a refund. Amazon gives the customer a number of ways(such as UPS dropoff or shipping via another logistics company) in which the item can be shipped back to Amazon’s warehouse. They even provide the customer with a shipping label so that errors in putting correct shipping address do not occur. Once the Returns department has received the returned goods, they verify the item and its condition and if all is well, they initiate the refund process by involving the concerned team which is authorized to process refunds.
Said Ouedraogo says
Nice post, and you are absolutely right about the managing customer master data portion. However, there can still be mistakes especially at the delivery. I have received several times other customer packages from Amazon. The deliveries were made by third parties shipping companies (UPS, USPS, Fedex…) In that case, the error was human. The drivers were certainly having a long day and delivered to the wrong address.
Seunghyun (Daniel) Min says
Mansi,
Rightly said. Managing customers master data is a very important portion of the order to cash process. One simple mistake, putting a wrong address for example, can cause an unnecessary time to correct the order process. That is why the current order to cash systems are becoming more automated. We know that less human involvement results in better outcomes in terms of works done correctly. I also agree that Amazon is one of the very first runners in the race of implementing the fully automated order to cash system.
Yulun Song says
I totally agree with you Mansi! And thank you for adding. I trust Amazon because it has a 30 days’ refund policy and I can get the money back if some products I bought are bad, which makes people feel safe for online shopping! In adding (just got it), Amazon also organizes customer’s preferences from customer’s clicks and browses to the products. Based on that, Amazon sends customers about the similar products by Emails or Facebook, allowing you to click again and have more chance to buy them. However, sometimes I feel scared because Amazon has my all information and knows my styles.
Binu Anna Eapen says
Yes Yulun. Amazon return policy provides users the comfort to know that if they do not like the product, they will be able to return the product. So the customers tend to buy more products as this is completely feasible and saves on lot of time and money. Also the sales and discount coupons available make it even more attractive. It also has the Prime account which gives special advantages to the users. Yes, I agree that all the information -PII provided are vulnerable to threat and may be our privacy is being breached to certain extend.
Joshua Tarlow says
I also like they refund process. Online vendors have an inherent disadvantage relating to returns/refunds. However, Amazon is able to make the process more convenient than many vendors with physical locations. The drop of locations are definitely easy to use. Printing off the the shipping label is very easy, and can be shipped at any UPS location. While a vendor with a physical store is limited to locations it has stores, Amazon is able to leverage any UPS location as well as their Amazon lockers. Thereby providing many more locations from customers to choose. As soon as the package is shipped, Amazon then refunds the purchase.
Binu Anna Eapen says
And Amazon also lets us change the pick up location incase of returning the product.
Yu Ming Keung says
Nice post Yulun,
I am also a big fan of Amazon and I think the transparency of the Order to Pay process protects the customers when they are shopping in the amazon website. Customers clearly know what they are buying, the rating of the products, who they are purchasing from, how to pay, shipping methods and delivery date. And they have a strong customer service team backing up the customers which indicates making purchases can be fast, secured and comfortable for customers.
Yulun Song says
2. Which portion of the Order to Cash (OTC) process do they see as the most vulnerable to theft, fraud or failure of some kind? Explain.
I think the most vulnerable to theft, fraud or failure is the customer payments. Amazon will cancel the order if the payment authorization does not succeed and/or in cases of fraud, meaning once Amazon sees the payment is approved, then it trusts you and changes the status of the order, however, if the payment is not approved, it will change the status of the order to canceled, which Amazon does not approve you to do further status.
Brou Marie Joelle Alexandra Adje says
Yulun, I’m not sure I understand your answer well here. If there is a payment authorization step that allow companies to cancel suspicious orders, where is the vulnerability to fraud?
Yulun Song says
Alex! you are correct! I thought the questions was asking if the companies know the most vulnerabilities to theft! For correction, I think the most vulnerable to theft that Amazon sees is that the customer lies by saying they don’t receive his package shipped from Amazon. Based on its good customer service, I think Amazon will ship a new package again and delivery to the customer.
Fangzhou Hou says
Exactly. I think this is a good point that customers may lie to the customer service that they didn’t receive the package Yulun. However, from my experience of operating the Customer Service System, customers’ order and other account information is available in the system. If customers claim that they didn’t receive the package, customer service agent will track the package by using UPS or USPS delivery number to check whether the customers already sign for their package or not.
Said Ouedraogo says
Fangzhou,
You may be right, but based on my experience Amazon send you a new package if you tell them you didn’t receive your package. In fact, last year I ordered something from Amazon. I was not home when UPS delivered the package, so my neighbor took the package. So, when I got home I already received a mail from Amazon saying that my package was delivered, but I could not see my package. I then contacted the customer service and they were ready to send me another package. Later on the day my neighbor knocked my door and gave me my package. As a honest person, I contacted back the customer service and told them that I finally received my order.
Said Ouedraogo says
Which portion of the Order to Cash (OTC) process do they see as the most vulnerable to theft, fraud or failure of some kind? Explain.
I think the shipping note/delivery is the most vulnerable portion of the Order to Cash. The all process is considered complete only when the customer receive the product. The shipping portion is then critical to the completeness of the transaction and it is also exposed to theft, fraud and failure.
First of all, the fraud can come from within the company, someone can easily change the delivery address or even put the wrong product. The mistake can be unintentional or intentional (theft and fraud).
Also, if the company hires third party businesses it increase the probability of failure because the company and its third parties have to match their system (which is really difficult). We all experienced at least once the lost of a package in the delivery process. Sometimes the package get lost due to system failures or human errors.
Binu Anna Eapen says
Yes Said. The example is a great one. I am sure every one of us have atleast one case of misplaced delivery. Even without the third party involved we have lot of fraud happening. Do you think there is a way to prevent it? Is this only due to human error?
Said Ouedraogo says
Binu,
We can’t do nothing about human errors, but we can reduce fraud. There should be a tracking system from the order creation to the delivery. In that way, the company can track the order from A to Z. For example, let’s say I order three books from Amazon. The system will create my order and assign an order number. Then, the warehouse manager will receive the order number and it characteristics (books titles, quantity, delivery range date…). His/her team assembled the my order and re-virify the order. Next, the shipping team receives my order and verifies with the order number what is in the package. Then they make the delivery (in-house) or hire a third party to do it. At this point, a theft or failure can occur only if someone steals my order from the delivery truck or the driver delivers my order somewhere else.
Mansi Paun says
You’re partially right when you say that we can’t do nothing about human errors. Since human errors are mostly unintentional, it would be difficult to put a check at every step where human involvement is needed. Also, it might not be feasible to put a person at every step to verify and re-verify the order with the customer as it would probably open up more doors to a failure of some kind, it can also lead to a customer getting irate about the constant follow-up (I know I would be, if someone were to keep calling me for every order I placed). We can however, reiterate to the employees about areas prone to incorrect details being entered and ensure that they are more watchful of those and make it a point to enter the information or complete the task right the very first time itself.
Deepali Kochhar says
Binu, I believe log management and analysis can track such kind of problems. It is important to maintain the logs of all kind of transactions so that issues such as someone changing the delivery or address details can be tracked. It is a good kind of detective control for such issues.
Sean Patrick Walsh says
That is really good insight to that “link of the chain.” That is definitely an area of the O2C process that involves a lot of moving parts and is the actual physical movement of goods. At that point, like you mentioned, there are more personnel involved in both the business and outside of the business that pose new threats to the order and potentially have incentive and opportunity to intentionally or unintentionally cause a failure for the business.
Paul Linkchorst says
Hi Said,
Couldn’t agree with you more. I think the shipping portion is definitely an area that is susceptible to fraud. However, I just wanted to point out that the Order to Cash process is not just complete when the order is received by the customer, but is complete when the payment for the order is received by the seller. There are some areas of fraud when the money is received as well that affects this process.
Said Ouedraogo says
Paul,
Most of the time the seller take the money from your account when they ship the goods. For example, whenever I order something from Amazon they charge me only when they have shipped the package.
Paul M. Dooley says
Said, I agree with you 100% that the shipping portion is the most vulnerable fraud in the O2C process. This is obviously the area where the person committing the fraud is trying to get the goods purchased by someone else. Without delivery, there is no gain from the actor.
Seunghyun (Daniel) Min says
Said,
Really good point. Human errors are the all-time enemy like we’ve been discussing this in previous week questions. The most effective solution to minimize the human error is making every process automated. And we’ve seen more and more automated technology in the phase of delivery these days. For example, Amazon is trying to utilize drones to deliver products to customers. The drones will have an auto-confirmed address or be possibly pre-GPSed as the order has been processed. In this way, human involvements will be much reduced.
Yulun Song says
Agreed! The bad internal controls allow people to perform bad behaviors! The shipping department can easily change the shipping address and make a fraud. I also agree with you that the third party’s system is not matching to the company. In addition, the external control is also necessary. If a customer performs badly, saying he did not receive package from the company, I think the company would probably ship a new one to the customer.
Fangzhou Hou says
I agree with you Said. Indeed, the vulnerable portion of shipping and delivery process may cause potential theft and fraud no matter unintentional or intentional. From my experience in the customer service, in the most cases, the reason why customers didn’t get their packages is because they unintentional input the wrong address when they check out, but not intentional fraud.
Magaly Perez says
Great example Said.
Here are a few other examples of frauds that could occur within the shipping process:
Manipulation of financial statements, commercial bribery and cash skimming. More specifically, the shipping and ports industry are susceptible to:
-Cargo theft and misappropriation of assets
-Revenue leakage
-Unsupported payments
-Falsifications of shipping and customs papers
Executives can reduce the risk of serious fraud by promotion honesty and high ethics, implementing a code of conduct reinforced by a whistle blowing system and evaluating and improving anti-fraud processes and control activities.
Wenlin Zhou says
Absolutely, I agree with you. The shipping process has higher risk for the serious fraud. From my personal experience, I did not receive my product or I receive others products. I believe log management and analysis can track such delivery problems.
Binu Anna Eapen says
2. Which portion of the Order to Cash (OTC) process do they see as the most vulnerable to theft, fraud or failure of some kind? Explain.
Ans. The order to cash has 4 processes:
1. Quotation/order entry
2. Provision of goods or services
3. Billing(invoice)
4. Incoming payment
All the 4 processes are vulnerable to threats equally.
Quotation or order entry is most vulnerable to human errors or frauds. The risk associated with this incorrect or incomplete sales document can lead to lower sales or debts. The automatic completeness check must be in place for control purpose wherein documents are checked for incompleteness and reworked when necessary. Duplicate entry can cause miscalculations.
Also in billing Change transaction and triangular deals are not reflected correctly. Incorrect representation of sales tax. Incorrect determination of net prices which can lead to loss of sales and profit. There is also a risk for fraudulent actions.
Source: Auditing and GRC Automation
Brou Marie Joelle Alexandra Adje says
you are right Binu.
For instance, there would be fraud at the first step of OTC if the sales teams offer preferential terms to close a deal whereas the adjusted terms are inappropriate and unauthorised. Similarly, free goods and samples can be inappropriately used resulting in loss of assets.
Mansi Paun says
I have a slightly different view on which of the sub-processes are more vulnerable to fraud, theft or failure. To me, it seems that the order entry step is prone to more human errors – the customer or the representative can make mistakes in entering the customer data aswell as quantities and the order specification. The payment process is vulnerable to theft and fraud as it involves transfer of money via customer payment info as hackers would want to get their hands on customer card data for their future use. Provisioning of goods or services and invoicing steps are less prone to failure unless the infrastructure is poorly configured.
Said Ouedraogo says
Mansi,
I am glad you brought that up. Frankly, I did not think about hackers. I was only thinking how the company can mess up a customer order. It is true that during the payment process, hackers can take advantage of the company and the customers at the same time. In fact, they can steal customers information (credit card, addresses…), which makes the payment process really vulnerable to fraud and theft.
Abhay V Kshirsagar says
Binu,
In between quotation and provision of goods processes, I think there lies a process of Credit Management, which is also vulnerable to theft. Credit Management is ensuring customer is credit worthy and credit can be extended to the customer. The credit approval process must be multilayered, so that no one personnel should be able to perform credit approval duties.
Abhay V Kshirsagar says
I meant fraud* and not theft.
Paul Linkchorst says
Hi Abhay,
You bring up a really good point about credit management. In a fraud situation, an individual can raise the credit limit or worthiness on a particular customer in return for compensation or something else. Since sometimes credit worthiness can result in more favorable purchase terms, customers might be willing to bribe or somehow influence a credit manager. This can result in a fraud situation much similar to a kickback scheme when we were discussing the Procure to Pay process. However as you mentioned, multilayered approval process could help mitigate the risk.
Yu Ming Keung says
Hi Abhay and Paul,
You both brought up a very interesting issue about credit management fraud in the OTC process. A good credit score gives people access to credit when they need it or want it at the lowest rates or more favorable terms. I think the credit managers should be as independent as auditors because they are reviewing the customers’ credit and the credit report will be used to determine whether or not to accept the customer.
I agree that the credit score companies should have certain control like multilayered approval to ensure information they gather and distribute is a fair and accurate. Actually, there is a “Fair Credit Reporting Act(FCRA)” passed in the 70s to protect consumers from misinformation being used against them.It offers very specific guidelines on the methods credit reporting agencies use to collect and verify information and outlines reasons that information can be released.
For more information about the FCRA:
https://www.debt.org/credit/your-consumer-rights/fair-credit-reporting-act/
Said Ouedraogo says
Binu,
Thank you for your post. However, for some companies who use SAP, quotation or order entry is not really vulnerable to fraud or theft. In fact, the system won’t let you enter the same information twice (PO number) . It will give you an error, which reduces the risk of double entry.
Binu Anna Eapen says
I agree Said. That would mean they are taking precautions to mitigate that risk. If these application where not in place that would impose great risks right. So on a broader perspective, I still believe it is a risk which is fairly of concern.
Deepali Kochhar says
Very well quoted Binu.
Quotation or order entry is most vulnerable to human errors or frauds.
For this reason companies are using IT systems like Point of Sale so that such issues can be avoided.
Point of Sale system can help in:
A. POS Software features help you track return statistics.
B. POS software features enable you to print digital receipts.
C. POS software offers check fraud protection.
D. POS software features allow you to track customer purchases, and returns, whether you have one store or twenty.
E. Tracking returns by receipt and customer is the best way to thwart fraud.
Wenlin Zhou says
I strongly agree with you, The quotation and order entry are most vulnerable. The company can use the SAP software to mitigate the risk ,and the company also can use the Point of Sale system to mitigate the risk.
Sean Patrick Walsh says
2. Which portion of the Order to Cash (OTC) process do they see as the most vulnerable to theft, fraud or failure of some kind? Explain.
Issuing order invoices is the portion of O2C which I see as the most vulnerable to theft, fraud, or failure of some kind. Without proper controls, there is an incentive and opportunity for employees to issue fraudulent orders to fictitious customers. This type of fraud is exacerbated by sales target pressures put on employees and is playing out publicly currently with Wells Fargo for example. Even without an added pressure, employees due to economic fears might inflate sales to help ensure their individual job security with a business. This is especially easy for an employee to pull off if they have access to the portion of the process to cancel or remove the orders after they’ve been accounted for. A policy of separation of duties can help mitigate this risk of fraud by removing the “opportunity” portion of the fraud triangle. Discouraging sales target incentives can help lessen the “pressure” side of the fraud triangle too.
Joshua Tarlow says
Definitely agree that this part of the process is very susceptible to fraud, and Wells Fargo is a great example. I would be interested to see more information about the internal controls that were used. Clearly the employees felt pressure, and many employees independently exploited the same gap in internal controls. The accounts were most likely dormant since the customers were unaware, and also likely were multiple of these accounts linked to these employees. Shouldn’t have been so easy for employees to create so many accounts without customer permission, and more importantly it’s evident that Wells Fargo did not have controls, both preventative and detective. Seemed to be no effort to review these accounts after the issue first became apparent a few years ago.
Sean Patrick Walsh says
Great current example! I’m not sure just yet that there were no controls though. There could very well have been controls at Wells Fargo, but the failure point might have been separation of duties. There may have been controls in place that were handled by colleagues, as a “second set of eyes” to look at the record, or the controls may have been handled by the employees’ direct line supervisors who more than likely were benefiting from the fraud themselves so they overlooked what was happening. I think the real lesson with this scandal is that more thought has to go into whether or not to incentive sales targets as opposed to other measures like KPI’s, who benefits from the incentive, and how to properly incentivize employees to mitigate the pressure to commit fraud.
Joshua Tarlow says
I actually think that Apple Pay offers a convenient way to make purchases within Apple’s platform, and is easy to use at retailers when available. For example, my wife uses the Starbuck’s app to purchase coffee at work. Apple Pay allows her to reload funds to her account from her phone. Once a card is stored in Apple Wallet and then linked to Apple Pay, it can be used to make in purchases within iOS. Once the funds are placed in the Starbucks account, an order can be placed at any Starbucks location so she can order coffee and have it ready when she arrives at the store without ever having to use cash or a credit card.
While Apple Pay is convenient within iOS, it only sporadically available at physical retailers. While it has expaned since its inception in 2014, it is still not universally/widely used. Still, where it is available, I have generally had a very easy time using it and even found it faster than credit cards with an EMV chip. And it is always easy use a phone instead of reaching for a wallet.
Apple Pay can reduce the risk of credit card fraud because the card is stored on the device and uses a one time code for each transaction, similar to an EMV chip. However, EMV chips are irrelevant for online purchases because credit card numbers are used. If Apple Pay expands to new Macbooks and either incorporates a finger printer reader or syncs with the iPhone to authorize transactions, than purchases can be made directly through a computer without using a credit card for every transaction. Almost like PayPal.
Brou Marie Joelle Alexandra Adje says
Joshua, Apple Pay may seem to be more secure than using your actual card but that would not stop a hacker who has already hacked your credit card info and actually use it to create an Apple Pay account on their own device. That is an issue. In fact, that exact scenario poses what is probably the biggest fraud risk.
Priya Prasad Pataskar says
To add to your point Alexandra, Apple Pay would have its own vulnerabilities and potential to fraud.
So many applications are target to hackers. Eventually, Apple Pay will have bank or credit account details stored.
Joshua Tarlow says
Definitely agree that Apple Pay does have its risks and some have definitely already been written about. None of the current payment systems are really secure, it’s really more a matter of how good they are comparatively to one another. And hackers will definitely exploit more vulnerabilities in Apple Pay over time, especially if becomes more popular. I do think that it is better to allow fewer businesses access to my credit card information, which is what Apple Pay, EMV chips, and PayPal allow. If Apple Pay and PayPal are adopted by more businesses on the internet, than it will further reduce a credit cards exposure. Apple Pay can always be hacked, but there is a smaller probability my card being stolen if less businesses have access to it, and if it is used on less websites.
Wenlin Zhou says
I agree with you, Apple pay also has its own vulnerabilities. Apply Pay need your credit card information, when you add your new card. Apple Pay can always be hacked, and be targeted. However, Apple Pay is significant to make our process of payment convenient.
Wenlin Zhou says
As customers we experience various company’s order to cash process (OTC) whenever we buy something. Which company do you believe has a ‘great’ OTC process? Why?
I would like to use Amazon to buy something. If we consider the ERP system flow, this is typically categorized into the following eight sub-processes:
1.Customer presence
2.Order entry (creation of order / booking of order)
3.Order fulfillment (physical & digital fulfillment)
In its broadest definition, the possible steps in the process are:
Product Inquiry – Initial inquiry about offerings, visit to the web-site, catalog request
Sales Quote – Budgetary or availability quote
Order Configuration – Where ordered items need selection of options or order lines need to be compatible with each other
Order Booking – The formal order placement or closing of the deal (issuing by the customer of a Purchase Order)
Order Acknowledgment / Confirmation – Confirmation that the order is booked and/or received
Invoicing / Billing – The presentment of the commercial invoice / bill to the customer
Order Sourcing / Planning – Determining the source / location of item(s) to be shipped
Order Changes – Changes to orders, if needed
Order Processing – Process step where the distribution center or warehouse is responsible to fill order (receive and stock inventory, pick, pack and ship orders).
Shipment – The shipment and transportation of the goods
Delivery – The delivery of the goods to the consignee / customer
Settlement – The payment of the charges for goods / services / delivery
Returns – In case the goods are unacceptable / not required
4.Distribution
5.Invoicing :A typical invoice contains:
The word invoice (or Tax Invoice if in Australia and amounts include GST).
A unique reference number (in case of correspondence about the invoice)
Date of the invoice.
Credit terms.
Tax payments if relevant (e.g. GST or VAT)
Name and contact details of the seller
Tax or company registration details of seller (if relevant)[e.g. Australia Business Number (ABN) for Australian businesses.]
Name and contact details of the buyer
Date that the product was sent or delivered
Purchase order number (or similar tracking numbers requested by the buyer to be mentioned on the invoice)
Description of the product(s)
Unit price(s) of the product(s) (if relevant)
Total amount charged (optionally with breakdown of taxes, if relevant)
Payment terms (including method of payment, date of payment, and details about charges for late payment)
6.Customer payments / collection
7.Cash Application
8.Deductions (If invoice Short Paid by Customer)
Source: https://jellychic26.wordpress.com/2013/07/12/order-to-cash-process-of-amazon/
Wenlin Zhou says
Which portion of the Order to Cash (OTC) process do they see as the most vulnerable to theft, fraud or failure of some kind? Explain.
It may appear in the order processing. For example , the orders may not correctly Authorized. What’s more, if customers want to modify the delivery or ship-to address, someone may be intended to change the some target address, and then they explain that they did not receive products.
Credit also contained the risk, such as the external control issue, information leakage appeared in the credit card information.
Sean Patrick Walsh says
Your example of an employee changing/modifying the delivery address is great. That type of error would cause a loss for the business, and the incorrect changes might not even be intentional either. A separation of duties and a check in the ERP system could help mitigate that type of loss though.
Priya Prasad Pataskar says
Customer data collection and updation is indeed an important process. Check can be made when order is placed. The customer details in order must be mapped to customer master data. If not a new record must be created. Good quality of customer data must be verified.
There must be mandatory fields in customer data and if a record is modified, there has to be a check and a separate person must authorize the change. Completeness and accuracy being the two main factors.
Wenlin Zhou says
Who in a company should be responsible for the controls of that company’s Order to Cash (OTC) Process? Why?
CIO is responsible for OTC, because he is the top management in the overall organization system. the CIO will listen the SAP gourp report in order to make some decisions. What’s more, Order-to-Cash Director is specific responsible for the controls of that company’s order to cash process. The Order to Cash Director oversees the Contract Entry, Billing and Credit and Collections Departments. Responsible for ensuring the following:
* Credit review and approval processes comply with company internal controls
* Sales contracts are recorded timely according to company processing cutoffs and with high accuracy
* Invoices are provided to customers timely with high accuracy
* Timely cash collection, dispute resolution and escalation to customer contacts as needed
* Accounts Receivable (AR) aging is managed within company targets
* Proper review and approval of credit memos, write offs, refunds, etc.
* Financial close processes are completed within corporate deadlines
* Appropriate support of Legal department in collection / settlement efforts
* Timely reporting to management of quarterly AR metrics (DSO, AR aging, etc.)
* Directs various cross-functional teams in supporting process and system improvements
* Manages 3 direct reports and their sub teams.
Wenlin Zhou says
What key (1-2) competencies does the person responsible in a company for the Order to Cash (OTC) need to have? Why?
Strong interpersonal and leadership skills. Positive, self-motivated and an exceptional desire to win. Superior people skills: team-oriented, fast learner and personable understanding of business requirements and functionality
Understanding of integrated business management systems. Ability to quickly identify and analyze technical risks & impacts and define alternatives & prioritizations to remove technical roadblocks. Ability to manage multiple deliverables independently in a fast-paced environment.
Resource: http://www.careerbuilder.com/job/J3L7F36WBYSKTZBFV29
Brou Marie Joelle Alexandra Adje says
I definitely agree with you that leadership and interpersonal skills are a must . However, I would like to add that the person in charge of the oTc process should have some customer relationship management experience and above all some computer skills, including experience with ERP systems, MS Office etc. because they will constantly be in contacting with the operating system so knowing how to use it should be key skill required.
Priya Prasad Pataskar says
Rightly pointed out Alexandra. Customer relationship management experience will definitely help.
I also agree with Wenlin that the knowledge of business is utmost important. without understanding how business works. A person has to understand how a business works to detect if anything has gone wrong in the O2C process.
Magaly Perez says
Great points; knowledge of the business and effective interpersonal skills are most definitely key competencies in the OTC Process. However, I would say sense of a strong analytical skills trumps the business knowledge.
To be an effective leader one must possess the tenacity of analytics and strong communication skills. These skills may be seen as transferable but, they bring way more to the table when being an effective employee and manager. They set the stage for your work as well as your ability to handle situations that may occur.
Wenlin Zhou says
I strongly agree with Alexandra. The person also need the communication skills. Ability to work effectively in a diverse work group and to achieve results through team efforts. Ability to perform in a high pressure environment and/or crisis situation and render good decisions to resolve the problems, maintain safety and ensure adherence to Corporate Code of Conduct.
Fred Zajac says
As customers we experience various company’s order to cash process (OTC) whenever we buy something. Which company do you believe has a ‘great’ OTC process? Why?
I purchased two new mattresses, one for myself and one for my son. The OTC process we received seemed to work ‘great’. My family was very pleased with the entire OTC process.
Here was our experience.
We visited the store and selected the two mattresses based on the floor models. I negotiated a deal with the sales representative and agreed to the price, delivery, set-up, and financing terms. The sales representative searched his system to determine if the make and models were at this location. The mattresses were at this location and a delivery day / time was set for the next day. The mattresses arrived the next day and on time. The delivery drivers contacted me by phone 30 minutes before they arrived. The delivery driver successfully set-up the frames and placed the box spring and mattresses in both bedroom sets. Once the job was completed, the delivery driver had me sign a receiving slip and presented me with a receipt.
About two months later, we received a bill from the company for 3 years of interest free monthly payments. We contacted the billing department and scheduled automatic payments for the next 36 months.
The entire process was smooth and will visit the store for all of my future furniture needs.
Fred Zajac says
Which portion of the Order to Cash (OTC) process do they see as the most vulnerable to theft, fraud or failure of some kind? Explain.
The portion of OTC process I see most vulnerable to theft, fraud or failure is the sales process. I believe the sales process is most vulnerable because it has “Many Flavors” to sneak a taste. Here are a few example for the list provided in on page titled The Many Flavors of Sales Order of the Power Point.
1. Standard Order – Delaying or placing future orders for extra commission and personal incentives.
2. Free of Charge – Offering samples to family or friends
3. Returns – May not account for the return and take it
4. Credit / Debit – Making side deals for personal benefit
5. Tax Scenarios – Dishonest tax practices
The more “Flavors”, the more areas of risk and possibility of fraud, theft, or failure.
Fred Zajac says
Who in a company should be responsible for the controls of that company’s Order to Cash (OTC) Process? Why?
I believe the C-level executives (CFO, COO, & CIO) should create the controls for the company’s OTC process. The control framework should be a joint operation to accurately identify the risks, and allocate the appropriate resources to mitigate the risk. The CFO will identify the Pre-sales & Sales, Billing, Financing, and Payment controls, the COO will set controls on the direct labor, direct materials, production, and shipping, the CIO will set controls and policies on the IT infrastructure.
Binu Anna Eapen says
Well said. I was not really sure about this answer. But after reading this post it gave me a little better insight. I guess CIO is responsible for any controls in a organization. Order to cask should be a joint operation by CFO, CIO and COO.
Fred Zajac says
What key (1-2) competencies does the person responsible in a company for the Order to Cash (OTC) need to have? Why?
Each responsible party should have a passion to achieve the organizations mission statement and accomplish / exceed the company’s goals. They have to believe in what the company is doing, why they are doing it, and how they are doing it. The other core competency each leader should possess is the success of the stakeholder (Customers, Employees, Shareholders, and other associated with the company). Understanding what the company wants to achieve is great, but identifying what key stakeholders want is the only way to keep people satisfied, putting the company in a better position to consistently grow.
Priya Prasad Pataskar says
Great point Fred. The competency to stakeholders success is very important. Attention to detail while performing each activity like checking the sales order, checking the quotation correctness, verifying customer data is important.
Vu Do says
Agreed Fred, the stakeholders needs are the most important and the company must satisfy that need in order to retain and get more customers. If the OTC process is not good and customers do not received their product on time or received the wrong item then they would not want to do future business with the company. Making sure the process is correct and an easy flow would keep things in order and make everyone happy. Making sure everyone in the process is satisfied will keep the process going and run more smoothly. Everything has to flow correctly and putting the needs of the stakeholders first will ensure the business is on the right path and will continue to grow like you said.
Mansi Paun says
In my opinion, the person responsible for the Order to Cash process needs to have –
• Accounting knowledge, and
• Sales & Distribution knowledge
This is because :
• The Order to cash process manages the life-cycle of a sales process
• It consists of the sub-processes of receiving customer orders and processing them.
• Orders are received via different Sales channels
• Orders are fulfilled though transportation & logistics
• Invoice is generated and referenced as sales
• Debt is recorded and collected through collections management
• Funds are received and are to be accounted as appropriate
All the above steps make use of Accounting and Sales & Distribution knowledge so a person well-versed in these areas would be able to visualize and design a great O2C model.
Sean Patrick Walsh says
I agree with your two key competencies selected. The entire process entails both of those aspects from beginning to end as you explained. It’s hard to limit it to just two because I also think a risk awareness mentality is so important as well. Since the person would be responsible for the entire process I think they should be aware of where the inherent risks are in the process and know ways to mitigate those risks as much as reasonable possible. But like you said, without having a solid knowledge of accounting and sales processes the person might not be able to properly identify where those risks are because they might not know whey risks are there.
Mansi Paun says
You’re absolutely right, Sean. It’s hard to limit the competencies to just two as there are other aspects of the role which are equally important. Having a risk awareness mentality is key to the role to spot pitfalls and plan mitigation strategy therefore someone with Accounting and S&D experience would be a great fit as they would already know the process, its inherent or associated risks and the best possible solutions considering impact and ROI to overcome those risks.
Abhay V Kshirsagar says
Mansi,
I strongly agree that understanding of life-cycle of a sales process is something a person responsible for O2C must know. In addition to the goals that you mentioned I think the person should also be focused on achieving wide goals by improving process to bring best possible business solutions for the company.
Yu Ming Keung says
Hi Mansi,
Good points! Having the competencies in accounting knowledge and sales & distribution knowledge is a must because he or she is responsible to oversee the whole OTC process. Like the benefit Sean brought up, having the solid knowledge of accounting and sales process enables the OTC manager to identify risks associated with OTC process. I would like to add to your point that having the solid knowledge also enables the OTC manager to determine the needs of the companies and customers.
Brou Marie Joelle Alexandra Adje says
I think Honeygrow has an awesome order to cash process because the ordering process is very easy with plenty of terminals for order to be processed quickly.
First you walk into the restaurant and walk up to an available kiosk. Tap the screen to start your order. You can select from stir-fry, salad, honeybar, or drink. If you pick food, you can customize it yourself with the available options or go straight to a suggested option. When you are finished creating your order you hit the looks good button. Then chose if you want it to go or to eat in the store. you will then have the option to add a drink or dessert. The next screen will have a summary of your order. If everything looks good hit done. It will then ask you if you are paying with cash or credit. If you hit cash, a receipt of your order will be printed and you go to the cash register to pay. The cashier will process your payment and mark your receipt as paid. If you hit credit, there is pin pad next to the kiosk that you can use to complete your payment. A receipt of your order will be printed afterwards. When you complete your order on the kiosk, the order will be electronically sent from the kiosk to the touch screens behind the counter where the workers stations are. There are different stations behind the counter and you can see them making your food. Duties are segregated in a way that each worker has a specific task which can be making the stir-fry, the salads, or the honey bars for example. There is also someone working at the cash register, and someone working at the pick up counter. When an order pops up on the screen, the workers will see whose station is in charge of putting together that order. If it is their station, the cooks will prepare the food. Once the meal is made and the complete order is assembled, the cook who prepared the food will bring the meal to the pick up counter, and the worker at the pickup counter will call out the order number. The customer whose order it is will hear their number and go to the counter to pick up their meal and voila!
Joshua Tarlow says
I really like their process too. They are able to process a large number of customers efficiently and I’ve never waited there too long, regardless of how long the line was. Having the customer order on a computer helps the process because less employees need to take orders, and it is less expensive to buy additional computers. Allows the employees to focus on their tasks with lest interruption, and essentially allocates resources much more efficiently.
Mansi Paun says
Per my understanding, the VPs of Sales & Services, Finance and Production in conjunction with the CTO should be incharge of the Order to Cash process. The entire order to cash process requires personnel involvement of the departments headed by these VPs along with the Specialists that help manage the technology aspect of the process, who report in to the CTO. To make the process a successful and smooth-functioning one, buy-in from each of these business area leaders is required.
Abhay V Kshirsagar says
As customers we experience various company’s order to cash process (OTC) whenever we buy something. Which company do you believe has a ‘great’ OTC process? Why?
The only company after Amazon that has a great OTC process that I can think of is Flip Kart, which is a direct competitor of Amazon in India.
The process is as follows:
Order Management:
Order is placed by customer through the front-end e-commerce website of Flipkart
Order is then downloaded onto the Order Management System (Not sure if the OMS is on the back-end Enterprise System or on the web-store)
Order Fulfillment:
Here, the inventory from the warehouse gets allocated to the quantity on the order
A picklist is generated for the picker in the warehouse to pick goods and transfer them to the picking location
Customer Billing:
The documents required with the goods are prepared (shipping labels, invoice, etc.)
Distribution:
The order is packed and is assigned with a third party courier depending on the shipping location
Shipment is transferred over to the courier company and shipment is out of the warehouse (database is updated to reduce the SKU)
Goods are sent to ship-to-location and the invoice is sent to bill-to-location
Customer Collections: Payment method is credit card, debit card, Cash on Delivery, Pay Pal, etc.
Customer Returns Management: Handling the goods that have been return by the customer. For Cash on Delivery goods, the customer doesn’t need to send the item via mail; the courier company associated with Flipkart arranges the pick up from the ship-to-location.
I think they have a good O2C process as the cash on delivery increases the complexity of the process. Cash on Delivery method is possible only because of a preventative control called OTP (one-time password), which is an extra level of security that Flipkart uses as an multi-factor authorization.
The way Cash on Delivery works is, when a customer selects Cash on Delivery as a payment method, an OTP is sent to the registered phone number in the form of text message. The customer has to enter the pin on the webstore and complete the transaction.
Yu Ming Keung says
1 As customers we experience various company’s order to cash process (OTC) whenever we buy something. Which company do you believe has a ‘great’ OTC process? Why?
As a loyal customer of Dunkin Donuts over two years, I personally believe it has a great Order to Cash process because the ordering process is very easy and quick. When you walk in to the Dunkin Donuts location, it has all the food display for the customers to select. A customer can customize the drink such as sugar, cream, and flavor. When the customer finishes the order and then the cashier repeats and confirms the payment amount. He or she can choose the method to pay such as cash, cards, coupons or DD credits. A receipt of the order will be printed for the customers with the order details. The order will be processed based on the order details and hand the ordered items to the customer according to the order number. The whole process of OTC may take up to 3 – 5 minutes depending on the line.
Recently, Dunkin Donuts introduced a new ordering feature, order on-the-go which enables customers to place the order by using their smartphones. The OTC process is much simplified compared to the OTC process above.
1. Select a location
2. Select food
3. Customize
4. Order
5. Pick up and skip the long line
Paul Linkchorst says
Hi Yu Ming,
I would agree that sellers such as Dunkin Donuts that have the products located at a store will have the best Order to Cash processes. Since the product can be provided to the customer usually within a couple of seconds, it makes for a very secure and easy transaction. With that being said, I think Dunkin Donut’s new ordering application will add a new twist to its OTC process. Despite what seems like to be a very simple transaction, Dunkin Donuts still has to make sure that the orders being placed on the application will be available when picked up. Either that, or all of their orders made on the application will be made fresh. Nonetheless, I think Dunkin Donuts OTC process will still have a very simplified manner in which they receive compensation for its products.
Priya Prasad Pataskar says
Yu Ming,
You mentioned about the order on-the-go process and its interesting. Does DD ask you for the time of pick up in the application while you place the order?
The staff at DD also must be simultaneously working on in restaurant customers and they should have the knowledge of which order should get priority. If in their O2C process a time estimate is there would be of great help towards customer satisfaction.
Yu Ming Keung says
Priya,
You raised a good concern, it is very important to prioritize which kind of order should be taken care of. I personally never used the on-the-go ordering but I think it depends on how DD set up the policies toward its operational structure. I agree with you point that DD can satisfy both different orders of customers if their O2C process works well in terms of estimate of time handing the food items over to its customers.
Seunghyun (Daniel) Min says
As customers, we experience various company’s order to cash process (OTC) whenever we buy something. Which company do you believe has a ‘great’ OTC process? Why?
I found a great definition of OTC in amalto’s website. “Order to Cash is an essential business process that can either boost your bottom line when managed efficiently or leave you in the dust of your competition. It determines how quickly your business is paid for the products or services you sell and directly impacts your relationship with customers.” One company I think that has a great OTC process meeting the definition above is Foot Locker in which I recently had a great experience. A couple weeks ago I went to Food Locker to see any shoes if I liked to purchase. And I found the shoes that I wanted to buy. I asked the clerk if they had the shoes in my foot size. He went back to check it and came out to tell me they currently didn’t have a stock in their store. But he offered if I wanted to order it through their online store while I was in the store. He said I could just pay the amount at the cashier and the shoes would be delivered to my house. After couple days I received my shoes.
I really liked what Foot Locker offered to me, and I thought it was such a smart way to run the store. The reason is that they don’t have to carry all their inventory in each physical store. Each store can carry minimum inventories in the store and if they are out of stock for a specific item when customers ask it for buying. Then they can simply lead the customers to order it through online. (I understand the reason why some people go to the physical store is to buy the products at the day they go there, but like shoes? I don’t mind waiting a couple days to wear them.)
Finally, the whole process was very smooth and flawless. Without punching every my credit card number on their website, I could just slide my card at the cashier and tell the cashier the address where I wanted my shoes to be delivered. I think it was a pleasure experience.
Paul Linkchorst says
What key (1-2) competencies does the person responsible in a company for the Order to Cash (OTC) need to have? Why?
As we know, the Order to Cash process involves a customer ordering a product or service to begin with, and ending with the seller receiving the payment. When I think of the Order to Cash process, the two underlying processes that come to my mind are documenting/recording items such as orders and invoices with the other process fulfilling the order. With that being said, I think the two main competencies a person responsible for the OTC process must have are good communication skills and have technical knowledge in accounting information systems. The reasons why I say a person responsible for OTC should have those two competencies, is because that individual has to work with a wide range of employees throughout the process. To just think of a few, some groups of employees that this individual will need to communicate with are accountants, salespersons, warehouse workers, transportation workers, and probably a couple of more. Therefore, you need to be able to communicate to different individuals throughout the process. Similarly, I think being technical in accounting or information systems or both is beneficial since the OTC involves many different areas. If you are responsible for the OTC process throughout a company, then you should be able to understand the systems involved and how an order results to a payment within an ERP or other information system.
Paul Linkchorst says
Who in a company should be responsible for the controls of that company’s Order to Cash (OTC) Process? Why?
I would say the two individuals responsible for the controls of the company’s Order to Cash would be the CFO and the COO. In my mind, the two major elements of the Order to Cash process is the accounting of the orders and the fulfillment of the orders. Therefore, I believe the CFO (Chief Financial Officer) should be responsible for implementing controls revolved around the company’s accounting in the Order to Cash process. Since they are responsible for producing the financial statements and signing off on them, I would believe that the CFO would have an integral part in the design and implementation of the accounting controls. With that being said, for the fulfilling of the orders, I would say the COO (Chief Operating Officer) would be responsible. Since their role is to management the day to day operation of the organization, I feel the COO would have a large responsibility of controls around fulfilling the orders which consists of packaging, transportation, and sales.
Seunghyun (Daniel) Min says
Paul,
Great assessment on responsibility for the controls of that company’s Order to Cash process. I also agree with you that COO and CFO are two main characters that have significant responsibility for company’s Order to Cash process. I really believe both COO and CFO are equally contributing to OTC process because if either one of them is not taking good care of or overseeing the OTC process, it just cannot be fulfilled. There are a lot of financial payments or possible refunds involved in OTC processes; therefore, CFO should be heavily included in all the transactions. At the same time, COO should oversee every transaction movement of ordering, packaging, transportation/delivering and sales.
Vu Do says
Great point Paul, I agree both are equally responsible for the OTC process since one controls the financial side and the other the operation. The Operating officer must ensure that the whole order process flows smoothly and is user friendly for customers. The day to day operations to get the order in, process, packing, and shipped is in their hands. They must make sure all those processes are in order so that the customer can received their item on time. The financial officer must verify the payment process to make sure the company is getting paid. They must verify that they are not over spending and that they are making a profit from the sale. Both are responsible for getting the customer their order.
Paul Linkchorst says
As customers we experience various company’s order to cash process (OTC) whenever we buy something. Which company do you believe has a ‘great’ OTC process? Why?
One of the company’s that I believe to have a good Order to Cash process is Valve Corporation. Valve is a software and video game developer that created a video game client called Steam. Essentially this software client/application, which is made available to PC users, can be downloaded for free from Valve’s website. From the application, you can purchase not only games developed by Valve but from a majority of the developers on the market which houses thousands of games with millions of users. With that being said, Valve has really transformed the Order to Cash process with Steam. Instead of the old method where a game is ordered, comes in the mail or picked up at a store, and uses a disc to play, Steam allows users to download the game over the internet instantaneously. For Valve, there is no packaging or transportation in the Order to Cash Process. Likewise, once a game is purchased, the transaction is instantaneous with the delivery of the good. While this is a different scenario than most Order to Cash situations due to the fact that the good is digital, it does demonstrate how a company has transformed an industry that once required physical goods to going digital, all while improving the Order to Cash process.
Ming Hu says
Nice answer. I’m a fan of valve, too, one thing that impressed me mostly is its Provision of goods or services process, once you purchased one game, it will be automatically recorded in your account, if you replace your computer or device, just log on your steam account and re-download it with no charge.
Paul Linkchorst says
Hi Ming,
Definitely became a big fan of Valve/Steam when I switched over to playing on a PC. You bring up a good point though about how a game is permanently recorded to your account. This helps with the Order to Cash process since customers don’t need to worry about their product being “lost” or any claims made about not receiving a product can be quickly handled. With that being said, it’s worth to mention that a tradeoff of offering a digital product on a digital platform is that the need for software developers and technical employees is greater. I can imagine that the Steam platform integrates in some way with Valve’s accounting information systems.
Priya Prasad Pataskar says
Q] Which portion of the Order to Cash (OTC) process do they see as the most vulnerable to theft, fraud or failure of some kind? Explain.
A]
Order to Cash process has multiple potential processes vulnerable to fraud. I believe the preparation of sales order is the most vulnerable one. This document collects data from all ends, customer, product, order, delivery. The correctness of this document defines success of the transaction.Multiple things recorded in this document can cause a problem.
1. Customer data must be correct. Address, contact details etc
2. Duplicate customer data can cause inaccurate orders. Duplicate sales order can a problem.
3. Quotation given to customer can be erroneous either incomplete or incorrect
6. The sales document header, product details, delivery time can be missing or wrong.
7. Customer data or product data can be missing
8. There is potential theft in changing price on the receipt. Price change must be authorized
9. Inappropriate discounts can be given
10. Free goods or sample goods can result in loss
11. Unauthorized credit notes can cause theft or loss
12.Deliveries without sales order can lead to fraud
Deepali Kochhar says
Great explanation Priya. I would like to add an example to it.
Lets take the example of GBI. In order to assemble a cycle, we would need to take order of various required to make a cycle. Now if there is an error in sales order preparation in a way that it misses some parts of a cycle, it can ultimately lead to delay in assembling and hence would be a loss to business.
Therefore it is very important to secure this step from any kind such kind of issues.
Abhay V Kshirsagar says
Deepali,
In addition to what you mentioned, I think ship-to-address and bill-to-address are also very important. I have had incidents in the past, when the item was shipped on to bill-to-address.
Yu Ming Keung says
3. Who in a company should be responsible for the controls of that company’s Order to Cash (OTC) Process? Why?
I would believe CFO (Chief Finance Officer) and COO (Chief Operating Officer) should be responsible for the controls for the company’s Order to Cash process. Accounting is a major part of the OTC process in which the billing process, an invoice, accounts receivable, cash received is created and released to financial accounting. I would believe that the CFO should be responsible for participating in designing the OTC process and place controls to ensure the reliability, integrity, availability, confidentiality of the OTC process. The COO is responsible to ensure the operational efficiencies and effectiveness of the OTC process. He or she will place the controls to operating devices/systems, employees and shipping.
Deepali Kochhar says
I would like to add to your point.
OTC needs control of CFO and COO along with end to end process managers and staff in a way:
a.It is important to achieve real-time visibility into operational data across the chain from planning to return
b. Break down operational “silos” and provide visibility into the performance of key metrics
c. Constantly monitor orders flowing through the supply chain and report data, exceptions, and proactive alerts
d. Facilitate analysis by segments such as carrier performance, geography, inventory network integration, etc.
Therefore there is a need of a process control owner at each and every step of OTC in order to perform all the above steps.
Deepali Kochhar says
1. As customers we experience various company’s order to cash process (OTC) whenever we buy something. Which company do you believe has a ‘great’ OTC process? Why?
Order to cash process includes following steps:
• Customer presence
• Order entry (creation of order/booking of order)
• Order fulfillment (physical & digital fulfillment)
• Distribution
• Invoicing
• Customer payments/collection
• Receipt
Order-to-cash process includes multiple departments, companies, and back-end enterprise applications. Therefore, in order to have a great OTC process it is important for each department to complete its part of the overall process error-free and transfer correct information across functional boundaries.
I think Domino’s has one of the best Order to Cash process with a 99.6% success rate of 30-minute pizza delivery. There Order to cash process is as follows:
Customer presence: Order is placed online or in store
Order entry: Order is flashed on the kitchen screen (Takes 4 minutes for the order to Oven process)
Order fulfillment: Pizza maker looks at the order and gets the job done
• Takes 6 minutes to bake the pizza
• Takes 5 minutes to cut and pack
Distribution: They have 8-minute delivery time
Customer Payment/collection: Either online or cash on delivery
Receipt: System generates the receipt which is send to the customer along with the pizza.
There is a buffer time of 7 minutes to perform task such as payment collection, traffic, rain etc.
Fangzhou Hou says
Question: As customers we experience various company’s order to cash process (OTC) whenever we buy something. Which company do you believe has a ‘great’ OTC process? Why?
An order to cash cycle consists of multiple sub-processes including:
• Customer order is documented
• Order is fulfilled or service is scheduled
• Order is shipped to customer or service is performed
• Invoice is created and sent to customer
• Customer sends payment /Collection
• Payment is recorded in general ledger
Apparently, Amazon has a great OTC process. When a customer wants to purchase something on Amazon, the steps in the OTC process followed:
1. Order Configuration – Where ordered items need selection of options or order lines need to be compatible with each other
2. Order Booking – The formal order placement or closing of the deal
3. Order Acknowledgment / Confirmation – Confirmation that the order is booked and/or received
4. Invoicing / Billing – The presentment of the commercial invoice / bill to the customer
5. Order Sourcing / Planning – Determining the source / location of item(s) to be shipped
6. Order Processing – Process step where the distribution center or warehouse is responsible to fill order
7. Shipment – The shipment and transportation of the goods
8. Delivery – The delivery of the goods to the consignee / customer
9. Settlement – The payment of the charges for goods / services / delivery
Source: http://searchfinancialapplications.techtarget.com/definition/order-to-cash-OTC-or-O2C
https://jellychic26.wordpress.com/2013/07/12/order-to-cash-process-of-amazon/
Ming Hu says
As customers we experience various company’s order to cash process (OTC) whenever we buy something. Which company do you believe has a ‘great’ OTC process? Why?
I think that must be Jingdong, one of the biggest online shopping malls in China. What impresses me mostly can be list as follows:
Multiple payment methods: on delivery; online; remittance; installment (this is in connection with your credit)
Logistics speed: based on my six years’ experiences, I could receive most of my orders within 24 hours, hardly later than 48 hours.
Delivery fees: if you can’t meet free shipment requirement and don’t want to pay the fee, you may choose pick-up by customer, just 5 minutes away from my dorm.
Yu Ming Keung says
2 Which portion of the Order to Cash (OTC) process do they see as the most vulnerable to theft, fraud or failure of some kind? Explain.
I would see the most vulnerable to theft, fraud or failure is in the quotation or order entry process as it is the beginning of the whole OTC process and it affects the rest of the OTC process. Wrong prices, quantities, wrong customer information can be entered into the system because of human errors, fraud, or miscommunication between both parties. Fraud like bribery and kickback program is also a big vulnerability in the beginning of OTC because customers always want favorable terms.
With that being that, I think this vulnerability can be mitigated by segregation of duties where one personnel provide the sales quotes for customers and another personnel is responsible for accepting the quotes and documenting the sales order.
Ming Hu says
I think double check is also a good method for mitigating the vulnerabilities, after finishing each step. a confirmation page will be created, the customers or personnel could confirm whether the information and data is correct.
Binu Anna Eapen says
Nice point Ming. Double check verification can mitigate human errors. Also there can also be another person to verify the correctness of the data or by setting constraint checks we can reduce lot of human error.
Yu Ming Keung says
What key (1-2) competencies does the person responsible in a company for the Order to Cash (OTC) need to have? Why?
I believe the key competency would be the technical skills and knowledge in accounting since the order to cash process will play an important role in involving with revenue recognition, invoicing and cash received. Without accounting knowledge, it is difficult to assess the risks such as inherent risks, fraud risk and place the right controls to mitigate the risks. Having good knowledge of accounting is absolutely essential for this specialized role.
Binu Anna Eapen says
In addition to accounting knowledge, he should also be technically well versed and know the business and its goals well. He should be able to analyze the risks and suggests way to mitigate it. He/she should have complete understanding of the process and should be quick decision maker when issues pop up.
Magaly Perez says
As customers we experience various company’s order to cash process (OTC) whenever we buy something. Which company do you believe has a ‘great’ OTC process? Why?
I believe Amazon has the greatest OTC Process. As a prime member, I order from Amazon very frequent, probably more than I should. I think amazon has one of the easiest navigable site, literally just a click of the button. My favorite aspect is most definitely the two day shipping. However, that isn’t a huge step in the OTC Process.
When considering ERP system flow, there are 8 steps in the OTC Process:
1. The customer presence on the site
2. The selection of the order item
3. Order fulfilment
4. Distribution from factory
– Amazon verifies the payments of order:
– Payment verification: Amazon changes the order status, contacts customer of the orders status as well notify the customer regarding their est. delivery date
5. Invoicing, the creation of the receipt
6. Customer payment
7. Cash application
8. Deduction of invoice
This process sounds much more complex than what it is on via Amazon website. Amazon is able to make this process quick and painless and that’s why I will continue to be a loyal customer.
Annamarie Filippone says
Q1. As customers we experience various companies’ order to cash process (OTC) whenever we busy something. Which company do you believe has a ‘great’ OTC process? Why?
An OTC process that I recently observed and appreciated was with Starbucks, within their mobile application specifically. Once you create an account, you can store card information there, meaning you do not have to input it every time you want to order.
You can order your food/drink of choice, select the location you want to pick it up from, and then pay, all within the application. The Starbucks location you chose will have a receipt of your order printed, so they can fill it while you’re on your way. Then, once you get the location, you do not have to wait in line and can just pick your drink up from the counter and go. This is incredibly convenient, especially first thing in the morning when the line is out the door. The app also includes a history tab, so you can see all your past transactions.
Joshua Tarlow says
I mentioned their app in my first post. Great example of OTC process. Extremely easy to order and pay before every setting foot in the door. Also significantly reduces the wait time, sometimes I’ve gotten there and it’s ready, which couldn’t be more convenient.
Vu Do says
Good example Annamarie, I have to give this Starbucks app a try. I like how you explained how easy it is to make an order, pay for it, and then just pick it up from the counter without having to wait in line. It is so convenient and the fact that you do not have to re-do the payment information is super helpful. It sounds like its secure and user friendly so that’s a plus.
Annamarie Filippone says
Q2. Which portion of the OTC process do they see as the most vulnerable to theft, fraud, or failure of some kind? Explain.
I believe the order entry portion within the OTC process is one of the steps most vulnerable to theft, fraud, or other failure. First there is the risk of human error, which is not intentional, but can still cause problems for the organization by messing up orders. There can also be intentional fraud, such as a sales team adjusting terms for customers without permission in order to boost sales.
Annamarie Filippone says
Q3. Who in a company should be responsible for the controls of that company’s OTC process? Why?
The Chief Operating Officer and Chief Financial Officer are the individuals that should be responsible for the controls of the OTC process. The COO would be responsible for the controls within the non-accounting portion of the process, such as packing and transport. The CFO would oversee the controls of the accounting portion of the process, including goods issue and invoice creation.
Tiesha Christian says
Annamarie Filippone – I see what you mean about upper management being responsible, I don’t know if that is what it looks like at every business. Do you think upper level management really plays a role in the OTC process? I feel like more times than not, they delegate that sort of stuff to the middle line management. Honestly, I think everyone should be held accountable. There are so many moving parts in the OTC process, and everyone involved shoule be held accountable.
Annamarie Filippone says
Q4. What key (1-2) competencies do the person responsible in a company for the OTC need to have? Why?
I think an important competency for the person responsible for the OTC process is technical skill and understanding of the system that is utilized for this process. OTC has many steps, each with its own set of requirements and risks. By understanding how the systems operate for each step, the responsible party can better understand potential threats, as well as remediate issues as they occur.
Wen Ting Lu says
Annamarie, I totally agree with you. The person who is responsible in a company for the OTC should have technical skills and background of the OTC process. Without knowing what occurs within each step, it is very difficult for he/she to determine what are the potential threats and what actions should take in place to minimize or resolve the threats.
Magaly Perez says
Which portion of the Order to Cash (OTC) process do they see as the most vulnerable to theft, fraud or failure of some kind?
I believe the order fulfillment step in the OTC process is the most vulnerable to theft, fraud or failure. Inherently, there is the risk of human error, which at most times is not intentional whatsoever; however, it causes huge problems for business. Many wholesalers still use the manual data entry processes, which significantly increase the chances of human error while also slowing down their order-to-cash (OTC) processes and putting customer payment data at risk. By integrating with automated inventory management solutions, all of these issues can be dramatically reduced.
Magaly Perez says
Who in a company should be responsible for the controls of that company’s Order to Cash (OTC) Process? Why?
I believe that there are two individuals that are responsible for the controls of a company’s OTC Process: the Chief Financial Officer (CFO) and the Chief Operating Officer (COO). The CFO’s role in the OTC process is to provide the accounting basis behind the process by implementing controls specifically tailored to the company’s accounting. As for the COO’s role is to make sure the order fulfillment process is fulfilled as well as provide transparency. Both the CFO and the COO have huge stakes in the OTC Process; they are both in charge of the financial statements and with that being said, they are responsible for the controls of the company’s OTC process just in different realms of the process.
Fangzhou Hou says
Question: Which portion of the Order to Cash (OTC) process do they see as the most vulnerable to theft, fraud or failure of some kind? Explain.
In my point of view, the shipping process is the most vulnerable to theft, fraud or failure. First of all, in most cases, shipping process involved a third party to ship the order, which means the contractors also have the accessible authority to access in the system. Under this situation, the safety of customers’ personal identify information and order information may be stolen by data leak.
Besides the potential risks of information assets, the physical products may be stolen or unintentional loss during the shipping process. Moreover, because in many cases, the contractors are usually allowed to access to the system and update the delivery information, this have risk in potential fraud since the contractors have authority to change the shipping information. Therefore, the effectiveness of detective control is very important in this situation.
Ming Hu says
I want to add that caused by couriers, sometimes, they carelessly put the physical products in front of doors, which may easily be stolen, lost, damaged, and reported to company that the orders safely delivered. I actually experienced it that when Amazon informed me “delivered”, I found my package two days later in a garbage can.
Fangzhou Hou says
Thanks for adding your experience. You are right, put the package in front of the door has potential risk that the package might be stolen. Actually, I was thinking that if this scenario literally occurred, who should take the responsibility of losing the package? Because the customer choose this type of delivery, they should have basic knowledge that it’s not the most save method to ship, so do you think the customers should also take part of the responsibility of their own choice?
Wen Ting Lu says
This is a good question. I think what company such as Amazon should do is enhance their distribution process. They should have a contract with the shipping carrier to make sure the delivery person don’t leave the package unattended. In addition, they should make sure the customer signed when they received the package. In Ming Hu’s case, I think the shipping carrier should take the responsibility of losing the package because they should not leave the package unattended. I think it’s ridiculous that the delivery person put the package in the garbage can, what he/she should have done is at least add a delivery note saying where he/she left the package at.
Fangzhou Hou says
Exactly, you mentioned the contract between the outsourcer and contractor. Signing a contract to identify and clarify the responsibility is an appropriate way to solve this issue. In fact, I never choose “in front of the door” option to deliver the valuable packages, because I know that it may loss. However, if it’s a common package, then I may choose this option since it’s more convenient. Therefore, whether to choose delivery in front of the door is really depends on the specific situation.
Vu Do says
1. As customers we experience various company’s order to cash process (OTC) whenever we buy something. Which company do you believe has a ‘great’ OTC process? Why?
I believe Amazon has the best OTC process. I am a frequent user of Amazon and always trust their whole delivery process. First off, when looking for an item I need, I would just simply pick out the item I want and put it in my cart and click the save for later. I would then check it daily and wait for the price to drop and once it does, I would purchase it. The fact that they offer this is pretty great and they also offer the buy the product new or used, so you can buy or sell products through Amazon.
Now for the delivery process. I am a student so I sign up for Amazon prime and can get items that are eligible for 2 days delivery. With that items are expected to arrive to customers within 2days once they place their order. Also when placing an order, if you made a mistake or simply decide you do not want the order, you can go to your account settings and into orders and just simply cancel the order you had place by just going to one of the options listed for cancellation. It’s simple and easy for users. In that order settings also, you are able to view the status of your order and track it. That way you know where your items are at all times. If a problem should arise, then you would get an email notification with the details and how to proceed.
For the payment process, Amazon gives you the ability to add as many cards as possible, from Debits and credits. You can add it and Amazon will save the card information for future orders. It is safe and secure and if you see any orders that you did not place on your account. You are able to contact Amazon to let them know and they can nullified the order. With these easy convenience and user friendly navigation, I would say this is why I think Amazon has a great OTC process.
Vu Do says
2. Which portion of the Order to Cash (OTC) process do they see as the most vulnerable to theft, fraud or
failure of some kind? Explain.
I would say the payment process is the most vulnerable to theft, fraud or failure. Thieves can steal customer credit card information and place orders online through them. With that there are no measures in place to cancel the order unless the customer finds out before hand about it. If they don’t then the thief can just simply place the order, wait for it to get delivered to whatever address they put and then pick the item up and the victim would never know until they look at their credit card statement. Sites do ask for billing address now so that can help protect users but if the thief has that information along with the card info then that is an issue. Not being able to verify if it is the real customer/user making the order is the biggest issue. So with that I would say payment is the most vulnerable in my opinion.
Binu Anna Eapen says
I had an experience once when I was trying to pay online the website redirected me to another page. Thankfully I noticed it showed much higher price than what was the actual cost of the product and then realized that it was a hoax website. So I agree with you that payment process is very vulnerable to fraud. Also certain sites store the credit/debit card details. This also imposes a risk which cannot be neglected.
Tiesha Christian says
Vu Do – This is an issue that theives are perfecting everyday. What are some ways you think consumers can protect themselves, and retailers/vendors protect their customers? Many people are still oblivious to this growing issue in the consumer world.
Jianhui Chen says
I think Best buy has a great OTC process, according to my recent purchase of a laptop. When I chose the laptop model, I asked the sale representative whether the laptop is available today. And the sale checked their inventory system and told me there is no inventory in this location, so I order one and the laptop will ship to my address in two days. Two days later, I received the laptop, and it was charged as the list price. The process is smooth.
Jianhui Chen says
Which portion of the Order to Cash (OTC) process do they see as the most vulnerable to theft, fraud or failure of some kind? Explain.
I think delivery process is the most vulnerable. I think there is so many threats exploiting the vulnerability of delivery process. For example, if you live in a house, there is no one to receive the package when you and your family go out for work, sometimes the UPS staff will just drop the package in front of your door. There is some many intentional or intentionally threats to cause the loss of your package, like the wind blow away the package, or the theft intentionally take the package away.
Wen Ting Lu says
I agree with you that delivery process is vulnerable. I think a company with good OTC process should enhance their distribution process. Perhaps, when delivery to the customers make sure the package is delivered in person. The company should note the shipping carriers do not leave the package unattended, also the company should make sure that the customers signed when they received the package. I have seen people call the customer services to request another order to be send because they” claimed” they didn’t receive the order. Once the company has the delivery signature on hand, they can use that as an evidence that the order was successfully delivered.
Tiesha Christian says
Jianhui Chen – You make a very good point. I would of probably though of miskeyed information of the order. I guess because that is very common. In all reality theft is actually just as common when it comes to the OTC process. The examples you made are very valid, and I am sure each of our very own class mates have experienced one them. I know, I have had a package taken off my porch before. Amazon, was really good about it and asked if I wanted a refund or another product.
Wen Ting Lu says
2. What portion of the Order to Cash (OTC) process do they see as the most vulnerable to theft, fraud or failure of some kind? Explain.
a. As in a typical business model, every single part of the Order of Cash chain could be mistaken by human errors because the process is linked together. However, the fulfillment and distribution processes look extremely vulnerable to failure. The reason is that the order entry is usually secured because customers tend to double check their orders even after the purchase of products. However, at the point of fulfillment, it is extremely easy for workers to mess up since they are constantly under high pressure at long hours of work. Some failure might occur in configuring the order, perhaps there is more than one item in the order. In addition, if a employee fail to update the inventory there might be an issue as well. From my personally experience, last week I was purchasing clothes online from one of the retailer store. After I purchased the order, the website still showing the item was in stock. However, two days later, I received an email saying that the item I purchased was out of stock. From a customer’s perspective, I was dissatisfied because I spend time to order the item and I was not able to receive it. Similarly, distribution seems equally vulnerable because of the possibilities of creating human errors such as shipping to the wrong address, made wrong determination of which carrier to use for shipment might delaying the time of customer receiving the order. Furthermore, theft also occurred in fulfillment distribution process. There is possibility that employees take the item and “pretend” it was packaged into the order.
Tiesha Christian says
What key (1-2) competencies does the person responsible in a company for the Order to Cash (OTC) need to have? Why?
The persom responsible for th Order to Cash (OTC) process in a company needs to posses two major skills:
– Order entry (creation of order/booking of order)
– Order fullfillment ( physically & digital fullfillment)
All while making sure orders are created and booked accurately. There are valubale skills that are key when it comes to the OTC process.
Paul M. Dooley says
My personal favorite O2C process is used by Wawa when ordering a sandwich. It is very convenient and eliminates the potential of error when entering the initial order since the customer is responsible for inputting the ingredients for the sandwich they are ordering. It also helps streamline the process by giving the order fulfillment employees (the sandwich makers) start the process of completing the order while you continue to shop for additional items you may want with your sandwich like a drink or bag of chips. Also, the system allows for real-time inventory so if they run out of a specific ingredient for your sandwich they just remove it form the ordering application. Once the order is paid for you have to take the slip that is printed out once your sandwich request is entered which is then stamped as paid with a custom stamp which must be collected by the employees making the sandwich before giving it to the consumer. Overall I think it is a very efficient process and gives the consumer a great deal of control while not sacrificing but rather enhancing the order fulfillment process. This is one of the primary reasons that Wawa has such a strong and loyal customer base.
Wen Ting Lu says
4. What key (1-2) competencies does the person responsible in a company for the Order to Cash need to have? Why?
1. Technical skill is a must for the person who is responsible in a company for the OTC process. This person needs to have an understanding of how the OTC operates including what occurs in each parts of the process. Without having the knowledge of how OTC process operates, it is difficult for this responsible person to make determination of possible vulnerable part of the OTC chain. In addition, he or she is not able to take actions in resolving the potential threats.
2. The ability to lead and communicate effectively is another important competency. A Successful leaders need more than technical prowess, soft skills such as conflict resolution, change management and strategic thinking are very important for sustaining organizational and personal growth.
Wen Ting Lu says
3. Who in a company should be responsible for the controls of that company’s order to cash process? Why?
I believe that the Chief Executive Officer should be responsible in terms of establishing a well-organized Order of Cash process chain that is properly staffed. The Chief Executive Officer has knowledge of entire company’s operational strategy as well as financial stability. He should be knowledgeable to create proper opportunities to improve OTC process of the company, such as to digitize order entry, fulfillment, and monitor OTC performances.
Jaspreet K. Badesha says
1. As customers we experience various company’s order to cash process (OTC) whenever we buy something. Which company do you believe has a ‘great’ OTC process? Why? Amazon. You are required to login, find your product, place your order, pick a payment process, a shipping address and billing address and the delivery date. The order is in process with amazon and them completed once payment is confirmed, they also track your order status for you and ensure delivery on the actual date you picked. I am extremely pleased with amazon as I can research my products, find ratings and similar products. It is also a secure and easy transaction that occurs, also if you need to make modifications or return your order they make it that easy.
2. Which portion of the Order to Cash (OTC) process do they see as the most vulnerable to theft, fraud or failure of some kind? Explain. The most vulnerable to theft can be the credit card process. The credit card be miss-used as the shipping address not have to match the billing. Someone an amazon’s end can steal your information. Amazons system could get hacked and a thief can get a hold of your credit cards saved and used in transactions.
3. Who in a company should be responsible for the controls of that company’s Order to Cash (OTC) Process? Why? The CIO or equivalent should be responsible as polices are implemented from the top down. There can also be someone who directly manages the process and they would also be enforcing policies very strictly that are decided on.
4. What key (1-2) competencies does the person responsible in a company for the Order to Cash (OTC) need to have? Why?
The person should have previous CRM experience since they are managing customer orders along with other computer program knowledge.
The person should also have strong leadership, interpersonal and communication skills so they can enforce policies and connect with their employees and customers at an efficient and professional level. This will also help the person when dealing in high pressure environments for example in a call with an angry customer whose order was incorrect.
Wen Ting Lu says
1. As customers, we experience various company’s order to cash process (OTC) whenever we buy something. Which company do you believe has a ‘great’ OTC process? Why?
a. I believe a company with great OTC process should be properly staffed at every single department including order entry, fulfillment, distribution, even customer services. I agree with many of you that Amazon has a great OTC process. I have been using Amazon for purchasing in many years, I have so many positive experiences with Amazon whether in ordering, shipping, making returns, or even customer services. Everytime I ordered from Amazon, I am able to receive my order in two days because I am an prime member. Amazon is very convenient to use because you are able to track you order status online. In term of payments, you have so many options to choose from Visa, Master card, discover, etc. It is pretty secure because every time I use a different device to purchase item it will ask me to verify the credit card information. In addition, amazon has a very simple return process. You are able to log in your account choose the options either UPS pick up from your location or you drop off. Moreover, Amazon has a very good customer service, you are able to get problem resolved very quickly.