- 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?
Rouying Tang 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?
Online B to C company like does amazon Alibaba do a great job on OTC and surprisingly some restaurants provide same level of service. They provide choices in each pages and pictures or text explanations for customers to choose. The limitation of input decrease the possibilities of error or attacks and simplified the processes. After choice and the payment made, an invoice is created automatically. None human involved also reduces the errors.
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 process of payment. By entering the credit card information to finish the payment, a lot of risks are involved. Some customers may want to save credit card information for next time shopping. The storage of information may face the risk of theft. And to vilify the credit card information, the authorization of payment are required. A fraud may happen, because the valid information may be achieve from others.
3. Who in a company should be responsible for the controls of that company’s Order to Cash (OTC) Process? Why?
The controls of a company’s order to cash process should be in the charge of multiple departments. The sales /accounting & finance/ IS department should work together to set up the controls of that company’s OTC. Because this process contents multiple business functions. Sole department or individual is hard to handle.
4. What key (1-2) competencies does the person responsible in a company for the Order to Cash (OTC) need to have? Why?
They need to be clear about the main business process procedures. At the same time, they should fulfill the requirement of segregation of duties. They must have a comprehensive view as well as a mind focusing on specific part in details. Because any small mistake from any small criteria can cause the failure of the whole transactions.
Deepa Kuppuswamy says
Hi Rouying, nice answer. I would like to add on a point to your first answer. Though most of the modules are automated by using ERP systems like SAP, Oracle, JD-Edwards.. but still there is human intervention. For example in O2C process, Shipment process is partially dependent on people for product delivery which may sometime involve fraud and shipment scams.
Imran Jordan Kharabsheh says
1. Among the most prominent examples of companies with well-known order to cash processes, some notable names include the likes of Amazon, GrubHub and, most recently, McDonald’s UberEats partnership. Some of the most notable and admirable traits of these companies’ order to cash processes are their quick delivery speeds, abundance of convenient delivery options, and delivery process transparency. These features have made Amazon, GrubHub and UberEats extremely successful and created the perception of them being customer-friendly.
2. The phase that is most threatened in Amazon, GrubHub and UberEats’s order to cash process is the payment processing phase, as this phase deals with sensitive information and is executed customer-side. The sensitive information that can be included in transactions include customer names, dates of birth, credit card numbers and addresses. Should this sensitive information be stolen, the customer and organization could face serious damages. This theft of information can be accomplished through various dubious means such as phishing scams or an already bugged device being used to make the purchase.
3. When deciding who should be in charge of a company’s order to cash process, it should be considered that the process itself is incredibly complex and diverse. The order to cash process for even small companies includes work across at least four different departments which include Sales, Supply Chain, Procurement, and Finance. This would mean that the leaders of all these divisions will need to communicate and check each others work thoroughly, and maybe have audit also make sure the process is running without any hiccups.
4. The people who are to be responsible for a company’s order to cash process must be familiarized with when their own work starts and ends so as to make sure not to impose on other people in the order to cash process. The people responsible should also make an effort to be familiarized with the work processes of the other collaborators in the order to cash process, so as to ensure that there are minimal mistakes when handing off data from one department to another. These key competencies help mitigate the risks of overreaching departments and human errors when handling valuable information.
Penghui Ai says
Hi Jordan, I think you are correct about these questions. One interesting topic I wanna talk about is about Question 3. When I saw this question, my first answer was the payment process because this process contains so many valuable information. After thinking for a while, I changed my answer to shipment section because I cannot find a reason to connect high-value information to be a vulnerability.
Deepa Kuppuswamy says
Hi Pengui,
In a nutshell, i would say that all the steps in O2C process is a moderate to high vulnerable areas. So along with Shipment an Payment process following modules like Customer Invoicing, Credit Management, Accounts Receivables are also equally important during our risk assessment and evaluation of Segregation of Duties process. Heads/Manager’s of each of these departments should be held responsible and accountable.
@Imran: I perfectly agree with your answer. You have put together really well! great job..
Haitao Huang says
1. Order to cash process is a set of business processes that a company receiving, fulfilling, and completing a customer’s request for goods or services.
I believe Amazon has a great OTC process because Amazon’s OTC process is very transparent, precise and efficient. Customers are able to check their order status once they placed orders on Amazon. Amazon will inform its customers of all changes in their order status. Most important, Amazon’s OTC process is extremely effective. Amazon offers same-day delivery in many metro areas across the U.S. If Amazon’s prime member place orders by noon and choose same day delivery option, they will receive their items by 9 p.m.
2. The sale and distribution process is considered as the most vulnerable portion that subjects to theft, fraud, or failure. In the sales area, sales personnel have incentives or pressure to commit fraud, for example, sales personnel might be required to achieve a sales target, or they want to inflate sales target and earn more commission. In the distribution area, personnel has opportunities to commit fraud (for example, steal customer’s items) if the company lack of appropriate controls in place.
3. It takes a company-wide effort to implement the controls for the order to cash process because the order to cash process involves many departments in a company such as sales, accounting, or production departments. Each department bears different responsibilities to ensure the effectiveness of controls in the order to cash process, for example, the management should design security policy to set the tone for the controls, IT department should implement access controls to allow only authorized personnel to use systems in OTC process, and audit team should conduct regular review of the sales record to detect frauds.
4. The person should have sufficient accounting knowledge to detect fraudulent activities in the Order to Cash process. The OTC process involves our major steps: quotation/order entry, provision of goods and services, billing, and incoming payment. All these activities should be recorded in the financial accounting systems. The person should have sufficient accounting background in order to review billing, payment, and inventory records to ensure all the records are correct and legitimate.
Deepa Kuppuswamy says
1. All the retail/wholesale/distribution business like Amazon, Jabong, Myntra, Lyft, Uber services etc… are the best examples to demonstrate the Order to Cash process. O2C process is all about cash inflow which defines part of companies business. In order to achieve this goal in terms of cash flow, the company should have an effective Accounts Receivables (AR) process. Let us take the example of Amazon’s O2C which always strives for global retail domination in the industry, it has well designed AR module and I believe following are the key areas for its success factor:
– It has standardized processes across all channels
– Centralized and digitized order fulfillment
– Best customer service
– Credit decision tools with continuous monitoring
2. Any company that works on O2C process is highly vulnerable to fraud and theft as it involves cash flow and customer’s PII. Company should excel at every function of business, including sales, manufacturing, technology management, fulfillment, shipping, and accounting. Though each of these stages are important, additional attention should be paid to the following modules:
– Order Fulfillment
– Invoicing and Accounts receivables function
Order Fulfillment: Employee collusion is a major threat in O2C. In most of the companies this is the area with high potential to fraud.
For example: An employee from order fulfillment department has close friendship with customer then they collude to over ship some of the orders without changing the invoice for the original order quantity, leading to profits for the two but a loss for your company.
Invoicing and Accounts receivables function: Delays in collection can complicate accounts payable, payroll, potential acquisitions, and other issues related to liquidity.
Deepa Kuppuswamy says
3. As the Revenue recognition of the company depends directly on O2C process, every individuals and department heads of each of the following departments are equally held responsible for their duties – master data management, order management and fulfillment, invoicing, collections, accounts receivable, cash applications, deductions, and dispute management. Order-to-cash cycle will have a direct impact on workloads in the finance and accounting department as well as on external audit costs so it very important to have segregation of duties in order to reduce risk and prevent fraud.
4. Important key competencies that are important in Order to Cash process is customer service, demand forecasting, planning functions, dedicated policies and IT infrastructure, network distribution choices, Customer segmentation in centralized and regional approach because these are some of the prerequisite competencies that are essential for the company to stay profitable and for customer retention. Inefficient O2C cycle, will put the company to the potential of higher financial loses.
Penghui Ai says
1. I think Amazon has a great OTC process because its OTC process is efficient and convenient. First, we are able to find almost everything we want on Amazon whenever we want. In addition, the system is designed reasonably by checking products, address, and payment method during the order section, which reduced the possibility that customers make mistakes. Amazon also has its prime service with free 2-days shipping on its shipment section, so customers always can finish an order and receive within 3 days. The most amazing function within Amazon’s order section is that they have recommended things by reviewing things you have viewed and ordered.
2. I think the shipment portion is the most vulnerable to theft, fraud, or failure. It is hard to make sure no package lost or stolen in the shipment portion. The package might be stolen by people pick it up in the front of your door, or the package might be lost by the careless management of your apartment’s officer. The worst vulnerabilities in shipment portion are the customer, who receive the package, reports a missing package to Amazon.
3. The OTC process involves different departments in the company. For example, the accounting department is responsible for the payment portion, and they need check each account is correctly recorded. The warehouse should be responsible for the shipment section, and make sure no errors in the number of inventories. The auditing group should be responsible to check all the processes are efficient.
4. First, the person should know some basic IT knowledge. For example, the person responsible for OTC should know how to use SAP correctly if the company use SAP as a tool to assist their OTC process. In addition, the person needs to understand the OTC’s portion they responsible for because the more familiar with the portion, the more effective the process is, and the fewer mistakes they made.
Imran Jordan Kharabsheh says
Hello,
Using Amazon as an example of a company with an outstanding Order to Cash Process is an excellent choice, since they represent the world’s largest and most diverse business to consumer supply chain. I also thoroughly enjoyed your response to the most vulnerable part of the order to cash process, as it introduced me to a new perspective on how the shipment part of the process could represent a large vulnerability. I also agreed with your point on how the Order to Cash Process spans multiple departments,
Peiran Liu says
1. I have many OTC experiences back in China. In my opinion, Taobao, which is a subsidiary company of Alibaba Group has the best OTC experience for me. The main payment method Taobao use is Alipay, which is also a subsidiary company of Alibaba Group, so that the order and the payment can be combined both seamless and secure.
2. As my experience for Taobao, the most vulnerable portion of the OTC is the order part. There are many cases on these. As the payment is very secure, the one who tried to theft or fraud turned their sight to somewhere else, which is the order part. The way they perform the theft or fraud is giving you a different link or tell you that if you use my way to order it, there will be a discount, Some people might step into their traps and get theft or fraud.
3. OTC process combines order, cash and. Order needs technical support, merchandise management and some security support. Cash need accounting and some security support.
4. The key competencies is that the person should be very familiar with the work and have certification on specialities like accounting, so that the company can safely give the work to the person and also the person won’t feel overwhelmed.
Rouying Tang says
Hello Peiran,
Thank you for your sharing. I saw your point that the vulnerabilities of order part from Taobao’s purchasing experience. But I also recognized some amiss from the payment process such as no authorizing process needed for small amount orders and the process for resetting the passwords.
Yuan Liu says
1. I think GOAT is the greatest O2C company in my opinion. Goat is an online sneaker trade market, which provide a completed and reliable platform for sneakers to trade their shoes. As a customer, I can search preferred shoes and see the market value is. Then I make a offer on the web based on the recommendation price or higher price for quick acceptation from seller. My payment will be in the GOAT account as guarantee. Once seller accept the deal, he need to ship shoes immediately to the GOAT for the quality check. If he ships shoes later than the deadline, he will receive a warning and the deal will be canceled. At the meantime, the payment will come back to my account. Because there are lots of fake shoes in the market, GOAT can help sneaker to find real pair and be responsible for shoes checked. After quality check, GOAT will send to customers immediately. When we get the shoes with GOAT Checking Tag on it, all the transaction is finished. During the whole process, we can track our shipping no matter seller ships to GOAT or GOAT ships to us. Also,we can know the reason why our offer has been canceled. In my opinion, all the transaction we can track and is security.How the GOAT make profit is that they make a quality check service and guarantee for that, which mean there is a third part to connect seller and buyer with trust.
2. I think the part seller ships shoes to GOAT looks like the most vulnerable to fraud and failure, because seller could get a better offer than GOAT. Once the seller get a better price, he could sell the shoes to another person for a higher price. If it happens, the buyer from GOAT would waste time to find another deal. Good news is that seller will get a warning if he accept offer, but ship it late or cancel it. The accumulation of warning is enough, he cannot use GOAT anymore. GOAT is one of the biggest sneaker trade platform. If a sneaker seller lost chance to sell his shoes on GOAT, which means he would lost chance to make money.
3. There are many different department working together for process order to cash, such as shipping, accounting, online system. I think each apartment management should be responsible for that, because they only responsible for their part. The company cannot let one person response for all the process. Individual person should be responsible for their own part.
4. In my opinion, sponsor should have leadership, accuracy and coordination. Order to cash process include customer order, create delivery, create shipment, picking, packing, shipping documentation, invoice and payment. There are different managers for each part, so sponsor should lead and coordinate them to finish the job. At the meanwhile, sponsor need to be accuracy in every step, Accuracy can be shown in the number of detail. More detailed can be considered means better customer experience.