The order-to-cash and procure-to-pay processes play essential roles in business operations. While each serves a different purpose, process inefficiencies like manual work or disjointed systems can lead to costly delays, lags in communication, and poor customer or supplier relationships.
Learn more about the differences between these two processes and how each can benefit from business process automation.
What is order-to-cash (O2C)?
Order to cash — also known as OTC or O2C — is a set of business processes that receive and fulfill customer requests for goods or services. O2C is a term used to describe the finance-related component of customer sales.
O2C begins the moment a customer places an order and is completed when an order is processed and payment is collected. Below is a breakdown of the steps associated with order-to-cash:
- Order intake and management
- Fulfillment
- Shipping
- Invoice generation and issuance
- Payment received
- Reporting
What is procure-to-pay (P2P)?
The procure-to-pay process — sometimes referred to as purchase-to-pay — is a structured workflow that involves receiving goods or services and issuing payments. Procure-to-pay is a part of the larger procurement process and is the bridge between purchasing and accounts payable.
P2P begins when a purchase request is submitted to procurement for review and approval and is completed when accounts payable reconciles invoices and issues payment. Below is a breakdown of the steps associated with procure-to-pay:
- Purchase request submitted for review
- Sourcing
- Request approval
- Purchase order issued
- Invoice reconciliation
- Payment issued
- Reporting
Differences between O2C and P2P
While both O2C and P2P deal with fulfilling purchase or service requests, the two serve different purposes. Whereas order-to-cash is focused on processing orders placed by a customer, procure-to-pay is focused on processing orders placed by the company.
The processes follow similar steps, like reviewing purchase orders, processing invoices, and collecting payment. The difference between the two lies in who the requester is and which financial process is needed to complete the transaction. For example, because P2P deals with purchases made on behalf of a company, the connected process is accounts payable because money is paid. Conversely, O2C deals with purchases made by customers, so the connected process is accounts receivable because money is received.
O2C vs. P2P: definition and key differences
| Order-to-cash (O2C) | Procure-to-pay (P2P) |
| Related to sales | Related to procurement |
| Processes orders placed by customers | Processes orders placed by the company |
| Connected to accounts receivable because money is collected | Connected to accounts payable because money is paid |
| Involves managing purchase requests and communication with customers | Involves managing purchase request and communication with suppliers or vendors |
How automation can improve O2C and P2P processes
Business process automation (BPA) refers to the use of software to minimize and enhance/minimize the human effort required to complete work within a specific business process. Since each process is composed of a series of tasks and workflows, the primary goal of BPA is the automation of as many elements of the process as possible. The result is greater efficiency and less time spent on tedious, repetitive, and time-consuming work like sharing status updates, requesting approvals, or handing off work between departments.
Benefits and drivers of process automation
A recent Pipefy survey of business leaders found that efficiency, productivity, and a reduction in errors were the leading drivers for adopting software.
Among the primary benefits of adopting automation technology, better use of data and improved decision making ranked number one for nearly 60% of all respondents.
Types of business process automation
BPA is one element of a process management strategy and is typically used to describe process automation as a whole. However, there are specific types of automation, including:
- Task automation: eliminates or minimizes manual tasks within a process like sending emails, generating documents, capturing signatures, or updating statuses.
- Workflow automation: applies automation to a defined series of tasks and activities.
- Process automation: examines an end-to-end process to identify as many automation opportunities as possible.
- Robotic process automation (RPA): automation using custom-coded software bots for structured, repetitive tasks that require no decision making and that occur the same way each time, without exceptions.
- Intelligent automation: a complex solution that incorporates task automation, process automation, and RPA,combining those with artificial intelligence, data analysis, and other advanced technologies in order to automate higher-level tasks such as decision making.
Order-to-cash and procure-to-pay automation opportunities
The O2C and P2P processes are excellent candidates for automation due to the many manual tasks associated with each, such as following up or generating/issuing documents.
Because each step of the order-to-cash and procure-to-pay cycle must be completed in a timely and accurate manner, implementing a process automation solution not only prevents delays but it can also help reduce poor customer or supplier experiences.
Let’s dive into a few order-to-cash and procure-to-pay automation opportunities.
Less process waste and better use of employee time
Automating your P2P and O2C processes and workflows will likely translate to gains in productivity across the board. The time spent manually issuing purchase orders or reconciling invoices can then be used for value-adding work.
Automation also results in less waste. Fewer errors and manual tasks means less rework and duplication.
Fewer errors
Avoid errors by reducing the repetitive auto-pilot work that can lead to them and by enforcing rules and conditionals that create more consistent and accurate data. Automation features such as forms can prevent missing or complete information, while the structured processes that result from automation reduce the variation that’s often the source of errors.
Cost savings
The potential cost savings automation provides are significant. When manual work is eliminated, teams expend fewer resources on repetitive tasks, meaning more time for improving supplier relationships or seeking additional ways to optimize procure-to-pay and order-to-cash processes.
Faster approvals and workflows
The approvals process can quickly become a tangled mess of communication mishaps, follow-ups, and a timeframe stretched over multiple weeks. With P2P and O2C automation, you can automate the approvals process and remove all manual communication, follow-ups, and time-consuming manual processing.
For P2P, immediately notify the appropriate individuals and give them a deadline to complete the required steps and automatically advance work without interruption or bottlenecks. For O2C, alert customers of their order status as their request moves along the process.
Better relationships
Whether it’s building a supplier portal with self-guided workflows, improving the onboarding process, or automating status notifications for invoices or payments, process automation can greatly improve supplier experiences, resulting in a more efficient and strategic P2P process.
Brand reputation is everything, so automating communication and creating self-guided service portals for customers can increase customer satisfaction and loyalty. Internally, automate process handoffs so that there’s never an interruption in service delivery and so that customers can receive what they want by the time they need it.
Enhance your O2C and P2P processes with Pipefy
By automating manual and repetitive tasks or workflows, O2C and P2P teams can archive results like:
- Faster processing and approvals
- Lower processing costs
- No more paper trails
- End-to-end process transparency and accountability
- Greater customer, requester, supplier, and employee satisfaction
- Efficient, timely, error-free service
- Improved cash flow and compliance
- More time for higher-value tasks
