Running a business means handling many processes, some of which may seem confusing. For example, procure-to-cash and order-to-cash. They sound alike but are very different. Not knowing how they differ can cause big problems, like payment delays or missed orders.
If you don’t understand how Procure-to-Cash and Order-to-Cash work, your business can face a lot of problems. For example, delayed payments to vendors can cause supply shortages, which means you can’t get the products you need. On the other hand, mixing up customer orders can lead to missed sales and unhappy customers. These issues can also hurt your cash flow and slow down your business. If the processes aren’t clear, you could end up wasting time, losing money, or damaging important business relationships.
In this guide, we’ll explain the key differences in simple terms. You’ll learn why both processes are important and how they can work better for your business. By the end, you’ll see how understanding these workflows can save time, improve cash flow, and make daily operations smoother.
Understanding Procure-to-Cash and Order-to-Cash
Every business runs on two important workflows: procure-to-cash and order-to-cash. These processes are important to understand how you manage spending and earnings. While they focus on different parts of the business, both are necessary for keeping your finances in check.
Procure-to-Cash is about buying the goods or services you need and paying the vendor on time. Let’s say you run a cafe. To keep your business going, you regularly order coffee beans, milk, and packaging from a vendor. This process starts with placing an order and ends when you’ve received the goods and made the payment. Keeping it smooth ensures you never run out of the essentials your customers love.
Order-to-cash, on the other hand, involves serving customers and getting paid for it. In a cafe, for example, this process begins when a customer orders their favorite latte or sandwich. You prepare their order, serve it, and collect the payment. Whether it’s through cash, a card, or an app, this process wraps up once the payment is in your account.
Why These Processes Are Important
When these workflows run smoothly, your business stays financially healthy. If procure-to-cash is slow, you might miss out on important supplies or upset vendors. On the flip side, issues with order-to-cash could mean delayed payments or unhappy customers. Both problems hit your cash flow directly, and that can quickly snowball into bigger issues.
Why Efficiency Matters
The smoother these processes are, the better your business performs. Think about the cafe again. If your supply orders are on time and customers pay without delays, you can focus on growing the business rather than juggling payments or tracking orders. Efficient workflows save time, reduce stress, and keep everything running like clockwork.
Now that we have a clearer picture of these processes, let’s focus on procure-to-cash and the steps involved in it.
What is Procure-to-Cash?
Procure-to-cash starts with figuring out what you need, continues through placing the order and receiving the goods, and ends when the payment is made. This system ensures your business stays organized and avoids unnecessary delays.
Example: A construction company needs materials like cement, steel, and tools to keep its projects moving. Procure-to-cash helps request these items, place orders with vendors, confirm deliveries, and pay invoices. This process ensures the worksite has the supplies it needs without interruptions.
Steps Involved in Procure-to-Cash Process
The procure-to-cash process is built on four key steps, ensuring every purchase is tracked and paid for properly:
1. Requisitioning
This is when your team identifies what’s needed and submits a request. For example, a project manager might notice that the cement stock is running low and request an order.
2. Purchasing
Next, you select a vendor and place the order. Before deciding, you might compare vendors based on pricing, delivery speed, or material quality.
3. Invoicing
After the materials arrive, the vendor sends an invoice. This step ensures that you only pay for what was delivered and that the invoice matches the order.
4. Payment
Finally, you settle the invoice within the agreed terms, keeping your vendor relationship strong and your supplies flowing.
Focus on Managing Procurement and Vendor Relations
Procure-to-cash is more than ordering materials. It’s about creating dependable vendor relationships. When vendors trust you, they’re more likely to offer priority service or better pricing.
For example, if the construction company consistently pays invoices on time, a steel supplier might offer a discount on bulk purchases or expedite delivery during an important project phase. This helps save time, cut costs, and keep operations running without delays.
Now that we’ve explored procure-to-cash let’s shift our focus to order-to-cash, the process that keeps your revenue coming in.
What is Order-to-Cash?
Order-to-cash starts when a customer places an order and ends when the payment is complete. This process is all about managing customer relationships and keeping your revenue on track.
Example: A customer orders a dining table from a furniture store online. The order-to-cash process ensures that the order is processed, the table is delivered, an invoice is sent, and payment is collected. When this process runs smoothly, both the customer and the business benefit.
Steps Involved in Order-to-Cash Process
The order-to-cash process has three key steps. Each one plays a role in making sure customers are satisfied and payments are handled properly:
1. Order Processing
When a customer places an order, it is confirmed and prepared for delivery. In the furniture store example, it is important to check the inventory to confirm that the dining table is available before scheduling the delivery.
2. Invoicing
Once the table is shipped, the store can generate and send an invoice to the customer. This step ensures that the customer knows the exact amount to pay and how to complete the payment.
3. Payment Collection
Finally, the payment is collected through the customer’s chosen method, like a credit card or bank transfer. Once this is done, the process is complete, and the store owner updates the records.
Focus on Customer Management and Revenue Generation
Order-to-cash isn’t just about processing payments. It’s about building trust and ensuring a seamless customer experience. This process directly impacts revenue and customer loyalty.
In the furniture store example, customers who receive their tables on time and have no issues with payments are more likely to shop with the store again. At the same time, efficient payment collection keeps the business’s cash flow steady, helping it grow.
Now that we’ve explored the basics of both processes let’s compare procure-to-cash and order-to-cash to understand their key differences.
Key Differences Between Procure-to-Cash and Order-to-Cash
Businesses need to know the difference between procure-to-cash and order-to-cash. While they both involve money, they handle completely different tasks. Procure-to-cash focuses on buying what your business needs and paying vendors, while order-to-cash involves handling customer orders and getting paid.
Here’s a table to help break it down step by step:
| Aspect | Procure-to-Cash | Order-to-Cash |
| Objective | Manages how your business buys goods or services and pays vendors. | Manages how customer orders are fulfilled and payments are collected. |
| Main Goal | Ensure smooth purchasing, maintain strong vendor relationships, and avoid delays. | Deliver orders quickly, keep customers happy, and ensure payments are received on time. |
| Stakeholders | Involves teams like procurement, accounts payable, and vendor management. | Includes teams like sales, customer service, logistics, and accounts receivable. |
| External Parties | Works with vendors or suppliers to meet business needs. | Deals with customers who buy your products or services. |
| Flow of Processes | Starts with identifying what to buy and ends with paying the vendor. | Begins when a customer places an order and ends when payment is received. |
| Example | A company orders office supplies from a vendor and pays after receiving them. | A customer buys a product, receives it, and makes a payment to the company. |
| Strategic Importance | Helps control spending and ensures your business always has what it needs to run. | Brings in revenue by managing orders and making sure customers pay on time. |
When you know how these processes differ, it’s easier to improve them. For example, making procure-to-cash more efficient could mean fewer delays in getting supplies, which keeps your business running smoothly. On the other hand, improving order-to-cash could help you collect payments faster, which strengthens your cash flow and helps you grow.
Now that we know how the processes work, let’s look at the challenges businesses face with procure-to-cash and order-to-cash workflows.
Challenges in Procure-to-Cash and Order-to-Cash
Both processes are important for a business, but they can be challenging to manage. Small mistakes or inefficiencies can lead to delays, errors, and financial losses. Let’s explore some common problems and how they affect businesses.
1. Manual Processing Can Be Slow and Error-Prone
Manual workflows are time-consuming and increase the risk of mistakes. Tasks like entering data or matching invoices take longer and often lead to errors.
Example: Imagine a company managing vendor invoices manually in its procure-to-cash process. A small typo in the payment amount or invoice ID can lead to double payments or payment delays.
For order-to-cash, tracking customer orders by hand can result in delays or missed updates. Customers may not receive their orders on time, causing frustration. Automating these tasks can help reduce errors and speed things up.
2. Poor Coordination Between Teams
Both workflows involve multiple steps and teams. Without proper communication, delays or confusion can occur, creating bottlenecks and slowing down the process.
Example: In procure-to-cash, if the procurement team doesn’t inform accounts payable about late vendor deliveries, payments might be processed incorrectly. This could lead to overpayments or strained vendor relationships.
In order-to-cash, if the sales team doesn’t update logistics about a customer order, deliveries might be delayed. This can frustrate customers and harm your business reputation. Proper tools and communication can prevent these issues.
3. Errors Can Impact Financial Health
Mistakes in these workflows can directly hurt your cash flow. Late payments to vendors can lead to penalties. Errors in customer invoices can cause payment delays.
Example: In procure-to-cash, missing invoice checks could lead to paying vendors too much or missing out on early payment discounts.
For order-to-cash, sending incorrect invoices to customers could result in payment disputes. Payments may be delayed, and your business might struggle with cash flow issues. Ensuring accuracy at every step is key to avoiding these problems.
Now that we’ve talked about the challenges, let’s look at how automation can make procure-to-cash and order-to-cash processes simpler and more effective.
Automation in Procure-to-Cash and Order-to-Cash
Imagine spending hours checking invoices, tracking payments, or following up on customer orders. Frustrating, right? That’s where automation steps in to save the day. By replacing manual tasks with smart systems, businesses can reduce mistakes, speed up workflows, and get a clearer picture of their operations. Let’s explore how automation helps, the tools that make it possible, and how others have used it to improve their processes.
1. Benefits of Automation
Automation takes over these repetitive tasks and does them faster and more accurately. It’s like having an extra set of hands that never gets tired or makes mistakes. It gives you a real-time view of what’s happening. This visibility helps you spot potential issues before they become big problems.
- Fewer Errors: Let’s face it—manual work is prone to errors. Automation catches those issues before they even happen.
- Better Visibility: Automation gives you real-time updates, so you always know where things stand.
- Time Savings: With the busy work taken care of, your team can focus on more important things, like improving customer and vendor relationships.
Example: Let’s say you run a business that supplies office furniture. Automation handles vendor invoices in your procure-to-cash process by matching them with purchase orders automatically. No more late payments or overpayments. For order-to-cash, automation tracks every order from the moment it’s placed until the payment is received. You get fewer delays, happier customers, and more time to grow your business.
2. Tools and Strategies for Better Processes
Automation works best when you’ve got the right tools in place. These tools simplify your workflows by connecting all the pieces, from procurement to payment or from order placement to collection. Instead of juggling spreadsheets or manually following up, everything runs like clockwork.
For example, ERP systems are great for managing procure-to-cash and order-to-cash in one place. They help with purchase orders and invoices, track payments, and even send alerts.
Example: A retail business can use an ERP system to manage its procure-to-cash process. The system can create purchase orders, track deliveries, and schedule vendor payments. For order-to-cash, it can track customer orders, generate invoices once products are shipped, and update payment records instantly. There are no missed steps and no headaches.
Why Automation Works?
Think of automation as a tool that helps you work smarter, not harder. For procure-to-cash, it ensures vendors are paid on time and without errors, which keeps your operations running smoothly. For order-to-cash guarantees that customers get their orders quickly and payments are collected without hassle.
By automating these processes, you can focus on growing your business while knowing your operations are running like a well-oiled machine.
How Peakflo Can Transform Your Procure-to-Cash and Order-to-Cash Processes
Managing procure-to-cash and order-to-cash workflows can feel overwhelming. There are too many steps, and mistakes can happen easily. That’s where Peakflo steps in. It simplifies the entire process, automates repetitive tasks, and helps your team save time and avoid errors. Let’s go through how Peakflo can make a real difference for your business.
1. Order-to-Cash Automation Solution
Peakflo automates the order-to-cash process to ensure smooth, fast, and efficient transactions. Some of the features are listed below:
- Make proforma invoice validation easy—let clients review, approve, and raise disputes with a single click while tracking everything in a timeline.
- Streamline invoicing—create GST tax invoices, set approval policies, and add e-signatures effortlessly.
- Boost collections efficiency with Finance CRM—enable teams to collaborate, automate tasks, and track KPIs without relying on spreadsheets.
- Automate payment reminders—set up workflows, categorize customers, and keep all communications in one place.
- Simplify payments—provide a Customer Portal to your customers for easy invoice access, dispute management, and self-service options.
- Get real-time AI-powered insights—track receivables, monitor payments, and generate reports instantly.
- Automate cash application—match payments to invoices, identify payers easily, and simplify reconciliation.
2. Procure-to-Pay Automation Solution
Peakflo simplifies the procure-to-pay process, helping businesses manage their procurement and payments more effectively. Key features include:
- Make procurement faster and smarter by automating approvals, supplier management, purchase orders, and invoice matching in one place.
- Eliminate invoice processing hassles with AI-powered OCR that captures every invoice detail and organizes documents seamlessly.
- Improve financial accuracy with automated PO matching to detect overpayments, duplicates, and unauthorized transactions.
- Simplify complex approvals with automated workflows that adapt to any business requirement.
- Streamline finance operations by automating payments and reconciliations, reducing manual work.
- Manage budgets efficiently by automating tracking and defining budgets based on your organization’s needs.
- Easily onboard and manage vendors with a secure, self-serve vendor onboarding solution.
- Give vendors a seamless portal to check POs, issue invoices, track payments, and communicate effortlessly.
- Speed up vendor statement reconciliations by 20x with AI-powered automation, saving your AP team hours of manual work.
By automating both order-to-cash and procure-to-pay processes, Peakflo helps organize operations, reduce errors, and save time, giving you better control over your financial workflows.
Conclusion
Managing procure-to-cash and order-to-cash workflows can feel overwhelming, but it doesn’t have to be. By simplifying these processes and reducing errors, your business can save time and improve its cash flow. With the right tools, you can shift your focus from chasing payments and fixing mistakes to growing your business. That’s where Peakflo comes in.
Peakflo is designed to make your life easier. It helps you automate payment reminders, streamline vendor payouts, and manage budgets all in one place. You don’t have to juggle multiple tools or worry about things slipping through the cracks. With Peakflo, you can build stronger relationships and a more reliable financial workflow.
Request a Demo to learn how Peakflo can automate your business’s procure-to-cash and order-to-cash process!
