Order-to-cash and procure-to-pay: the key differences

order-to-cash vs procure-to-pay

Last modified on July 1st, 2024

A few years ago, a Lithuanian man defrauded Facebook and Google of $122M by impersonating one of their common suppliers. Procurement fraud is sadly very common, but fraud also targets the order-to-pay process. Both processes are different, but both need to be optimized. Keep reading to understand the differences between order-to-cash vs procure-to-pay and how to make them more effective.

Trustpair safeguards your procure-to-pay process by continuously auditing supplier data, meaning you know your funds will always go to their intended recipient — not a fraudster! Request a demo to learn more!

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What is order-to-cash?

The order to cash process is an essential part of business management. It describes the cycle through which an organization receives, fulfills, and gets paid for an order.

This process follows the work of the sales and marketing teams, whose roles are to foster the relationship until a customer places an order.

The order-to-cash cycle (or OTC cycle) is crucial for companies, as it is what delivers the value and gets compensated in return. Without order management, fulfillment, or payment collection, there is simply no business or organization.

The process encompasses various activities like:

  • Receiving and accepting customers’ orders
  • Fulfilling the customer orders (delivering the goods or services).
  • Sending an invoice to the customer.
  • Collecting orders payments.
  • Recording the payments.

Ensuring your order-to-cash process is effective is key to your growth:
If there are delivery delays because of inefficiencies in your process, you risk customer dissatisfaction, which would impact your future sales and reputation.
If payments aren’t promptly collected, you face cash flow problems which would endanger your company’s well-being.

To sum up, the order-to-cash process has to do with your customers getting what they purchased as fast as possible, so you can collect your payment quickly — it’s also called order cash cycle.

 

What is procure-to-pay?

The procure to pay process involves the other side of your business: your suppliers. It’s the workflow your organization follows to source, order, and pay for the goods and services needed.

Procurement is a synonym for it, although the procure-to-pay (or P2P) process targets specifically the activities from starting procurement to paying for purchases.

The P2P cycle usually follows these steps:

  1. Identifying your needs for a product or service internally.
  2. Sourcing suppliers that can meet your requirements.
  3. Negotiating quotes and terms with selected vendors and signing a contract.
  4. Creating purchase orders following the agreed-upon terms.
  5. Receiving the goods or services and their invoices.
  6. Matching the purchase order, delivery confirmation, and invoice.
  7. Sending payment to vendors and recording it.
  8. Evaluating your suppliers’ performance to foster long-term strategic partnerships.

That’s what every company goes through when they purchase from external vendors — with more or less formality and delay in the process depending on the company’s specificities.

For example, the sourcing stage can take 6 months for large companies, whereas it could only take a small amount of time (like a few hours) for smaller ones.

Order to cash vs procure to pay: both processes need to be effective to keep your company operating smoothly. A delay in this process leads to a delay in your production, which would in turn impact your O2C process and turnover.

Get all the latest procurement trends and actionable best practices in our latest Deloitte x Trustpair white paper!

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What are the main differences between the two?

Both the order-to-cash and procure-to-pay processes are essential business processes for running a successful organization. To improve order cash, you need reliable suppliers who can keep up with your procure pay order goals.

They impact each other and the inefficiencies in one echo to the other. They act as mirrors with the customers on one side and the suppliers on the other.

While they work together, they have some key differences summarized below:

Order to cash vs procure to pay:  Order-to-Cash Procure-to-Pay
Focus Customer management Supplier management 
Stakeholders Clients Suppliers
Departments involved Sales, Operations for order fulfillment, Accounts Receivable (for credit), Accounting Procurement, Accounts Payable (for debt), Accounting, Finance.
Strategic goals Efficient order processing, delivery and invoicing, customer satisfaction, optimized cash cycle management Cost and quality control, streamlined procurement, good supplier relationships
Process starts with Customer places order A need for a purchase of  goods and services

identified internally

Process ends with Payment received and recorded, client satisfaction evaluated Payment sent and recorded, supplier performance evaluated

Order to cash vs procure to pay: 

  • Optimizing order cash is important for your company.
  • This needs to be supported by your procure pay process.
  • It results in good cash flow management and financial health.

 

Best practices to improve order-to-cash and procure-to-pay processes

Streamline P2P and O2C with automation

Few companies nowadays rely only on manual labor to complete their order to cash vs procure to pay. Doing so is time-consuming and error-prone: we see delivery mistakes, increased delays, and added bottlenecks.

The one example that speaks volumes to illustrate this is invoice processing. Handling invoices manually is tiresome, and there are chances that they get lost between departments or under a drawer. The information isn’t centralized, so not everyone can consult it when they need it. In 2024, this is completely inefficient.

Thankfully with the rise of technology, those processes have become faster, more accurate, and more secure. Automation helps reduce the number of steps, creating a streamlined system for all businesses involved — customers and vendors.

Using software services to streamline your O2C and optimize your P2P processes offers many benefits:

  • Improved accuracy (less errors) with orders,
  • Centralized information for purchase and delivery,
  • Increased visibility on cash flow, quality, and other important KPIs,
  • Optimized cash flow management,
  • Added security against fraud.

This leads to an overall increase in efficiency, so your company can keep on thriving securely. Your procurement and accounts payable teams’ time is freed up for higher-value tasks that require more strategic thinking.

But while procure-to-pay software and order management solutions are necessary, they aren’t enough to adequately protect you against the risk of third-party fraud.

Protect Your Organization with Anti-Fraud Software

In 2023, 96% of US companies were targeted by at least one fraud attempt. While wire transfer fraud ranked at the top, vendor fraud (like in our intro) came a close second.

As it turns out, the development of automation and AI also helps scammers.

The solution? Reducing the risks inherent to P2P so you don’t fall victim to fraud and avoid:

  • Direct financial losses that could heavily impact your cash flow.
  • Reputational and relationship damages with your customers and vendors.

Trustpair is an anti-fraud software that prevents third-party fraud. We secure your P2P process by intervening at your most vulnerable step: right before authorizing payments to your suppliers.

As cyber fraud tends to go undetected until fraud is committed (and the money irretrievable), using anti-fraud software gives you peace of mind.

Our solution automatically and continuously audits your third-party credentials to ensure that you are sending funds to your intended recipient. If our algorithm detects any suspicious activity, we raise the alarm and block the transaction.

We have access to otherwise hard-to-reach data in the US and internationally to ensure no third-party fraudsters can divert your payments. We also integrate with the main procurement platforms to ensure a seamless and safe experience.

Thanks to automation and predictive modeling, Trustpair, best-in-class fraud prevention software, completely eradicates the risk of third-party fraud from your procure-to-pay process.

 

Key Takeaways:

  • Order to cash vs procure to pay: the former focuses on client delivery, while the latter is about supplier management. Both are essential and need to be optimized.
  • With fraud on the rise, it’s essential to secure your P2P process. Trustpair protects you against third-party fraud so you always know who you’re paying.

FAQ

Order to cash vs procure to pay are two different processes of an organization: order cash focuses on your clients, while procure to pay (P2P) is about managing your vendors. One influences the other, and both need to be optimized for optimal cash flow management.

Trustpair continuously and automatically audits your suppliers’ credentials before sending them any payments. Our solution blocks any transaction to impostors or fraudsters who managed to breach your security defenses or convince your employees to change credentials through a social engineering attack.

Services also include extensive customer support and automated account validation. Our software blocks vendor fraud by controlling supplier data and warning financial teams in case of risky situations. We increase efficiency for procurement and financial teams and protect the entire source-to-pay process. Our software will help your business reduce fraud risks and secure the entire payment cycle. Protect your company today!

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