March 27, 2019



Today, almost all companies and businesses use information system for their day to day operations, management and decision making.


If you have a chance to visit any company any day, especially large and medium sized companies, you will see huge number of employees, many a number of departments and processes not only spread across different floors of the same building, but also across different buildings and different locations, including international locations. They carry out their business on a large scale driving huge sales and earning profits. They all strive for one goal, maximizing their profits.


With huge number of transactions beginning from purchase of raw materials, transportation of raw materials, production of products, marketing and sale of products, many interactions happen between these departments on day to day basis. Apart from the operational transactions listed above, other processes will take place in support functions and in the management and there will be interactions among them too. The interactions can seamlessly happen, only if the communication between these departments are prompt and error free. With huge volumes of transactions happening in each of these departments every single day, automation of all these processes is the only way to make the process seamless in order to achieve the goal because this cannot be done manually, given the number of transactions and complexity of each transaction in today's business world.


For example, if a customer orders 200 units of furnitures from a furniture manufacturing company, the process, starting from receiving the order to dispatching the goods, to collecting money and properly accounting it, requires seamless integration. If this is for one customer, imagine the amount of co-ordination required for thousands of customers, placing thousands of orders at different points of time, where the delivery of goods, collections and accounting also happens at different point of time.


To make the company moving forward towards its business objectives, information systems are implemented and these systems help the company in carrying out the processes easily. To achieve this, companies, usually make a standardized process or steps to carry out each of its activity. The management and employees stick to these steps in carrying out a process successfully. 


Taking the same example, if a customer orders 200 units of furniture from a furniture manufacturing company, the company drafts out a process or steps to be carried out by all the employees in the sales department so that finally, the product ordered by the customer, reaches him on time in good condition. Not only that, these procedure or steps are also to ensure that the company receives the payment from the customer on time and also it is properly accounted in its books.


Companies using ERP (Enterprise Resource Planning) systems like Tally, SAP, Oracle to manage its business follow more or less the same procedure or processes to carry out all transactions seamlessly.


The entire business process is divided into three categories





Without much ado, let us look at an example of how a sale process is automated using these information systems. The sale process comes under the category "Operational Processes".


The sale process in the business parlance is called Order to Cash Cycle. This typically means, the entire process from receiving the customer's order to dispatching the goods on time to collecting cash will be plotted and frozen for companies to follow. The information system which the company uses will also be designed or programmed according to these standardized processes.


Steps in Order to Cash Cycle


An Order to Cash is a complete process in itself which has many sub-processes as listed below




Order to Cash Cycle Explained


Step 1  Receipt of Customer Order - Receiving customer's order mentioning the type of product, date of expected delivery, quantity, quality etc.


Step 2 Order fulfillment: In this step, the company ensures the customers requirement on the type of product, quantity, quality and expected date of delivery are fulfilled without any hassle


Step 3 Delivery Note: This is an important step, as this step is the proof of delivery made to customer according to his specifications. The delivery note is usually signed by the customer and returned to the seller


Step 4 Invoicing: After delivering the goods and getting the delivery note signed by customer, the company generates the invoice/ bill as proof of sale made.


Step 5 Collections: The next step is to collection of money from the customer 


Step 6 Accounting: The next step is to account the amount collected from the customer in the books of the company. 


[ Note: The accounting mentioned above is the recording of cash collection only as the sale would have been recorded as per the revenue recognition]


For further clarifications and questions on the topic, drop us an email to therankholder@gmail.com. We are happy to help you.





































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