You just closed the biggest deal in the history of your company, one that crushed the competition and enables you to exceed your revenue goals. So, the hard work is done, right? Not quite yet. Closing the deal is just one step on your journey to receiving and recognizing revenue. The quote-to-cash process touches nearly every function within your enterprise – sales, legal, order fulfillment, finance, etc., which in many organizations remain siloed entities.
At the center of the quote-to-cash process is the customer, who expects a seamless onboarding experience. As a customer-centric activity, the entire quote-to-cash process needs to be fast and flawless. However, manually handling the processes or using disparate systems leads to delays, errors, revenue leakage, and in some cases customer dissatisfaction. The answer to this dilemma lies in automating and streamlining the entire quote-to-cash process.
But first, what is quote-to-cash (QTC)?
What is Quote-to-Cash?
Encompassing the sales and payment processes, QTC covers end-to-end functions beginning with offer configuration and concluding with revenue recognition. While a critical process for your enterprise’s ongoing profitability, QTC often remains status quo, and for many businesses this means unresolved weaknesses within one or more of the processes.
Depending on your industry, business size, and other elements, QTC steps and processes may vary. Let’s look at each of the foundational steps, what they entail, and common weaknesses.
8 Steps from Quote-to-Cash
1) Offer Configuration
The QTC process starts with the configuration step. This first action consists of the sales rep using available information to determine the configuration of the product(s) the customer wants to purchase. It’s essential that this step is accomplished as quickly and accurately as possible. If sales reps are using spreadsheets or other manual tools, the risk of configuration delays and/or errors is high, which will impact downstream quote-to-cash process.
2) Pricing
A critical step in the quote-to-cash process, the pricing model – whether for products, services, or a combination – is often complex. Even if you have a relatively simple pricing structure, there is always the chance of a sales rep misquoting the price, which again will have ramifications down the road. When promotions, discounts, bundles, or add-ons come into play, pricing becomes even more complex.
3) Quote
As one of the first customer impressions you’ll make, the quote needs to be error-free and promptly delivered. Unfortunately, this step is where many companies encounter a breakdown in the flow. Generating the quote requires information from numerous internal stakeholders and is often prone to delays.
Quotes that aren’t delivered promptly or contain errors often result in the prospect going to the competition. This not only can result in you losing the deal, but your credibility too.
4) Negotiation/Contracting
Once the prospect agrees to the quote, a contract is created. This step can be as simple as the customer immediately accepting the contract or it may take numerous iterations with negotiations. While you can’t completely eliminate negotiating, you can reduce the number as well as the duration by ensuring that the contract is error-free.
5) Order Management and Fulfillment
Once the contract is signed, the order is placed and various departments are notified, kicking off the fulfillment process. This step consists of processes that range from order approval to disseminating the order for processing, fulfillment, and notifying the shipping department. If you run a SaaS organization you won’t ship products, but access to the purchased software must be provided.
This step then triggers a notification to finance, informing them that an invoice can be generated. With numerous notifications between departments taking place, automation is a must to ensure notifications happen quickly and accurately. This way the next activity can commence without delay.
6) Invoicing
The process is now in the hands of your accounts receivables team who calculate final charges and produce an invoice. To avoid payment delays, the invoice needs to be error-free and sent quickly while containing all necessary information. This includes purchase order number, breakdown of purchased products and services, fees, taxes, payment terms, discounts, promotions, etc.
7) Payment
In an ideal world, payment would be received on or before the due date. What happens when payments are delayed or there’s a need to issue a credit or a refund? In the case of late payments, you need to reach the customer quickly to come to a resolution. Credits or refunds constitute one of the most labor-intensive activities of the billing cycle and needs to be handled quickly and efficiently.
To simplify the payment process and reduce days sales outstanding (DSO), be sure to offer customers a variety of payment options such as debit/credit card, checks, PayPal, direct debit, lockbox, and hosted payment pages to support any payment needed.
When payments remain in arrears, you need to quickly manage outstanding debt by scheduling and tailoring messages to keep customers informed of past due balances. This is best accomplished by creating dunning actions that can automatically be triggered at different times (based on predefined thresholds).
8) Revenue Recognition
The final step of the quote-to-cash process, accurate revenue recognition is essential for reporting integrity. However, recognizing and reporting revenue isn’t as simple as it sounds. To stay compliant with ASC 606 and other regulations, you need to ensure that the revenue you receive is recognized only when realized and earned. The accuracy of this step is also important to ensure precise financial forecasting and revenue projections.
With so many touchpoints (the prospect, internal resources, and disparate systems), this cross-functional, multi-layered process is prone to delays, errors, miscommunication, and unfulfilled customer expectations.
Quote-to-Cash vs. Configure, Price, Quote vs. Order-to-Cash: What’s the Difference?
Quote-to-cash includes the entire spectrum of steps, from offer configuration through to revenue recognition. The start of the process begins with configure, price, quote (QPC), which encompasses the first three steps within the Q2C processes. Order-to-cash (OTC) picks up the process once an order has been placed and concludes at the revenue recognition stage. However, the contract management step is typically not included. Dig a bit deeper to learn more about process disconnects, QTC, CPQ, and OTC differences, and why a solution that automates the entire quote-to-cash process is needed to streamline operations and drive profitability.
Drive Profitability with Seamless and Automating the Quote-to-Cash Process
Quote-to-cash is a complex, multi-step process that encompasses numerous organizational functions, as well as disparate systems. Unfortunately, for many enterprises the journey is riddled with inefficiencies and manual efforts. QTC is the connection between your gross revenue, net income, and customer satisfaction. A misstep on the journey can result in missed opportunities, monetary loss, and customer churn. The key to streamlining the quote-to-cash process lies in automation.
BillingPlatform delivers the core capabilities to support enterprises, in all industries, with their QTC initiatives. Our industry-leading, cloud-based solution enables organizations like yours end-to-end automation of the quote-to-cash process for increased profitability and enhanced customer satisfaction. Reach out to our team to learn how we can simplify automating your quote-to-cash process.
