The quote-to-cash process: A concise guide for founders

Closing a business deal after several negotiation rounds is an achievement. Every step you take to reach this stage is a part of the quote-to-cash process. From sharing a quote with the potential customer to finalizing the purchase and collecting payment, every step falls within the quote-to-cash procedure. 

To streamline your entire sales cycle and drive revenue for your business organization, you need to learn the basics of quote-to-cash. This guide will elaborate on the process and provide detailed tips on leveraging this approach to successfully generate company revenue.

What is the quote-to-cash process?

The QTC or Q2C process identifies the quote-to-cash and identifies the entire customer lifecycle. This journey starts the moment your sales reps approach a buyer to introduce your product or service. After the buyer expresses interest, buys it, and you deliver it, the sales cycle is completed. 

The QTC process includes negotiations, contract lifecycle, production, order management, billing, and order delivery. Unlike the order to cash (OTC) process, QTC has a more extensive scope because it does not focus on the order fulfillment stage.

What is the difference between quote-to-cash And order-to-cash?

Quote-to-cash appears similar to order-to-cash, but both processes are quite different. QTC is dependent on the customer's intent and action of making a purchase. In comparison, OTC revolves around invoice and revenue recording. In OTC, you also don't deal with Contract Lifecycle Management and Configure Price Quote (CPQ). In other words, QTC is the broad umbrella term, and OTC is one part of it. 

What are the 3 layers of quote-to-cash?

Quote-to-cash uses three core layers to create a seamless revenue process. 

Opportunity management

Opportunity management works on sales pipeline, project scoping and estimation, and proposal approval. It predicts which strategies will develop better future opportunities. An opportunity manager estimates the final cost of a project and creates proposals accordingly.

Contract lifecycle management (CLM)

Contact Life Management (CLM) streamlines contract agreement processes during the initial stages. These stages involve generating, negotiating, storing, and complying with sales contracts. Signing end-to-end legal documents, such as non-disclosure agreements (NDAs), is also part of CLM.

After both parties sign contracts, CLM tools are used to assess if everyone's upholding the contract's obligations. The contract management department has a legal team that ensures deal terms are quickly converted into legal documents. It helps negotiators follow the company's policies while finalizing the contract terms.

Revenue management

Revenue management is a data-driven strategy in the quote-to-cash process. It predicts the best ways to maximize revenue generation after evaluating customers' frequent behaviors.

In addition, it controls and manages order production and billing and differentiates between inaccurate revenue recognition and accurate revenue opportunities. Managing revenue allows you to avoid mistakes that can hurt your relationship with clients. You always stay ahead of business opportunities through revenue management, such as contract renewals.

8 steps to create quote-to-cash workflow

Every company creates its Q2C workflow according to the sales process and customer information. A good quote-to-cash workflow amplifies revenue generation. However, every Q2C process is designed through some uniform steps, which are:

  1. Create a quote
  2. Companies use a quote for lead generation, as it explains the specification and prices of their service. By looking at a quote, clients get a clear idea of whether or not they require a service. Customers often request quotes from multiple companies. Therefore, a well-developed quote is an excellent go-to marketing strategy that attracts clients to your service.
  3. Configure Price Quote (CPQ)
  4. Configure Price Quote (CPQ) is a pricing software that provides updated product information to the buyer. Sellers use this system to quote complex and scalable products. CPQ solutions allies companies to enforce pricing rules, which stops buyers from demanding big discounts. 
  5. You can use CPQ software to customize discounts, service specifications, and sales packages. You can manually perform CPQ or use automation tools. 
  6. Proposal creation
  7. Seller proposals are detailed documents that highlight the strong points of your services. Sales reps offer these proposals to document their offerings and their charges. Developing a proposal is different from making a final quote. A quote is a brief introduction of your service, while a sales team's proposal consists of the total estimated cost, project completion timeline, and details about the service.
  8. Make the contract
  9. A contract binds the verbal or written sales agreement between you and your customer. The finance teams of your company negotiate the terms of sale before formulating and signing the final contract. Sometimes customers will accept your proposal as it is, but in a few cases, agreeing on the right price is time-consuming.
  10. Order celivery
  11. Once your customer signs the contract, you must start working on order fulfillment. The inventory management department will ensure you have everything to finish the order. Ensure the order is produced according to the agreed terms mentioned in the contract. You can use SaaS software to automate the order production and delivery process. Your main priority should be ensuring the quality and delivery timing of the product or service.
  12. Create and ship invoice
  13. You can use automation tools, or your finance teams can manually create an invoice. You must include the total charges, tax breakdown, order number, and product/service description in the invoice. Invoicing is as crucial for you as it is for the customer. Keeping track of payment records helps you stay updated on the incoming cash flow. Additionally, you must send the bill free of invoicing errors to receive payment quickly. 
  14. Payment processing
  15. Use different payment portals, such as credit cards, debit cards, bank transfers, and wire transfers, to accept payment. You should make it easier for the customer to pay within billing timeframes. When the customer is comfortable with the payment portal, they will quickly transfer the money and reflect it in your account sooner. 
  16. Analyze and report
  17. In the final step, you analyze sales processes to conduct revenue management. The entire Q2C process is treated as a single journey to learn about the efficiency of internal operations and the accounting department. After performing the analysis, make a report about inefficiencies and areas that require improvement to generate more revenue. You can use different metrics to review achieved KPIs and customer experience to gain insight into your QTC process. This improves your workflow, converting more potential and existing customers into long-term clients.

Importance of the quote-to-cash process

Quote-to-cash is an essential part of the sales cycle. Q2C creates a quoting, contracting, ordering, and payment processing workflow. As a result, you can better gauge the efficiency of your production cycle and its effects on business outcomes. 

If you have an issue in sales processes, the accounting team uses QTC solutions to pinpoint the exact root of the problem. You can independently check each stage and make the required changes without affecting the rest of the process. Some fast actions you can take are:

  • Deliver accurate service information to the client
  • Check and solve order and invoicing errors
  • Conduct data analysis
  • Evaluate sales team efforts

5 error signs in the quote-to-cash process

Regularly check your quote-to-cash process to ensure it brings positive results. If you observe any of these signs, revamp your QTC process.

  1. Inaccurate revenue forecasts
  2. Poor connection between customer relationship management (CRM) and enterprise resource planning (ERP) creates a blind spot. It also creates a disconnection between orders and deliveries, causing inaccuracies in revenue forecasts. Due to this, you may lose new opportunities.
  3. Low order fulfillment efficiency
  4. If you are consistently having issues in order fulfillment and delivery, check your QTC process. Some internal errors can disrupt timely order fulfillment. This affects the order delivery efficiency and sales cycle, as clients do not appreciate delayed responses.
  5. Contractual disputes
  6. A high number of contract disputes means there is an issue in the entire process. An ineffective quote-to-cash removes links between different steps of the process. To avoid this, identify the problems interrupting contract execution and investigate that stage of Q2C. This way, you can learn the main problem and solve it immediately.
  7. Change in profit margins
  8. Minor fluctuations in profit margins are a part of the business. However, if you observe a drastic change in profit margins, review the Q2C process immediately. Make sure the quote and proposal state the accurate pricing of products.
  9. Increase in Aged Debt or Accounts Receivable
  10. Without any funds, your business can stay afloat for a while. But it needs a proper cash flow to thrive. Find out if customers are paying on time or if the aged debt is constantly increasing. If an aged debt increases, go through the contract terms to see why your clients are not paying on time. 

Challenges of using the quote-to-cash process

The biggest challenge while using the quote-to-cash process is streamlining it across different departments. Each department has its own set of priorities, resulting in quote-to-cash inefficiencies. So, you must test QTC before launching it on the organizational level. 

You will have to sift through multiple spreadsheets to create a quote if you don't have an automated and effective QTC process. This is how quotes' inconsistencies and errors affect the entire sales cycle. A poor QTC structure also delays payment collection, interrupting the company's steady cash flow.

Pros of the quote-to-cash process

Many businesses use the quote-to-cash process to boost sales team productivity. Implementing Q2C solutions will provide your company with these benefits:

  • Accurate quoting.
  • Effective pricing and promotion strategies.
  • Quicker order delivery.
  • Better customer relationship with your brand.
  • Cross-sell and identify new sales opportunities.
  • Customer renewals for recurring revenue.
  • Provide exemplary customer experience.
  • Accelerated sales teams' responses.
  • Error-free quotes and proposals.
  • Customized quoting offers for each client.
  • Automated sales cycle approval.
  • Minimize issues in order specifications and invoices.
  • Automated order renewal process.
  • Increases customer retention rate.

Wrapping Up

Quote-to-cash process consists of sales reps contacting potential buyers, sending a quote, making a proposal, negotiating the contract terms, signing the contract, order fulfillment, invoice delivery, and payment collection from the customer.

You can use this guide to formulate the QTC process for your business and enjoy multiple benefits. It improves your sales cycles and revenue and helps you gain new clients while maintaining the old ones. Make sure to check QTC regularly to ensure it is free of errors.

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