Blog Credit: Scott Beaver, July 14, 2021 (Quote-to-Cash Process: What It Is, Benefits, & Examples | NetSuite)
The quote-to-cash process encompasses everything your business needs to do from when a potential customer is given a quote for your product or service until a purchase is made, the product or service is delivered and payment is collected. While quote-to-cash may look different across industries and business types, many common quote-to-cash process steps may be improved or automated to help companies increase revenue while cutting costs.
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What Does Quote-to-Cash (QTC or Q2C) Mean?
Quote-to-cash, sometimes abbreviated as QTC or Q2C, is a term for a portion of the sales and payment process. Other aspects of your business that precede the quote include branding and marketing. But the concrete beginning to the QTC process is typically regarded as the preparation of a quote. At that point, you have a prospect in your sales funnel, and measuring the success at converting potentials to customers and collecting payment is an insightful key performance indicator (KPI), not just of your sales processes, but also other aspects, including order fulfillment, invoicing and accounts receivable.
What Is the Quote-to-Cash Process?
Quote-to-cash is a process with several moving parts that can benefit from sales and payment automation. It’s common for small businesses and startups to use standalone software solutions to manage different parts of their businesses at first. For example, they may have one vendor for accounting software, another for supply chain and a third for customer relationship management. The trouble with this approach is that you’re unable to view your processes holistically. Enterprise resource planning (ERP) software integrates data from different areas into a single, digital environment that is especially useful for the quote-to-cash process because it connects all of the steps from sales to order fulfillment and payment.
Depending on your business size, industry and other factors, your quote-to-cash process will vary. Here are a few common steps frequently included.
- Product or service configuration
- Contract and order management
- Payment Processing
8 Step Quote-to-Cash Workflow
- Preparing the quote: This is a way to formally present pricing and details for a product, job or order. This will give your customer a clear idea on pricing. It’s common for potential customers to request quotes from several companies and weigh pros and cons, along with pricing before making a decision. But a quote usually means they’re contemplating doing business with you and your marketing efforts have been successful. This always involves pricing but doesn’t necessarily require configuration. Time for sales to take over.
- Configure, price, quote (CPQ): CPQ is a series of steps that generate optimized sales proposals for high-touch sales (or products that usually require more interaction with customers than average). Online sellers can use CPQ to create customized discounts, product customizations or sales packages. CPQ can be performed manually or with completely automated pricing, which creates quotes quickly and accurately. The CPQ concept originated in manufacturing, specifically make-to-order and engineer-to-order. Unless you sell a complex product with lots of different options a customer can choose from, you probably don’t need a configurator.
- Proposal: Proposals are detailed documents submitted to potential customers in an attempt to get their business. This term is commonly used for service engagements where the deliverables offered need to be spelled out in greater detail than a simple quote. It will often include multiple quotes that estimate costs of supplies or labor and may also include timeline information. Proposals may be requested by a prospect or customer in addition to a quote in order to better understand how the costs add up, and these are typically countersigned to indicate an understanding or agreement to the document.
- Contracting: Also known as legal review, the contracting stage is the point where you and the customer negotiate the terms of the sale, until an agreement is reached and a contract is signed. This can be as simple as the customer accepting a quote, or as complicated as lots of back-and-forth communication and negotiations for more complex sales.
- Order fulfillment: When a customer signs a contract or proposal, the next stage is order fulfillment. It’s important to fill that order as accurately as possible and on the agreed upon schedule for the best customer experience. Some companies that provide more complex products, and software as a service (SaaS) businesses can fully automate order processing, while others may need additional processes for shipping orders or creating a customized product or service.
- Invoicing: Some invoicing can be completely automated and contain self-service instructions for customer payments with finance management software. Depending on your needs, you can include purchase order (PO) numbers, tax and fee breakdowns, and anything else your customer requires to get the payment sent. Regardless of how they’re sent, it’s vital to keep meticulous payment records so each order is paid for. This is also an area where efficiency improvements can help boost your cash flow. By sending invoices on time and making the accounts receivable process as simple as possible, you can help get cash in the door quicker and improve your cash flow. Revenue recognition tools in financial management software can help you ensure accurate revenue recognition and juggle different performance obligations so you can spend less time managing revenue, better comply with industry guidelines and easily visualize expected future revenue intake.
- Payment processing: It’s important to make the payment process as easy as possible for the customer, even if that means an additional expense for the seller. Depending on your business, you should be prepared to accept payments via credit card, ACH, bank wire or check. Again, this can be fully automated in many cases. And when customers don’t pay invoices on time, you should have a collections process in place.
- Reports and analysis: By looking across traditionally siloed operations (e.g., sales, order management and accounts receivable) and viewing the entire quote-to-cash process as a single journey, you’re able to better understand the internal processes in operations and accounting. It’s also a way to try to find inefficiencies or areas of possible improvement so you can convert more potential customers and speed up payment to boost your cash flow. Dashboards displayed in ERP software can help you see at a glance KPIs and other metrics to give you insight into QTC processes. You can see in simple-to-understand visuals things like churn rate, revenue and days sales outstanding. One of the major benefits of ERP software is that data from all these disparate areas can be aggregated into one digital space so you can more easily monitor each step in the quote-to-cash process.
Benefits of Quote-to-Cash
Carefully analyzing the quote-to-cash process can lead to various benefits, including increased revenue, improved cash flow and a greater overall efficiency.
Think about each step that’s initiated after a quote is given to a customer. From sales processes, to order fulfillment, inventory management, billing, accounts receivable and more. There are many opportunities to refine processes and automate repetitive tasks that can benefit your company, including everything from more productive sales teams to fewer quote and proposal errors and faster order fulfillment and billing. And ultimately, an improved QTC process helps boost the customer experience leading to repeat business and more revenue. Improving inefficiencies should also help decrease costs. Spending time on each stage of the customer lifecycle may help you identify areas where you can better automate to cut costs and improve the customer experience.
As technology develops at lightning-fast speed, areas for possible automation also grow. Some of the prime possibilities for automation include redundant or recurring tasks that require much manual effort. From data entry, to invoicing there are likely many areas of your business functions within the QTC process that could benefit from automation. Depending on the size, industry and type of business, automation may look very different. Additionally, you’ll need the technology and tools to make it possible. ERP software is ideal for automating QTC processes because all your business data is aggregated into one digital ecosystem, rather than living in separate silos. Here are some of the places your company may consider automating.
Quote: Gathering various information and data from different spreadsheets to compile quotes is a time consuming and cumbersome process. ERP software can simplify this process for your sales team by automating quotes and sending them out to prospects that have requested them.
Configure, price, quote (CPQ): This process is ideal for a personalized approach to sales. Customize discounts and promotions and even products with accurate pricing and product information gathered from data within your ERP.
Contracting: After an order is placed or a purchase made, ERP software can begin an automated order process. This can integrate with your online shopping portal, so after the purchase is made, picking, packing and shipping processes begin automatically. Preconfigure inventory approaches (such as last in, first out) and integrate with shipping companies so printing labels are created as accurate orders are filled.
Invoicing: Sending accurate bills promptly helps encourage more on time payments. After orders are placed, invoices can be sent or scheduled automatically with finance management software. It can also track payments and send reminders for past-due invoices. And with online bill pay, you receive payment faster while making it easier and quicker for customers.
Insightful reporting: Gone are the days when you need to submit a request to IT for them to gather data from around the business and create custom reports. Instead, easy-to-understand visuals that provide insight into the different stages in your QTC process can be available to you through an ERP. Preconfigured dashboards serve up KPIs for order management, finance and more, while still offering you the option to customize reports to meet your business’s unique needs.
Customer Relationship Management (CRM): Enhance your customers’ experiences with automated CRM systems. This type of software can help you track all communications with customers, improve customer service, and help with lead generation across a wide range of industries.
Manage the Quote-to-Cash Process With ERP
Rather than operate with several different software programs or use paper or email submission forms, ERP software can connect the disparate areas involved in the QTC processes. This way, you can find customer details, sales statistics, details on past and potential sales and much more from dashboards displaying at-a-glance information. You can also drill down into the metrics and KPIs to do more investigation of the data.
Benefits from ERP software are more than just connecting data into one digital environment. The software modules can also help with individual portions of the processes. For example, after a customer order is received, that purchase and interaction history is automatically updated in the CRM system. It then triggers an automated order fulfillment process. And you’ll be well aware of your inventory, thanks to warehouse and supply chain management software. It’s stored efficiently so it makes picking and packing quick. Next, the customer receives the order and an invoice is automatically sent. And finally, you’re able to keep an eye on the entire process to identify bottlenecks or areas of possible improvement so that customers have more positive interactions, receive their orders in a timely fashion and your business gets paid quickly.
The quote-to-cash process brings together sales, order management and fulfillment, billing, accounts receivable and more. It starts when a concrete step is taken by a potential customer — a quote is given. And follows every step in the process as that client makes a purchase, orders are filled, invoices sent and bills paid. And truly efficient QTC processes end by examining each step of the process to identify bottlenecks so your business can convert more customers, fill orders promptly and get paid. ERP software is a key component of analyzing each step of the QTC process. In addition to improving efficiency through automation and other steps, it can produce insightful reports on OTC process performance.
Frequently Asked Questions
What is the quote-to-cash process?
The quote-to-cash process is every step in the customer journey from the moment a quote or proposal is delivered to when a purchase is made and payment received.
What is the quote-to-order process?
It represents the sales cycle stages from when a customer quote is offered until the quote is accepted and ordered. Quote-to-order is a part of the quote-to-cash process.
What does CPQ mean?
CPQ is an acronym for configure, price, quote. It represents a stage in the quote-to-cash process where the quote is customized and generated for a customer.
What is the order-to-cash process?
Order-to-cash is part of the quote-to-cash process. This represents the sales stages from when a customer order is placed until a payment is received and processed.