Quote-to-Cash: Steps, Challenges and How to Improve the Process

Billing, Quote-to-cash

What is meant by quote-to-cash? 

One of the most important business processes, quote-to-cash is often abbreviated as Q2C or QTC and is associated with driving revenue for the organization. It is the end-to-end sales process that begins with configuration and pricing of the product and is followed by quoting, customer acceptance, placement of the order and finally managing revenue. QTC is typically preceded by branding and marketing. 

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

The QTC process is often confused with the O2C or order-to-cash process. OTC is essentially a subset of the QTC process. The OTC process is basically an organization’s order management system that plays a vital role in establishing and maintaining a robust relationship between the organization and its customers. OTC starts with the placement of the order by the customer and goes on until the order is fulfilled and paid for by the customer.  

It largely deals with how an organization can optimize order delivery. On the other hand, quote-to-cash is a more comprehensive process that encompasses not only the OTC process, but also other critical processes such as configuration of price quote, revenue management, contract management and so on. 

What is the quote-to-cash process? 

The QTC process entails a number of different functions such as sales management, account management, billing, order fulfillment, maintaining account receivables and more. The process starts with the sales team creating a quote and drafting a proposal for the client all the way to when the services are rendered and the payment is received.  

What are the steps in quote-to-cash process? 

Now that we know what QTC means, let’s talk about the various steps in the process and what goes into each one of them: 

  1. Configuration: The QTC process begins with the configuration step, which entails determining the ideal combination of products and services that would cater to the customers’ unique requirements. This step is crucial in making sure that you go on to seal the deal and is where you find out the specifications you need to include in your quote.
  2. Pricing: Next, you evaluate the potential cost of delivering the services and products, and the amount of margin and profit you aim to earn on the execution of the service. The pricing step can be leveraged to uncover the best pricing and promotion strategies that will help you win the customer without compromising your margins.
  3. Quoting: Once the pricing has been finalized, you can go on to draft and present a quote that your customer cannot say no to. Quoting is one of the most critical steps in your sales cycle as it presents your potential customer with the first impression of your business. A quick and error-free quote helps you optimize your customer experience and consequently seal the deal.
  4. Contract creation and negotiation: Once the customer accepts your quote, you need to draft a formal proposal and contract that not only includes all the details of the deal, but also provides ample visibility to stakeholders. The agreement captures a list of agreed terms and conditions, and must be designed in such a way that it is legally secure and does not adversely impact your revenue stream in any way. The terms of the contract are also redlined and edited during the contract negotiation step. You must stay on top of all the multiple iterations your contract goes through during this phase.
  5. Contract execution: As the name suggests, the contract execution step involves the finalizing of the contract by getting signatures from the parties concerned. You can enable an eSignature tool to significantly cut down on the time you spend on getting the customer to sign the contract in order to seal the deal. Once the signatures are received on the final contract, you can start working on getting your services and products executed and delivered according to your contract.
  6. Billing: Once the contract has been created, negotiated and executed, based on the model of your contract — time & materials, per user, or per device — the correct unit is calculated and an itemized invoice is sent to the customer to receive timely payment for products and services rendered. Accurate billing of all services and products rendered helps the organization determine cash flow and accurately forecast potential revenue for more efficient planning.
  7. Payment: Timely payment is essential for ensuring optimal cash flow. Provide customers with different options to make timely payments, like having a credit card on file, sending out an invoice during the same time every month, and outlining the payment policies up front.
  8. Revenue recognition: Once the customer receives the invoice, he/she will make the payment and you can then recognize your revenue accordingly. Underlining critical details of your revenue in your contract, such as pricing, delivery schedules, net payment terms and so on, will help your accounting team recognize revenue more accurately. 

What are the three layers of the quote-to-cash process?  

Another way to look at the quote-to-cash process is by dividing it into three layers, or levels, each of which encompasses a set of steps. Let’s see what goes into each of these layers and find out why each is important. 

Configure, Price, Quote (CPQ) 

The first level of QTC combines the activities of the first three steps in the process. CPQ is primarily a set of steps that encompasses the configuration, pricing and quoting processes, and helps teams optimize their sales proposals to ensure high-touch sales. CPQ comes in handy for creating sales packages, product customizations and customized offers and discounts. As opposed to performing CPQ manually, automating the phase can help create on-brand, error-free quotes quickly. 

Contract management 

The second level involves the contract creation/negotiation and the contract execution steps. During this phase, the customer is presented with a formal contract, which the customer can then negotiate or accept as is. Once the contract has been finalized, the agreement is signed and the terms executed. While in some cases, the contract gets finalized quickly, at other times, this phase might take longer, with multiple negotiations making the sales process complex. 

Revenue management 

The last level of QTC, revenue management encompasses the last three steps in the process. This phase is designed to ensure accurate and efficient management of processes related to revenue such as billing, revenue recognition, order management and so on. Revenue management is a critical level that focuses on building trust-based relationships with customers and ensuring that the business leverages revenue opportunities like renewals that might be otherwise overlooked.  

What are the challenges with quote-to-cash?  

Let’s now discuss some of the common challenges associated with QTC that you must be aware of: 

Billing challenges  

Often, we forget that sending an invoice to a customer is another touchpoint, and if the invoice is inaccurate, not only does it hurt your trust with your customer, it also often means that you are eating up that mistake in your cash flow.

Ensure that you are automating the ability to correctly count users, devices and cloud services that you have serviced for.

Quoting challenges  

Another challenge is that many businesses maintain an Excel spreadsheet of all products quoted, which can lead to a not up-to-date list of pricing and can lead to a quote with errors. Leverage integrations with distributors in your PSA to automatically pull in pricing and product descriptions to make quoting easy.

How do you improve the quote-to-cash process? 

How do you make sure that your QTC process is effective and beneficial for your business? Here’s a list of best practices that will help you improve the QTC process: 

  • Deploy a robust professional services automation (PSA) tool to optimize, standardize and streamline the QTC process. 

  • Leverage automation to make sure that critical processes, such as quoting and billing, can be performed error-free and in a timely manner. 

  • Make sure that your quoting process is up to date with the latest invoice schedules, payment terms and more to minimize the back and forth that the finance and delivery teams might have to face in order to make the changes. 

Quote-to-cash automation with Kaseya BMS 

Kaseya BMS is a comprehensive next-gen PSA solution that offers a modern and intuitive platform for businesses to perform critical QTC functions, such as the ability to pull in live pricing and product descriptions from Ingram Micro, Etilize, and Techdata to streamline quoting, and the ability to automate end-to-end billing from user, device and cloud-services reconciliation to sending out the invoice.

With its end-to-end billing automation, BMS eliminates human error and ensures that you can create a seamless, error-free experience from the very first to the very last interaction with your customers, every single time. Want to know how you can streamline your QTC process with Kaseya BMS? Request a demo today! 

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