Basics of Quote-to-cash Process and How you can Ace it

Closing a deal is a great feeling. The pitch, the negotiations, and finally the adrenaline rush of closing! So closing a deal is definitely a cause for celebration. But I wouldn’t open the bubbly just yet!

I don’t mean to be a wet blanket, but it’s a long, hard road from closing a deal to finally realizing the sweet, sweet cash in your books. So, what’s the ‘quote-to-cash’ process all about? Let’s dig a little deeper.

What is the quote-to-cash process?

Quote-to-cash process is the journey that begins the moment a buyer expresses intent to buy your product and ends in what’s the raison d’être for every business – revenue.

Quote-to-cash or QTC is an end-to-end business process that includes all sales processes, contract lifecycle, order management, billing, and collections, covering the entire customer lifecycle. It is larger in scope than the Order-to-cash or OTC process, which deals mainly with order fulfillment. 

An efficient and effective QTC process can help a business establish omnichannel selling strategies and a quality customer experience, which will eventually lead to profitable growth.

To learn about the differences between QTC and OTC, head here.

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

To effectively manage your sales operations, it’s crucial to understand the difference between the quote-to-cash (QTC) and order-to-cash (OTC) processes. While these terms are related, they cover different parts of the sales cycle.

Order-to-cash process

The order-to-cash process is all about executing transactions. It kicks off when a customer places an order and includes everything needed to deliver the product or service and get paid. The key steps are:

• Order management
• Fulfillment
• Preparing invoices
• Collecting payments

This process ensures that orders are completed and payments are received, connecting directly to your business’s logistics and financial operations.

Quote-to-cash process

The quote-to-cash process, on the other hand, is broader and more inclusive. It starts earlier in the sales cycle and includes all the steps of the order-to-cash process. Plus, it involves additional steps such as:

• Configuring the product or service to meet customer needs
• Pricing based on configuration and negotiation
• Generating a quote for the proposed solution
• Creating and managing the contract

So, quote-to-cash covers not only fulfilment and payment but also the initial sales activities like quoting and contracting. It provides a full picture of customer management from the first contact to the final payment.

By understanding these differences, businesses can streamline their processes to boost efficiency and enhance customer satisfaction. 

The quote-to-cash workflow

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

The quote-to-cash (QTC) process is a vital part of the sales cycle, designed to ensure everything runs smoothly from the initial quote to the final revenue recognition. It comprises three essential layers:

CPQ (Configure, Price, Quote): This is the starting point, where products or services are customized to meet customer needs. Sales teams configure the offerings, set the right prices, and generate precise quotes. This layer is all about meeting customer specifications accurately and efficiently.

Contract Management: Once a quote is accepted, the focus shifts to contract management. This involves drafting, negotiating, and finalizing contracts. It’s crucial to ensure that all terms are clearly defined and legally binding, creating a solid foundation for the transaction.

Revenue Management: The final layer concerns handling revenue. This includes correctly capturing payments, ensuring compliance with accounting standards, and accurately recognizing revenue over the appropriate period. It’s about ensuring the financial aspect is just as precise as the sales process.

Understanding these layers is key to streamlining the entire sales process. Each stage must be executed seamlessly to ensure efficiency and accuracy, ultimately leading to a smoother, more effective sales cycle.

Now, let’s dive into each step of the QTC workflow in detail.

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

The quote-to-cash process involves several critical steps that ensure everything runs smoothly from the initial deal to revenue recognition. These steps include:

Step 1: Deal/Opportunity

It all starts with a deal or opportunity created in the CRM. In the holy trinity of ‘Configure Price Quote (CPQ)’, the ‘configuration’ takes place in this stage. It is important to understand the customer’s needs and recommend the right combination of features in the product/service. This is the first stepping stone to closing the deal.

Step 2: Negotiate pricing

A critical step in the QTC workflow, this includes identifying and negotiating the right price for your product/service. At this stage, all the coupons, discounts, and offers are given, and then the negotiations ensue. It is important to walk the thin line of offering lucrative discounts that don’t gnaw away at your bottom line.

Step 3: Quote creation

In this step, a quote is issued to your prospect. Although it does not serve as the final offer, creating an accurate quote is an important step to lock in the customer. A quote has to be quick and error-free to ensure a continuous dialogue with the customer that leads to finalizing the contract terms.

Step 4: Contract management

Once the quote is accepted, the next step involves drafting a formal contract. This document must be meticulously prepared to avoid delays and misunderstandings, facilitating quicker signing processes.

Step 5: Order management and fulfillment

Order management kicks in with a signed agreement. Modern systems automate this phase, ensuring that the company can fulfill orders effectively and initiate subsequent billing procedures.

Step 6: Payment

The contract is signed and the said order is fulfilled on time. It’s now time to collect the payment. Here’s where technology and automation play a major role. It is important to streamline the QTC process to ensure visibility across all stages such as the pricing, quote agreement, and contract terms. This makes the next step easy. Payments can be made through offline or online methods, depending on your customer.

Step 7: Invoicing

With a streamlined QTC process, automated invoicing after the payment can be generated with an integrated billing system. An invoice can even be sent along with the payment link if your business prefers that. Details such as discounts and agreed-upon timelines for payments are very important for your finance teams and need to be captured. That’s why an integrated billing system that takes care of these nitty-gritty details will make the lives of sales and finance teams much easier.

Step 8: Revenue recognition

The final cogwheel of a QTC workflow is recognizing the revenue. According to US GAAP, revenue can only be recognized once it is ‘earned’ by providing the said product and service to the customer. But more on revenue recognition, here. With sales reps juggling multiple spreadsheets, there are bound to be errors in recording the correct contract and payment terms.

Automating revenue recognition and integrating it with your billing system will enable finance teams to recognize revenue accurately.

Each step in the Q2C process is interconnected and vital for the smooth operation and financial health of a company. Ensuring each phase is executed efficiently can significantly impact the business’s success and growth.

Challenges in quote-to-cash process

• Departmental Silos: Inefficiencies arise across marketing, sales, and finance due to differing priorities.
• Lack of Automation: Without an automated QTC process, sales reps must sift through numerous spreadsheets to find the right quote.
• Quoting Errors: Manual processes lead to quoting errors, resulting in back-and-forth between sales and finance and extending sales cycles.
• Revenue Leaks: Inefficiencies cause revenue leaks from poor response times, erroneous quotes, and missed upsell opportunities.
• Cash Flow Problems: Inefficient QTC processes can lead to delayed collections and subsequent cash flow issues.

What software is essential for improving the quote-to-cash process?

Leveraging the right software is crucial to overcoming these challenges. Essential tools include CRM for managing customer data, ERP for inventory management, CPQ for automating product configuration and pricing, CLM for contract management, revenue recognition software for compliance and accuracy, and data-driven pricing software for competitive pricing strategies.

Driving success in the quote-to-cash process

To avoid siloed processing, you need 360-degree visibility in every step of the QTC process. What you need is a tool that ties your CPQ (Configure Price Quote) process, Contract Management, and Revenue Recognition. This will ensure an automated, seamless, and error-free QTC workflow by:

• Automating repetitive and error-prone tasks for the sales teams
• Enabling sales reps to create accurate proposals and quotes within the organization’s guidelines of approved discounts 
• Reducing the sales cycle by reducing errors and the interdepartmental back and forth
• Bringing legal and finance teams on the same page enabling effective contract and revenue management
• Minimizing the risk of inaccurate revenue recognition
• Opening up revenue opportunities for upselling, cross-selling, and contract renewals
• Providing a deep-dive into sales analytics and metrics that will enable you to tweak your sales & marketing strategies on the go

Utilizing Chargebee’s solutions for an enhanced quote-to-cash process

At Chargebee, we understand the importance of a seamless quote-to-cash process. Our integration with Salesforce helps you automate repetitive tasks, create accurate proposals, reduce the sales cycle, and enhance collaboration across departments.

This ensures accurate revenue recognition, maximizes revenue opportunities, and provides deep insights into sales performance.

By implementing these strategies and tools, you can create a winning quote-to-cash workflow that drives higher revenue, improves customer satisfaction, and ensures long-term growth. Closing deals is important, but maintaining a healthy QTC process is essential for sustained revenue, lasting customer relationships, and profitable growth.

At Chargebee, we have created a framework for a winning quote-to-cash workflow harnessing our integration with Salesforce.

Closing deals is important but remember that it doesn’t end there. A healthy QTC process is essential for higher revenue, lasting customer relationships, and ultimately profitable growth.

FAQs on Improving the Quote-to-Cash Process

What is the quote-to-cash process?

The quote-to-cash (QTC) process starts when a buyer shows interest in your product and ends when you receive the payment. It includes everything from sales and contract management to order fulfillment, billing, and collections.

How is quote-to-cash different from order-to-cash?

Quote-to-cash is more comprehensive. It begins earlier with configuring the product, setting the price, and creating quotes, and also includes contract management. Order-to-cash is focused mainly on fulfilling orders and collecting payments.

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

1. CPQ (Configure, Price, Quote): This is where you customize products, set prices, and generate quotes.
2. Contract Management: This involves drafting, negotiating, and finalizing contracts.
3. Revenue Management: This covers payment collection and ensuring revenue is recorded correctly.

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

1. Deal/Opportunity: Identify and create opportunities in your CRM.
2. Negotiate Pricing: Discuss and agree on the right price.
3. Quote Creation: Generate and issue accurate quotes quickly.
4. Contract Management: Draft and finalize the contract.
5. Order Management: Automate the order fulfillment process.
6. Payment: Collect payments efficiently, whether online or offline.
7. Invoicing: Send automated invoices with all necessary details.
8. Revenue Recognition: Ensure revenue is recognized correctly and in compliance with accounting standards.

What challenges exist in the quote-to-cash process

Common challenges include inefficiencies across departments, quoting errors, long sales cycles, and revenue leaks, which can lead to cash flow issues.

What software can improve the quote-to-cash process?

• CRM: Manages customer relationships and data.
• ERP: Handles inventory and logistics.
• CPQ: Automates the configuration, pricing, and quoting process.
• CLM: Manages contracts throughout their lifecycle.
• Revenue Recognition Software: Ensures accurate financial reporting.
• Pricing Software: Helps set competitive and profitable prices.

How does automation impact customer experience and retention?

Automation makes interactions smoother and reduces errors, leading to better customer experiences and higher retention rates through timely and accurate communication.

How does reducing the sales cycle help with retention?

A shorter sales cycle means meeting customer needs faster, which increases satisfaction and boosts retention.

How does a positive customer experience aid retention?

Great customer experiences build trust and satisfaction, making customers more likely to stick with your business.

What are the benefits of reducing quoting errors?

Accurate quotes increase the chances of turning prospects into paying customers by building trust and reliability.

How does automation affect the sales cycle and revenue?

Automation shortens the sales cycle, improves the customer experience, and boosts revenue by quickly identifying opportunities for upselling and cross-selling.

How does streamlining the QTC process improve communication and operations?

Streamlining breaks down barriers between departments, improving communication and coordination, which leads to more efficient operations.

How does Chargebee enhance the QTC process?

Chargebee integrates with Salesforce to automate tasks, create accurate proposals, reduce the sales cycle, enhance collaboration across departments, and ensure accurate revenue recognition. This drives higher revenue and improves customer satisfaction.