What is Quote to Cash?

By Moira McCormick on January 20, 2016

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Also known as QTC or Q2C, "quote to cash" is a term that is used to describe a business process that covers product or service selection, pricing, quoting, contracting, invoicing, payment checking, and contract renewal. It is typically achieved through the support of a software solution.While there are several different strategies used to identify each of the steps included in this end-to-end business process, most aspects of the approach are considered common elements in any supply chain management and customer management strategy.

Quote-to-Cash is the most critical process for businesses today, yet it is one that few have effectively optimized. Why is Quote-to-Cash so important? In a nutshell, it's your business/livelihood we are talking about here. It’s the process of generating, collecting, and managing revenue, which should be the central focus for every industry and line of business. A streamlined Quote-to-Cash process makes “closing deals” a highly effective and integrated process that can be managed - even across geographies - in the cloud.

For many organisations, the elements of quote to cash are still treated as independent processes but managing each piece of the jigsaw separately and manually introduces inefficiencies and duplication to your sales cycle. QTC software will enable you to close a higher percentage of deals, increase customer satisfaction, beat the competition and grow revenue.

With an optimised QTC process, sales representatives can see which product combinations are most profitable and which deals are up for renewal. When the QTC process is optimised, executives have the visibility to assess cash flow and ensure their business is running smoothly and profitably.

 

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The 10 Steps of QTC

1. Product or Service Configuration

Identify the right combination of goods and services to recommend to the customer is the first step on the road to closing a deal. If you have heard of the term CPQ or Configure Price Quote, this forms the 'C' of that terminology.

 

2. Pricing

Pricing can often be complicated, but when using QTC, 'pricing' refers to the set of rules that dictate how sales can price a deal and what incentives can be offered without cutting into margins. Using pricing software to support your price management is an important step towards profit maximisation.


3. Issuing the Quote

Quotes are often the first impression you leave on your customer. There is normally an understanding that the quote does not constitute a final offer from the supplier or vendor to a potential client – it serves the purpose of providing the basis for ongoing dialogue. A good quote system gives you an opportunity to make a strong brand impression and demonstrate your commitment to the customer. However, you must get it right. Speed and accuracy are key and quotes also require a proper review process - available with QTC.


4. Creating the Contract

All deals end with an agreement that includes a set of terms and conditions that require effective contract management to prevent the risk of impacting your revenue stream.


5. Negotiating the Contract

Once negotiations have started it's critical to get your legal department to quickly intercede if something is added or removed that will negatively impact on the profitability of the deal.


6. Contract Execution

Signing and finalising the deal. E-signature tools can provide a faster, more automated way to close deals.


7. Fulfilling an Order

The order is received, processed and delivered. A QTC solution will provide ongoing visibility at each stage.


8. Invoicing

Final charges are calculated and an invoice is sent to the customer. The billing schedule determines cash flow so if you aren't punctually billing customers, funds will suffer. With QTC, billing is easy – it's a smooth, streamlined process when everything captured in the quote and contract is efficiently passed on to Accounts. Billing and renewal information is automatic.


9. Revenue Management

This covers not only recognising that the cash has been received, but also ensures the correct contract terms, like pricing, net payment terms and delivery schedules have been met to accurately manage cash flow.


10. Renewals

Managing customer retention and recurring revenue. QTC is an on-going process, exposing tremendous revenue potential from up-selling and cross-selling. Staying on top of contract renewals and customer buying history will shorten renewal cycle times, increase renewal deal size and reduce churn.

 

The ROI of QTC

Still not convinced of the potential of Quote-to-Cash in your business? According to the Aberdeen Group, Quote-to-Cash packs a significant punch giving the businesses interviewed the following Return-on-Investment:

  • 105% larger deal sizes
  • 49% higher proposal volume
  • 28% shorter sales cycle
  • 26% more sales representatives meeting their targets
  • 17% higher conversation rate

 

Conclusion

Quote-to-Cash is the single link between top-line growth, bottom-line results and customer satisfaction. No other process is as critical for maximising the value of capturing revenue in a profitable way as well as meeting the needs of customer sales requests. QTC management reduces time spent managing contracts, shortens the sales cycle and increases revenue.

The process relies on the collective intelligence of the enterprise - the impact of accurate quotes, proposals, contracts and orders make the flow of all data and processes within an enterprise work smoothly, thus creating value for businesses, their partners and customers.

 

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