What exactly is the quote-to-cash process? The clues are in the name: it’s the entire sales process, from its inception, when a business issues a quote or proposal, to its conclusion, when that business collects the cash it’s owed.
But what’s left out of that catchy phrase? There are many potential pain points along the road to payment.
There’s a reason there isn’t usually a position for “payment chaser”—at least not explicitly—at most businesses.
And yet, as of 2022, 42% of businesses reported spending more time pursuing past-due invoices than they had the year before. While chasing payments shouldn’t be anyone’s full-time job, receiving payments for services rendered is, after all, the fundamental purpose of a business.
That’s why modern companies seeking to optimize their sales cycles and enhance their financial efficiency need sophisticated quote-to-cash solutions. Let’s examine them more closely.
Why is the quote-to-cash process important?
The quote-to-cash process covers a business’s sales cycle end-to-end, from initial customer query to final payment.
Of course, without an organized approach to sales activities, operational efficiency will suffer, and customer satisfaction will lag. By streamlining revenue operations from the very start of the sales cycle, rather than hastily attempting to organize business affairs just before it’s time to collect payment, businesses can smooth out pain points and address issues as soon as they arise.
How does the quote-to-cash process work?
There are seven basic steps in the quote-to-cash process, which we’ll review.
1. Quote generation
A business must first understand the customer’s needs, objectives, and expectations to generate an informative and accurate quote.
This phase may involve:
- Research
- Brainstorming
- Customer collaboration
However, this step can include anything required to generate a quote that offers potential customers the precise pricing numbers and product configuration options they need to make their choice.
Once a business clearly understands the customer's wants, it must configure the offer's price and quote (CPQ). Sales teams may collaborate with other departments or use configure, price, and quote software to craft the best proposal.
If the first part of this phase is outward-facing—understanding the customer—then the second is inward-facing. The CPQ process requires a deep knowledge of the industry, the resources required to complete the job, and a business’s capabilities.
2. Contract management
The customer must agree to the pitch once sales reps generate a quote or proposal. At this point, a business needs to:
- Generate a contract
- Ensure that all stakeholders approve of it
- Manage negotiations as necessary
This can be a thorny process that must be acceptable to all parties. Streamlining contract approvals and negotiations can be game-changing, making this an efficient part of the overall process rather than the moment at which all project momentum is lost.
Even at this early stage, businesses can and should remain focused on staying compliant. Ensuring compliance early on and considering relevant regulations during the contract generation process will save organizations (and their clients) from regulatory headaches or financial risks later on.
3. Order fulfillment
The order has been fulfilled once a contract has been generated, revised, and signed. The specifics of this step will vary across businesses, industries, and products.
But, regardless of the details, this aspect of the QTC process will involve order fulfillment, logistics coordination, and, ultimately, the seamless delivery of promised goods or services.
4. Billing and invoicing
Once orders have been fulfilled, businesses issue bills and invoices. Put simply, this is the stage at which the customer is informed of what they owe and when they owe it.
While automation can support the QTC process, sophisticated digital methods can be essential during the billing and invoicing stages.
The ability to automate invoicing can provide a wide range of benefits for businesses, including:
- Streamlined operations and procedures
- Avoidance of common billing errors and inefficiencies
- Enhanced cash flow management and faster payment cycles
- Improved customer relationships and trust
- Simplified processing for digital payments
- Reduced administration costs
The ability to issue bills and invoices promptly is essential for a business—this allows for accurate record-keeping and maintaining strong working relationships with customers, vendors, and employees.
5. Payment collection
As many business owners know, an invoice issued is not necessarily a paid one. Once a bill has been generated and shared with the customer, follow-up, and clarification may be required before collecting payment.
Again, whatever a business can do to avoid snags or misunderstandings will make this process smoother. Implementing efficient payment methods—whether online credit card payment or clear information about how best to handle payment disputes—saves time and keeps business moving forward.
6. Revenue recognition
While it might seem logical for the quote-to-cash process to conclude once the customer has cash in hand—and while it arguably does end there for the customer—the business has more to do.
Revenue recognition, the accounting process whereby a business records revenue in its financial statements and reports, requires following relevant standards and guidelines, which may include:
- Accounting Standards Topic 606 (ASC 606), as codified by the Financial Accounting Standards Board (FASB)
- International Financial Reporting Standard 15 (IFRS 15) as set by the International Accounting Standards Board (IASB)
Revenue recognition guidelines and requirements will vary between businesses. Exact timelines and strategies will affect financial statements. However, strategic planning and automation can help companies avoid missteps or inaccurate reporting.
7. Reporting and analysis
The final stage of the quote-to-cash process is the most important one for ensuring future success: businesses should use reporting and data analytics tools to learn more about what went wrong and what can still be improved.
Leveraging insights from recent transactions will allow for continuous improvements that keep businesses flexible, adaptive, and profitable.
Common challenges in the quote-to-cash process
Of course, it’s easy to broadly explain the seven steps of the quote-to-cash process. And it’s true that when done right, an efficient QTC process will save time and generate business. But that doesn’t mean that the process is entirely without challenges or pain points of its own.
Managing time and resources
For the QTC process to run smoothly, business operations must be optimized for efficiency and accuracy. Issues related to manual processes or caused by outdated tools can lead to slower project timelines and higher expenses. Automated invoicing and other innovative approaches can free up valuable time and effectively use institutional resources.
Staying compliant
Revenue recognition can often be a complicated, overwhelming process. Businesses that recognize revenue at the wrong time—or fail to account for potential shifting variables when they estimate future revenue—can risk regulatory violations. Staying compliant is vital for any business, but saving time in the present is only helpful if it doesn’t create problems in the future.
Ensuring cross-departmental collaboration
Too often, data gathered by sales and finance departments remains siloed, with each department unaware or uninformed about what their colleagues have learned. Ensuring cross-departmental collaboration during the QTC process is essential for success. It allows all stakeholders to learn from one another’s mistakes—and successes.
Benefits of an efficient quote-to-cash process
An optimized quote-to-cash process will increase efficiency at every stage, from initial quote generation to final completed payment.
Enhanced customer satisfaction
It’s something that anyone who’s ever been a customer understands implicitly: smoother transactions and more efficient delivery of goods and services create loyal, returning customers. And businesses with high reported levels of customer satisfaction see overwhelmingly positive financial benefits.
Thus, businesses with efficient quote-to-cash processes are more likely to see a boost in customer satisfaction.
Increased operational efficiency and reduced costs
Incorporating quote-to-cash automation wherever possible will increase operational efficiency since it helps companies avoid common human errors made during manual processing.
Increased operational efficiency, in turn, saves both money and time. The less time a business spends on its invoicing process, the more money it can reinvest in company growth.
Improved cash flow
The digital transformation of the QTC process can also improve cash flow. Faster billing and payment cycles keep customers happy, businesses organized, and future operations streamlined.
Best practices for an efficient quote-to-cash process
The potential benefits of an efficient quote-to-cash process are clear. However, the steps a business should immediately follow to improve its QTC process are unclear. Here are a few relevant best practices for increasing operational efficiency with an improved QTC process.
Utilize CPQ software
Sales reps and their teams are the primary beneficiaries of configure, price, and quote (CPQ) software. With this software, they can focus on winning business rather than manually entering data.
The right CPQ software will:
- Manage supplier-specific configurations
- Reduce quote or proposal timelines by offering customizable templates
- Deliver quotes (and other relevant materials) digitally
These and other benefits will make the sales process faster, smarter, and more efficient.
So, the first step in the integration process is getting as many departments on board as possible.
Integrate your CRM and ERP
To maximize the benefits of a streamlined QTC process, businesses should integrate their sales cycles with their existing customer relationship management (CRM) and enterprise resource planning (ERP) systems. CRM integrations allow seamless data flow between different business channels, so a dropped connection or a misplaced physical quote will never delay invoicing.
Train your team
None of a business's tools, from automated billing to smooth CRM integrations, can overcome a team that isn’t trained to use them. Training employees to maximize the use of what’s available is a fundamental part of the QTC process.
This may look different depending on the size of a business, the scale of its operations, and the average tenure of its employees. Reach out to your QTC automation software provider for training tips and resources.
Evaluate and optimize your process consistently
Finally, the best practice is to keep learning and improving. Whether a business thinks it has a QTC process that runs like clockwork or it’s implementing these strategies for the first time, remember to:
- Gather regular feedback from all stakeholders
- Analyze data on a consistent schedule
- Learn from your raw data and analyses
Ready to improve your QTC process?
Even the savviest sales reps in the world cannot overcome a sluggish, disorganized sales process. Businesses can streamline their financial operations and attract soon-to-be loyal customers by implementing quote-to-cash process efficiencies at every level.
Ready to level up? WisePay can be a valuable partner in improving your QTC process. Its seamless payment automation software allows you to focus on what really matters: your overall business, not its tiniest details.
Learn more about automating your QTC process with WisePay.
