Quote-to-Cash Process Explained: Key Steps, Benefits, & More

 

Catchy as it sounds, the quote-to-cash process is a journey that encompasses the moment a potential customer receives a quote from your business until they actually pay for the service or product you offer. Now of course the shape and form of this process will invariably depend on the industry your business operates in, but the basic blueprint remains the same.

 

In this blog, we’ll walk you through the quote-to-cash process, listing how an automated quotation system can help your business achieve greater efficiency. 

The Meaning Of Quote-to-Cash Process

Let’s talk about quote-to-cash first. We’ll get to the process in a bit.

 

Simply put, quote-to-cash, also abbreviated as QTC or Q2C, concerns itself with a part of the sales along with the payment made for a particular product or service. A couple of steps precede the quote-to-cash journey and they typically include elements like branding and marketing.

 

That said, the quote-to-cash process in particular strictly begins when a quote is prepared for your target customer. This indicates that your sales funnel currently has a prospective client. Converting that prospect into a paying customer and collecting payment are actually measures of success or key performance indicators (KPIs), if you will.

 

Now as for the quote-to-cash process, this is made up of multiple components that directly relate to the automation of payment and sales. However, how much of the process is automated will depend on the scale of the business as well as the refinement of the software system they use.

 

For example, a small business might use a standalone software for different operations such as one for relationship management, one for accounting and one for the supply chain. This approach might seem cost-effective but it renders your business unable to view and track all of the processes involved in a holistic manner. In short, it’s limiting and inefficient.

 

However, you can fix this problem with a custom ERP software in place. An Enterprise Resource Planning or ERP system is highly effective in consolidating data from different departments and processes into a single digital platform that helps optimize the quote-to-cash process by connecting the dots from sales to payment and order fulfillment.

 

As we mentioned before, your quote-to-cash process will depend on a myriad of factors which include the size of your business as well as the industry you are in. However, a few steps in this process are common across the board, and these are:

 

• Product Configuration 
• Pricing 
• Quoting 
• Order management 
• Invoicing 
• Processing of payments 

Core Benefits Of The Quote-to-Cash Process 

Having a streamlined Q2C process for your business comes with benefits that range from enhanced business efficiency to revenue accuracy. You can optimize each step of the process (which we will discuss in length in the next section of this blog) to accelerate your sales cycle. Let’s take a look at other major benefits below:

 

• Increased revenue accuracy: Generation of accurate quotes reduces pricing errors while maintaining consistency. 

 

• Faster sales cycle: Helps in closing deals faster by streamlining multiple processes including approvals, contracting and invoicing. 

 

• Enhanced customer experience: Offers customers clear pricing and a seamless buying journey that leads to the efficient fulfillment of orders. 

 

• Improved sales forecasting: Allows businesses access to financial streams and revenue projections in real-time. 

 

• Reduction in revenue leakage: Helps in the prevention of revenue loss by eliminating billing errors as well as pricing inconsistencies. 

 

• Improved finance and sales alignment: Bridges the gap between operations, finance, and sales, ensuring smooth and seamless transactions. 

 

• Enhanced scalability and automation: Supports the growth of your business by reducing administrative workload while automating manual tasks. 

A Brief Outline Of The Quote-to-Cash Process

The key is to have a well-structured Q2C workflow. This will ensure smooth sales transactions while improving customer satisfaction and minimizing revenue leakage. Call it the backbone of a company’s revenue operations because that’s how crucial its role is. Moving on, below is an 8-step roadmap of the Q2C process for your reference. Each step highlights key actions that optimize profitability and efficiency.

 

Step #1: Quote Preparation

 

The first thing your quotation-making software will do is prepare a quote that details the pricing for a product, service or order. The purpose of creating this quote is to provide your customer with the specifics of pricing so they can compare it to the other quotes and decide which product or service fits their budget.

 

A quote should not be taken as more than an indicator of the fact that a potential customer might want to do business with you. Although it does indicate that your marketing efforts have been a success or your customer would not have ended up here.

 

Step #2: Configure, Price, Quote

 

Also known as CPQ, this generally falls to the sales department and involves a series of different steps. The goal of these steps is to generate an optimized sales proposal that might require a little extra persuasion and interaction with customers. Basically, high-touch sales.

 

If your business sells online, you can use CPQ to offer customized products or sales packages as well as specialized discounts to your customers so they are prompted to convert. When CPQ is a part of automated pricing, you can expect quick and accurate quote creation, which can consequently help boost sales.

 

Step #3: Proposal

 

The next thing your quotation system will do is create a highly detailed document and send it to your prospective client to convince them to give you their business. This document is known as a proposal. Proposals are mainly required for service-based businesses where an initial quote is simply not enough.

 

A proposal will feature a collection of quotes for the service offered that may include estimated timelines as well as costs of components such as labor or supplies. A customer will typically request for a proposal after seeing a quote so they can get a better idea of the price breakdown. They may be countersigned and serve as an agreement.

 

Step #4: Contracting

 

Contracting is the negotiation stage. Here you and your customer will discuss the terms of sale until both parties come to an agreement, which leads to the signing of a binding contract. That’s why this stage is also known as a legal review.

 

One thing to note here is that this process can be either simple or complex. For example, for some customers, accepting a single quote will be enough. However, others may require more communication and back and forth to come to an agreement. It depends on the nature of the product or service offered.

 

Step #5: Order Fulfillment

 

Once the contract has been signed, your quotation-making software will proceed to order fulfillment. Every detail in the order fulfillment form must be accurate and in tandem with the conditions agreed upon by your business and your customer. Accuracy and meticulousness are key here as they ensure customer satisfaction.

 

Although it’s not possible for all businesses to entirely automate this process, companies involved in selling complex products or services can benefit from full automation. Other businesses that require shipping their products might be in need of additional processes at this stage.

 

Step #6: Invoicing

 

The good thing about invoicing is that, unlike order fulfillment which may require manual involvement, it can be completely automated. Invoices can be filled out with a ton of details such as price breakdown, purchase order number, taxes and fees and any other relevant information your customer requires to make the payment.

 

Keeping a record of payments and invoices is crucial for any business. Automation not only streamlines this process but simplifies it, sending invoices on time so customers can easily make the payment, thus boosting your business’s cash flow.

 

Step #7: Processing of Payment

 

Keeping this process super simple is crucial as you don’t want to complicate things for your customer at this stage - even if you have to incur additional expenses as the seller. The reason behind that is you don’t want to deter your customer from paying you. You could lose business. One way to mitigate this is to allow multiple payment options and ensure your payment gateways are secure. In case your customer doesn’t clear their invoice on time, you should have a collection system in place to ensure they do.

 

Step #8: Report Generation

 

Since a good quotation system prevents data silos, it allows you to analyze the entire Q2C process so you can better comprehend the internal workings of both accounting and operations. This reporting process can help you quickly detect inefficiencies so you can drive more customer conversions and improve cash flow.

 

Furthermore, a custom ERP software will allow you to view important metrics such as KPIs on a consolidated dashboard, so you can gather quick insights any time you need. From revenue to churn rate and outstanding sales, key information is always at hand so you can monitor the Q2C process and make informed decisions.

 

Why Businesses Should Automate The Quote-to-Cash Process

Automating the Q2C process can help you eliminate manual effort required for redundant or repetitive tasks. In fact, components of the Q2C process such as data entry and invoicing among others can greatly benefit from automation. However, to make it happen, you need to have a robust ERP system in place as it aggregates all data into a single digital ecosystem. Your business should consider automating the following processes:

 

Quote Generation

 

Compiling quotes based on information scattered across various spreadsheets is a cumbersome process that can be simplified and automated with the help of custom ERP software.

 

CPQ

 

Also known as configure, price and quote as we discussed before, automating this process can help you quickly send out customized discounts, promotions, prices and product information to prospective customers in order to boost sales.

 

Contracting

 

With the help of an ERP system, you can automate the entire order fulfillment process. This works by integrating your online e-commerce portal with the ERP system so the order can be created as well as picked, packed and shipped automatically.

 

Invoicing

 

Accurate bills when sent in a timely manner encourage timely payments from customers. Automating this task can help you schedule invoices automatically. You can also send reminders and track payments as well as receive payments faster.

 

Reporting

 

With a custom ERP system, you can get detailed reports with visuals that provide you a deeper insight into your Q2C process. Preconfigured dashboard can help you view and track key success metrics as well.

 

CRM

 

Automated CRM systems are a great way to boost customer interaction and satisfaction overall. Not only do they help you keep tabs on customer communication but they can also help with new lead generation and improve customer service.

 

Conclusion

It can be a challenge to deal with multiple different software programs to track your Q2C process. Fortunately, smart quotation systems can make that job a whole lot easier for you by automating it. Vestra Inet can provide you with custom ERP software that meets your business’s unique needs while enhancing efficiency and improving cash flow. Contact us today to get sensible and smart ERP systems for your business.