What is quote-to-cash process? The 8-step guide

Why quote-to-cash Process is so popular?

It’s a great framework that covers all the steps from the initial quote provided to a customer to the final cash collection after a sale.

The customer experience is enhanced because the process is smooth and transparent. It is scalable, adaptable easily to growing sales, and integrates well with existing technology systems.

Understanding the quote-to-cash process

The quote-to-cash process enfolds the entire journey that begins when a buyer shows interest in purchasing your product and concludes with revenue generation = the ultimate goal for any business.

Known as QTC, this comprehensive business procedure includes all aspects of sales, from the lifecycle of contracts to order management, billing, and collections, effectively covering the full customer experience. It is broader than the order-to-cash (OTC) process, which primarily focuses on fulfilling orders.

A well-structured QTC process can empower a business to implement omnichannel sales strategies and enhance customer experiences, ultimately driving profitable growth.

What REALLY is quote-to-cash process?

Conversely, the quote-to-cash process is broader and more comprehensive. It initiates earlier in the sales cycle and includes all steps involved in the order-to-cash process. Additionally, it covers:

• Customizing the product or service to align with customer requirements.
• Setting prices based on configuration and negotiation.
• Generating a quote for the proposed solution.
• Drafting and managing the contract.

Quote-to-cash not only addresses fulfillment and payment but also initial sales activities such as quoting and contracting, providing a holistic view of customer management from the first interaction to final payment.

By understanding these distinctions, businesses can refine their processes to enhance efficiency and improve customer satisfaction.

What is behind “Quote-to-Cash process”?

The quote-to-cash (QTC) process is crucial in the sales cycle, ensuring seamless operations from the initial quote to the final recognition of revenue.

It consists of three fundamental layers:

1. CPQ (Configure, Price, Quote): This initial phase involves tailoring products or services to meet customer specifications. Sales teams configure offerings, establish appropriate pricing, and generate accurate quotes. This layer focuses on fulfilling customer requirements efficiently and precisely.
2. Contract: After a quote is accepted, attention shifts to contract management. This includes drafting, negotiating, and finalizing contracts, ensuring that all terms are clearly articulated and legally binding, forming a solid foundation for the transaction.
3. Revenue: The final layer deals with revenue handling. This involves accurately capturing payments, ensuring compliance with accounting standards, and recognizing revenue over the correct timeframe. It emphasizes the importance of precision in financial matters just as much as in the sales process.

Let’s delve into each step of the QTC workflow in detail.

Quote-to-cash workflow: The 8 Steps

We will examine both solutions: utilizing a dedicated quote-to cash automated system and managing the process manually with various tools. This comparison will highlight the advantages and challenges of each approach, helping you determine the best fit for your organization.

Let’s dive into the QTC workflow.

1. Deal/Opportunity

The journey begins with creating a deal or opportunity within the automated billing system. This stage involves understanding the customer's needs and recommending the optimal combination of features for the product or service, setting the stage for closing the deal.

Before diving into examples, it’s essential to recognize that effectively managing this step can significantly influence the overall success of the sales process.

• Manual Example: A sales representative meets with the customer to discuss their requirements and notes down their preferences and desired features on a spreadsheet.
• Automated Example: Using a QTC CRM, the sales representative inputs the customer’s information and preferences directly into the system, which automatically suggests relevant product features based on previous sales data and customer profiles.

2. Negotiating pricing

Negotiating pricing is a pivotal step in the QTC workflow. It involves identifying and negotiating the appropriate price for your offering, including presenting discounts and offers. Striking a balance between attractive discounts and profit margins is crucial.

Understanding how to navigate this phase can enhance customer satisfaction while ensuring profitability.

• Manual Example: The sales representative calculates potential discounts and presents them to the customer, adjusting the prices based on verbal negotiations during the meeting.
• Automated Example: The tool provides real-time pricing tools that allow the sales representative to quickly generate various pricing scenarios and discounts, making it easier to negotiate effectively while maintaining profit margins.

3. Quote creation

At this stage, a quote is presented to the prospective customer. Generating an accurate quote is vital for securing the customer’s interest and facilitating ongoing discussions that lead to finalizing contract terms.

A well-crafted quote can significantly enhance the likelihood of closing the deal.

• Manual Example: The sales representative manually creates a quote using a word processor, which may take time and require careful proofreading to avoid errors.
• Automated Example: The QTC billing system automatically generates a professional quote based on the entered deal details and provides e-signature features, ensuring accuracy and allowing the sales representative to send it to the customer instantly.

4. Contract management

Once the quote is accepted, the next step involves drafting a formal contract. This document must be meticulously crafted to prevent delays and misunderstandings, thereby speeding up the signing process.

• Manual Example: The sales representative drafts a contract using a template and sends it to the customer via email, requiring back-and-forth communication for revisions.
• CRM Example: The CRM provides contract templates that auto-fill with customer and deal information, allowing for rapid creation and electronic signing, minimizing delays.

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5. Order management and fulfillment

Order management begins with a signed contract. Modern systems often automate this phase, ensuring efficient order fulfillment and the initiation of billing procedures.

• Manual Example: After receiving a signed contract, the sales representative manually enters the order details into a fulfillment system.
• Automated Example: The biling system automatically processes the order upon contract signing, triggering fulfillment workflows and notifying relevant departments without manual input.

6. Payment

With the contract signed and the order fulfilled, it’s time to collect payment. Technology and automation play crucial roles here, ensuring visibility across all stages and simplifying payment collection.

A smooth payment process is vital for maintaining cash flow and customer relationships.

• Manual Example: The sales representative sends an invoice via email and follows up with the customer by phone to confirm payment methods and details.
• Automated Example: The CRM generates and sends an invoice automatically, providing multiple payment options directly within the invoice for the customer to choose from.

7. Invoicing

A well-structured QTC process allows for automated invoicing post-payment, facilitated by an integrated billing system. Capturing details such as discounts and agreed payment timelines is essential for finance teams.

• Manual Example: The finance team manually creates invoices based on payment agreements, which can lead to discrepancies if not tracked properly.
• Automated Example: The tool automatically generates invoices after payment confirmation, including payment links and detailed breakdowns of discounts and payment timelines.

8. Revenue recognition

The final step in the QTC workflow is recognizing revenue. Revenue can only be recognized once it is deemed 'earned' through the delivery of products and services.

Automating revenue recognition ensures compliance and accuracy in financial reporting.

• Manual Example: The finance team manually reviews contracts and delivery records to determine when revenue can be recognized, which can be time-consuming.
• Automated Example: Automatically tracks delivery milestones and integrates them with billing data to ensure revenue is recognized accurately and in compliance with accounting standards.

Conclusion and Q&A about quote-to-cash process

Which tools are required for a quote to cash process?

In an ideal scenario, having a single automated recurring billing system, such as Hyperline, can significantly simplify the Quote-to-Cash (QTC) process. This type of tool consolidates various functionalities, allowing for seamless management of quotes, invoicing, and payments in one platform.

However, when not using a dedicated QTC CRM, a sales representative may need several tools to manage the sales process effectively.

Here’s a breakdown of essential tools:

1. Spreadsheets (Excel, Google Sheets..): For tracking deals, managing customer data, and calculating pricing and discounts.
2. Document creation software (Word, Google Docs..): For drafting quotes, contracts, and proposals manually
3. Email communication tools (Outlook, Gmail..): For communication with customers.
4. E-signature solutions (DocuSign, Adobe Sign..): For obtaining electronic signatures on contracts and agreements.
5. Accounting software (QuickBooks, FreshBooks..): For invoicing, payment tracking, and financial reporting.
6. Project management tools (Trello, Asana..): These tools assist in managing tasks related to deal progression and collaboration with team members.
7. CRM systems (Salesforce, HubSpot..): While they may not have integrated QTC features, CRMs help manage customer interactions and track sales activities.
8. Communication tools (Slack, Microsoft Teams..): These platforms enable internal communication and collaboration among team members, facilitating quick discussions and updates.
9. Survey tools (e.g., SurveyMonkey, Typeform): These tools are used to gather customer feedback and understand their needs, helping to tailor offerings effectively.

Using these tools in combination can help manage the QTC process without a dedicated QTC CRM, but it will be less efficient and more expensive.

The reliance on multiple disparate tools can lead to increased manual effort, a higher risk of errors, and potential miscommunication among team members. This fragmented approach may also hinder visibility into the overall sales process, making it challenging to track progress and analyze performance effectively.

How can I easily find a quote-to-cash solution?

Finding the perfect Quote-to-Cash billing system is just a click away!‍

Hyperline simplifies this workflow by integrating the eight essential steps into a single platform:

1. Quotation generation.
2. Quotation approval.
3. Automated subscription creation initiated upon quotation approval, with optional usage-based billing facilitated through data loaders such as PostgreSQL.
4. Automated invoice dispatch.
5. Automated email reminders.
6. Payment collection with seamless integration of multiple suppliers, allowing for one-click addition of each supplier.
7. Automated revenue recognition, ensuring accurate recording of revenues in financial statements.
8. Real-time KPIs, with options for integrating additional tools to enhance functionality, including ChartMogul and Fincome.

Click on the link to explore how Hyperline can transform your QTC workflow today!