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Understanding the Quote-to-Cash Process

Quote-to-cash refers to the entire end-to-end sales process, starting with product configuration and pricing, quoting, customer acceptance, order fulfillment, and managing revenue.

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Team Maxio

April 18, 2022

What is Quote to Cash?

Quote-to-cash refers to the entire end-to-end sales process, starting with product configuration and pricing, quoting, customer acceptance, order fulfillment, and managing revenue.

However, it also includes related functions such as account management, order fulfillment, billing, and accounts receivables. Quote to cash occurs after the early stages of the buyer’s journey (marketing activities, prospect outreach, follow-up calls) have all been completed and has a significant impact on the revenue generated from a sales deal. 

That’s the technical explanation. In layman’s terms, quote-to-cash is just the process in which products and services are packaged to meet a prospect’s needs, the package is given a price, and the price is delivered as a “quote” to the prospect. If the prospect accepts the quote, their order gets fulfilled, and the finance team handles all the invoicing, billing, and revenue recognition afterward. 

The word “quote” refers to the initial quote or offer made to a prospect by a member of your sales team, and “cash” refers to the revenue generated from that deal. It is crucial for everything in between those two points in the sales funnel to work like a well-oiled machine.

What is the Quote to Order Process?

Quote-to-order is the sale—it describes the initial series of steps that exist within the quote to cash process: product configuration and pricing, quoting, customer acceptance, and order fulfillment. Basically, it’s everything that occurs before the finance team gets involved.

An efficient quote-to-order process is critical for sales teams because it is tied directly to their quote turnaround times and potential win rates. 

What are the 3 Layers of Quote to Cash?

With so many moving parts, it’s easier to break up the quote to cash process into three separate layers. Those three layers are as follows:

Configure Price Quote (CPQ)

Exactly as its name suggests, CPQ involves:

  • The configuration of a deal.

  • The pricing of its different components.

  • The final quote that a prospect receives.

Contract Management

This step involves drawing up, negotiating, and executing a contract that accurately reflects a proposed deal. A standard sales contract may go through several iterations where contract terms or clauses are redlined and changed. Then, it requires approvals and signatures from all parties before the order can be fulfilled.

Revenue Management

This is the final step in the quote to cash process that occurs after an order has been received, processed, and delivered. The rest of the process is executed by the finance department.

Revenue management can be broken down further into separate functions:

  • Billing: An itemized invoice is sent to the customer for payment.

  • Revenue Recognition: Once payment has been received, revenue must be recognized and recorded to stay GAAP compliant. Finance teams may need advanced FinOps tools to recognize complex and recurring revenue streams that are common in SaaS.

  • Renewals: Revenue generated through customer renewals must be processed, and the renewal must be logged.

Streamlining the Revenue Management Process 

Because quote to cash is connected to the sales process, order data spans CRM, order management, and accounting systems. 

These data silos force finance teams to wait until they receive the correct order data before they can generate invoices. This process gap in “quote to cash” bottlenecks invoicing and collections and causes SaaS companies to fall behind on cash schedules.

However, with advanced FinOps tools, invoicing and other accounting functions are integrated along with sales, fulfillment, and analysis tasks. This means finance teams can access real-time data and generate accurate invoices when an order is modified and placed. By integrating their FinOps software with the rest of the tools involved in the QTC process, finance teams can minimize collection delays and improve forecasting.

How to Improve Your Quote to Cash Process

The quote to cash process occurs throughout the entire sales cycle, the revenue management process, and is then subject to an analysis afterward to identify improvements. With so much data getting passed around, several key software tools are needed to complete each step.

For proposal creation, CPQ (configure price quote) software is the way to go. It helps sales reps explain and price out the features that a client wants. CPQ software can also save a business money by calculating margins alongside calculating the price of a client package.

The same goes for fulfilling client orders correctly. Automated order management systems have records that reveal any changes in the order or agreement that were made during the QTC process.

As for revenue management, Maxio allows finance teams to:

  • Access real-time, integrated data from CRM, order management, and accounting systems

  • Recognize recurring revenue to stay GAAP compliant

  • Reference SaaS metrics and order histories to improve forecasting 

Managing the QTC process in product-led and sales-led SaaS

Your SaaS company’s quote-to-cash process will function differently depending on your go-to-market strategy. Because product-led and sales-led SaaS companies appeal to different market segments, the CPQ, contract management, and revenue management processes will vary drastically.

Not only that, but many SaaS businesses are now using a hybrid of these two GTM strategies to expand into new markets and earn more revenue—what does this mean for your quote-to-cash process?

To bring some clarity to your financial operations, we’ve put together this ebook, How Product-Led Growth is Changing B2B SaaS. In it, you’ll learn:

  • How shifting GTM strategies are impacting financial operations in SaaS

  • Why product-led growth is being adopted so rapidly

  • How to determine if product-led growth is right for you

  • Is Sales-led SaaS dying?

  • How PLG will affect your SaaS business

  • How to introduce a hybrid GTM strategy

Sound interesting? You can download the ebook here.

Ready to achieve sustainable growth in today’s market?

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