What Is the Quote-to-Cash Process?

The quote-to-cash process encompasses the entire sales cycle, from the moment when you present your product or service to the time when you collect revenue from the sale. The Q2C process may include quoting and ordering, generating sales, committing resources, and delivering to customers on time.

Some businesses confuse the Q2C process with the order-to-cash process. While the order-to-cash process does include the steps it takes to fulfill orders, it does not include essential parts of the Q2C process, such as contract management and revenue recognition.

In essence, order-to-cash may be viewed as a process or subset of the entire quote-to-cash value stream. When seamlessly integrating these two value streams, organizations can provide a world-class purchasing experience for their customers.

Key Elements of Quote-to-Cash Value Streams

The key elements and steps in the Q2C process include the following.

Offers, Pricing, and Quotes

The sales team must use customer information and requirements to create offers and quotes that include the necessary details to complete a sale. The team must also develop a pricing strategy, which may include promotions and discounts. The process may include sending sales order acknowledgement forms and entering data into the company’s customer relationship management (CRM) platform.

Contract Management and Renewal

After a customer accepts a quote, the business must conduct negotiations and draft a formal contract with all of the terms. The business also has the opportunity to retain existing customers by renewing contracts. The renewal period has excellent cross-selling and upselling opportunities, through which you may add other products or services to the customer’s order. 

Order Management and Fulfillment

An order management system can ensure that you have everything you need for order fulfillment. This could include an inventory management system that effectively allocates resources and automatically orders materials when needed. Order management and fulfillment also require scheduling for assembling and shipping products.

Billing, Invoicing, and Revenue Management

After order completion, finance teams must take over to create invoices and properly enter transactions. These systems must be in place to reduce invoicing errors and optimize cash flow. In addition, the finance department must properly manage revenue by following revenue recognition principles, which is especially important for businesses that handle recurring revenue.

Why Businesses Struggle With the Quote-to-Cash Process

The many elements of quote-to-cash workflows can create confusion if not managed properly. Unfortunately, many businesses face challenges with their Q2C process, which can result in a poor customer experience, low customer retention, and delayed business processes. 

Offers, quotes, and invoices may face errors throughout the process. This could include issues such as noncompetitive pricing, delayed responses to customers, or simple mistakes on invoices that slow down payments. Any errors with these steps will result in more time being spent reviewing the documents and fixing the errors, instead of getting them approved quickly and moving on to order fulfillment and payment processing.

The sales process must also be set up to benefit the business’s bottom line through efficient contract management. Not only does this process require accuracy, but contracts also need to be eligible for renewal in a reasonable amount of time to allow for regular check-ins regarding customer satisfaction and upselling opportunities. 

Some other issues that may arise with the quote-to-cash process include inaccurate revenue recognition, delays in order fulfillment or shipping, low workforce productivity, or ineffective e-commerce platforms.

How Lean Strategies Can Improve Your Quote-to-Cash Value Stream

A core tenet of a lean strategy is to continuously analyze your processes to search for areas of improvement. The method helps businesses implement systems that are accurate and efficient, which can lead to more satisfied customers and higher revenue when implemented correctly.

Value stream mapping is often used in lean strategies. With this tool, a business creates a flowchart outlining the steps its processes require. When using VSM for your quote-to-cash sales process, you can see what steps are being handled efficiently and what might need to be reworked. Assess the following to enhance your Q2C process:

• Organizational alignment, roles, responsibilities, and skill sets
• Policies, procedures, and escalation protocols
• Technology, workflows, and data integrity
• Overall sales process, from lead generation to customer order and beyond
• Inventory management, supplier management, and order management systems that determine the availability of products or services
• Invoice management, payment processing, and revenue management
• Data analysis for KPIs and benchmarks, such as on-time delivery rates, cycle times, and lead times

A VSM flowchart that outlines the essential elements of your quote-to-cash process can help you determine your accuracy, efficiency, speed to market, and more.

Contact Incito Consulting for Help Implementing Lean Strategies

It has become imperative that businesses leverage value stream mapping to make critical decisions about their quote-to-cash process. VSM can have a significant impact when you’re making critical decisions, such as restructuring teams, adjusting business models, shortening decision chains, and streamlining your overall processes.

Incito offers Q2C value stream map coaching that can help you identify your sources of waste, prioritize improvement opportunities, track KPIs, and develop a schedule and road map for future enhancements to your quote-to-cash process. Unlike SaaS programs that are focused on solving specific issues within your organization, an Incito consultant can help you identify and solve issues across many departments and systems. 

To learn more about how Incito can help, fill out the form below.