What Does Quote-to-Cash Mean?
Quote-to-cash refers to the entire end-to-end sales process, starting with product configuration and pricing, quoting, customer acceptance, ordering, and managing revenue.
Think about all the steps that go into completing a custom quote. This can include discussing with your customer what it is they are looking to have quoted, getting the specifications just right, and then developing a quote for the client’s approval.
This is just the first part of the quote-to-cash process. The continuing process of negotiating the quote, invoicing the client for their order, and receiving payment is the next piece of this puzzle. It can even include re-orders and renegotiations which are sometimes used with repeat customers who come back to buy additional previously configured products.
Regardless of what software solutions you use, this process is integral to the work of your company. But it’s also an aspect of your business which needs to be streamlined and modernized so it runs more efficiently.
What is the Quote-to-Cash Process?
There are six basic steps to the quote-to-cash process. They are:
- Configuration — This is where the customer selects exactly what they want and makes known the specifications for their quote.
- Price/Quote — Here, the sales department determines exactly what will go into making this product, how much it will cost to make, and how much of a profit the manufacturer wishes to make on the quote. The sales department then sets the unit price and presents the client with a detailed quote for the order.
- Contract — Once the customer receives the quote and decides to accept it, this is the formal proposal and contract. Once they sign, the production line can get to work on the products.
- Billing — Once the quote is complete, the accounting staff will send out an itemized bill and collect the money owed.
- Analysis — The sales staff can then analyze the orders which have been placed and work on promoting sales with other potential clients. This point of the process allows you to improve the process.
- Renewal — If the customer wishes, they may also renew the order at a future date to purchase more of the previously configured product. Alternatively, the manufacturer can suggest the customer renew and can cross-sell or upsell.
These six steps make up the quote-to-cash process. You can see there’s a need to integrate and streamline the process so your company can run efficiently. It is often this last step—analysis—which many businesses neglect. Failure to analyze your successes as well as inefficiencies will prevent your business from growing in the years to come.
Navigating the Quote-to-Cash Process
Navigating the quote-to-cash process can be quite tricky at times. One of the problems is there are so many moving pieces in the process. As with a machine, all of these pieces have to work together. If one of them breaks down, it can cost you in the whole process.
If the configuration doesn’t go smoothly, if a quote is delayed, or if the follow-up analysis is not completed, then you could be losing out on sales and your production line could be throwing away money because they are not working at full capacity.
That’s why it’s so important to look at automating your process. By doing so, you streamline the steps and don’t have to worry about losing time and money.
Automating the Quote-to-Cash Process
So, how exactly do you automate the quote-to-cash process? There are several tools that can help you with this: CRM, CPQ, and ERP solutions.
Customer Relationship Management (CRM)
A CRM system keeps track of your relationships with your customers. It helps you manage the most up-to-date contact information and past sales information. It also helps you with marketing, sales, and customer service with those clients.
CRM software fits into the process by ensuring you have all the relevant data when it comes to signing contracts, billing, collecting as well as the post-sales analysis and marketing side of the quote-to-cash process.
Configure Price Quote (CPQ)
Your CPQ solution is used to create a custom-designed product. With CPQ software, the customer either contacts a salesperson who enters the specifications of the product into the system or (if you have an online store) they can enter the information into the software themselves from your website.
Then, the software determines if the product can be made according to those specifications and generates a Bill of Materials (BOM). At this point, the CPQ software determines how much the product will cost to make and can be programmed with pre-set profit margins to determine how much you should charge for the product.
The next step in the process is to generate a quote that is sent to the client for approval. When it comes back as approved, the project can move forward on the production line and can even generate a professional contract for the client to sign.
All of this is done much more efficiently than it has been in the past removing lots of back-and-forth between sales, engineering, and production. As a result, all of these departments can work more efficiently in their jobs.
Enterprise Resource Planning (ERP)
An ERP system maintains your item inventory in real-time, so your various departments have the best data in making decisions. One way this fits into the quote-to-cash platform is by keeping constant accounting of your internal inventory.
If a customer orders a configured product and the CPQ system creates a bill of material for that product, your ERP tracks your on-hand item inventory, how many need to be manufactured, and how many need to be ordered from an outside vendor. This helps to keep the entire process moving smoothly with little to no interruption.
What are the 3 Layers of Quote-to-Cash?
Another way to think of the quote-to-cash process is that it has three distinct layers. They are the aforementioned CPQ, as well as Contract Management, and Revenue Management.
- The CPQ layer covers the configuration, quoting, and ordering as it moves into production.
- The Contract Management layer allows for the quick creation of contracts for the configured order including binding legal documents such as NDAs (Non-Disclosure Agreements).
- The Revenue Management layer includes the areas of collecting on the order, including billing and contract renegotiations.
Quote-to-Cash and CPQ: Where Configure One Fits In
Configure One’s CPQ software does much more than just speeding up your quote-to-cash process. It functions as a sales tool with captivating visualization tools, it integrates with CAD software for engineering drawings, and it can even generate production routings for your shop floor.
Integrating Configure One CPQ with your CRM and ERP systems allows them to work together seamlessly and get the most out of each system. This setup provides you with the best collection of tools that can take your quote-to-cash process, and your entire company, to the next level.