Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

Quote to Cash Process

1. Quoting

Of course, the first step in the Quote to Cash Process is the customer inquiry or request for a quotation. The sales team is able to respond by providing a formal quotation detailing the details of the products or services they are offering, including prices, quantities, terms, and conditions. For further negotiations and discussions with the customer, that quote serves as a starting point.

2. Pricing

Pricing is crucial when it comes to customer relationships.  There may be multiple layers to the pricing process, such as promotional items, discounts, and extra charges. Or it could be as simple as that. Whatever the case, your team will have to be very quick since research shows that sales are going to whoever comes up with the fastest response. After all, price is one of the most important details to provide in a quotation.

3. Contract Management

The next step in formalizing the agreement is to sign a contract as soon as the customer has accepted the terms set out in the quotation. The contract ensures that any additional conditions of sale are adhered to, e.g. the payment schedules, delivery timeframes, or other terms and conditions. Contract management prevents misunderstandings and disputes, thus ensuring that both sides are content with each other.  A well-thought-out contract could be the difference between having to wait or having a sealed deal in place.

4. Order Management

A sales order shall be drawn up once the contract has been concluded. Any information that a customer has requested concerning the products or services is contained in this internal document. The order shall then be forwarded to the relevant departments, for example, production, distribution, or service delivery, and will begin a fulfillment process.

5. Billing and Invoicing

Invoices are drawn up to request payment from the client, as products and services are delivered or provided. Details of the amount to be repaid, payment due date, and any other tax or fee are set out in the invoice. To ensure a healthy flow of cash and the satisfaction of customers, it is important to invoice accurately and on time.

6. Recognition of Revenue

Revenue recognition plays an important role in the quote-to-cash process for companies. It involves determining, on the basis of contractual commitments and performance milestones, when and how to recognize revenue. In order to provide a correct financial statement, it is necessary to recognize the revenue correctly. Accurate revenue recognition is not only important for financial reporting integrity but also helps with revenue projections.

7. Collection and Cash application

Following the invoicing stage, the organization must actively manage collections to ensure prompt payment from customers. The receipt of the cash must be properly documented and used in the accounting system for the appropriate invoices once payment has been made by the customer. This step makes sure that payments are properly accounted for and reconciled, enabling an adequate level of visibility on the business’s finances.

8. Review and Analysis

Data collection and metrics shall be collected during the whole Quote to Cash process, with a view to assessing the effectiveness of the sales cycle. Key performance indicators (KPIs)such as quote-to-close ratios, sales cycle times, and customer payment trends help organizations identify areas for improvement and make data-driven decisions.

Quote to Cash in Procurement

The Quote to Cash process in Procurement refers to the process that involves acquiring goods or services from suppliers to payment. From RFQ to payment, it is quite similar to the general Quote to Cash process. The only difference is that Quote to Cash in Procurement means your organization is the customer.

To get a better grasp of the difference, here is the Quote to Cash process in Procurement:

1. Request for Quotation (RFQ)

The process shall start with a Request for Proposal being issued by the procurement team to invite quotes or proposals from potential suppliers. Details of the required goods or services, quantities, quality specifications, delivery schedules, terms, and conditions are included in the request for proposals.

2. Supplier Selection

The procurement team shall assess the submitted tenders or proposals after they have been responded to by suppliers. They take into account factors like pricing, quality, reliability, the performance of previous projects, and compliance with procurement policies. Following this assessment, the team will choose the best suitable provider to proceed with further negotiations.

3. Contracting and Negotiation

Once the contract is awarded, final terms and conditions shall be negotiated by the Contracting Team with the supplier. This shall include all the applicable contractual provisions, including price adjustments, payment terms, delivery schedules, service level agreements, and any other relevant clauses. The objective is to achieve mutual benefits for both the customer and supplier in order to protect their interests.

4. Purchase Order Creation

The procurement team shall create a purchase orderto formalize the contract and specify its agreed terms after it is finalized. Information such as product description, quantity, price, delivery date, and terms of payment shall be included in the PO. It shall be a legally binding document and shall serve as a reference point for both parties during the procurement process.

5. Receipt and Inspection

The Procurement Team shall verify, in accordance with the specifications laid down in the purchase order, any received goods or services upon their delivery or completion. This step shall ensure that the consignments provided satisfy the quality standards to which they are subject and comply with approved specifications.

6. Invoice verification

The supplier shall issue an invoice after receipt and acceptance of the goods. In order to ensure that the invoices are aligned with the terms and conditions of a contract and negotiated prices, the Procurement Team shall examine them and verify their authenticity. The invoice is authorized to be paid after validation.

7. Payment

The processing of payment in respect of authorized invoices shall be carried out by the Finance Department. Payments shall be made to suppliers in accordance with agreements on payment terms, e.g. immediate, net 30 days, or a different agreed-upon schedule of payments.

8. Accounts Payable Management

During the procedure, outstanding supplier payments shall be recorded and managed by the accounts payable team. They ensure that payments are made in a fair and timely manner, promote good supplier relations as well as maintain strong partnerships with suppliers.

Benefitsof Quote to Cash 

1. Streamlined Sales Cycle

The Q2C integrates the entire sales process into a seamless workflow, eliminating manual handling and reducing administrative tasks. This streamlined approach increases the speed of business cycles, enabling companies to respond more quickly to customer inquiries and close deals faster.

2. Improved Customer Experience

The experience of the customer will be enhanced by an efficient and transparent Quote to Cash process. Customers are provided with timely and precise quotes, while clearer terms of the contract will lead to more effective communication. Customer satisfaction is further enhanced by effective management of orders and timely delivery.

3. Increased Revenue

Optimization of the quotations to cash process can lead to an increase in revenue generation. The increased conversion rate is due, in part, to the quicker turnaround times for quotes and better management of sales. In addition, the average size of contracts may be enhanced by the fact that an opportunity to upsell or cross-sell can be identified in the sales process.

4. Accurate billing and invoicing

The risk of errors in billing and invoicing will be reduced by using automation during the quote-to-cash process so that customers are properly invoiced on time. As a result, payment delays are reduced and cash flow is improved.

5. Financial Transparency

By tracking and managing sales data, revenue recognition, and cash flow, an effective Quote to Cash process provides better financial visibility. The visibility enables enterprises to make sound financial decisions with a view to making the most effective allocation of resources.

Software Tools for ManagingQuote to Cash

1. HubSpot Sales Hub

HubSpot is a powerful and easy-to-use sales CRM that includes sales engagement tools, configure-price-quote (CPQ) functionality, and robust sales analytics for growing teams. Sales Hub is built on the HubSpot CRM platform where customer data, tools, and teams come together to create a single source-of-truth for unprecedented sales rep efficiency.

2. Salesforce Revenue Cloud

Revenue Cloud is a software that helps you grow profitably with agile revenue cycle management across any channel in any industry. Unifying all product-to-cash customer touchpoints on CRM allows you to launch recurring revenue streams, transform the customer buying journey, and reduce operating costs. Built on the#1 CRM, Revenue Cloud comes with built-in automation, intelligence, and real-time data.

3. IBM Sterling Configure, Price, Quote

IBM Sterling CPQ transforms the buying and selling of complex products and services across all of your buyers’ preferred channels to make it easier for your customer to buy from you. Their CPQ software solution guides eCommerce customers, sales teams, call center representatives, and partners to select the right products and ensure pricing is accurate.

4. OneBill

OneBill is an end-to-end billing & monetization platform for global scale. Businesses across regions trust OneBill to power their entire billing & monetization lifecycle, from subscriptions to sophisticated usage-based pricing models, product catalogs to bundles and offers, order fulfillment to user provisioning, quote-to-cash to AR management, accounting and taxes to revenue recognition, multi-org/ multi-tenancy to multi-currency pricing, self-signup to channel partner/ reseller enablement, customer portals to partner/ agent portals – all within a single unified platform.

Conclusion

Quote to Cash or Q2C is a business process that encompasses the entire sales cycle from the customer’s intention to purchase up until the final payment and realization of revenue. Thus, it’s so important for a lot of companies and organizations.

In addition, the Q2C process involves a wide range of activities so it’s more prone to errors and inaccuracies.

Furthermore, the Q2C process in procurement is the same as its general meaning. The only difference is that the customer is you. So, you’ll be given an RFQ and the process goes on further until you reach the accounts payable management.

So, it’s important to have Q2C because it doesn’t only streamline your sales cycle but also improves billing and invoicing, and involves financial transparency.