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What Is Quote-to-Cash?

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Quote-to-Cash (QTC) is a process that encompasses the end-to-end cycle from generating a sales quote to collecting a customer's payment. 

Quote-to-cash bridges the gap between sales and finance departments. Effective quote-to-cash processes ensure smooth operations from initial customer engagement to revenue realization. It encompasses quoting, contracting, order management, and invoicing, streamlining the sales cycle and driving revenue growth.

How the Quote-to-Cash Process Works

The quote-to-cash process kick-starts with the sales team generating a quote. This presents the customer with the products’ or services’ pricing and terms. Once the customer accepts, the quote transforms into a contract.

During contract management, the team negotiates, finalizes terms, reviews legal requirements, and sets payment and delivery schedules. One the contract is approved, the order fulfillment stage begins.

In order fulfillment, the team configures the product, manages inventory, and orchestrates logistics. They convert the sales order into an actionable plan, allocating resources and materials to meet customer needs. After delivery, they invoice the customer.

The process culminates with invoicing and payment collection. The team generates an invoice from the contract terms and sends it to the customer. Accounts receivable ensures prompt, precise payment collection. Upon receiving payment, they recognize revenue, wrapping up the financial components of the quote-to-cash process.

The Importance of Quote-To-Cash in the Subscription Economy

Customers are increasingly opting for subscription services. Therefore, businesses must efficiently manage the entire lifecycle of customer engagement, from quoting to invoicing and revenue collection. Quote-to-cash enables businesses to streamline and automate these processes. This reduces manual errors, improves customer lifetime value accelerates the sales cycles, and improves cash flow.

Implementing robust quote-to-cash systems enhances the customer experience, ensures accurate pricing and billing, and eliminates revenue leakage. The process provides visibility into the sales pipeline, enabling better forecasting and decision-making, and helps businesses scale effectively. 

The Difference Between Procure-to-Pay and Quote-to-Cash

While Procure-to-Pay (P2P) and Quote-to-Cash share similarities, they represent different processes. P2P focuses on the purchase of goods and services for a business. This encompasses activities such as requisitioning, purchasing, receiving, and accounts payable. On the other hand, Quote-to-Cash primarily centers around the sales process, from generating quotes to revenue collection. While both processes involve financial transactions, their focus and scope differ.

The Difference Between Accounts Receivable and Quote-to-Cash

Accounts Receivable (AR) is a subset of the Quote-to-Cash process. AR specifically refers to managing and collecting payment from customers after the sales cycle is complete. It involves tracking outstanding invoices, communicating with customers regarding payment terms, and ensuring timely receipt of funds. Quote-to-Cash, however, encompasses the entire end-to-end process. For example, quoting, contracting, order management, fulfillment, and invoicing, in addition to accounts receivable activities.

The Difference Between Quote-to-Cash and Order-to-Cash

Quote-to-Cash (QTC) covers the entire sales cycle, from generating quotes to collecting payment. Order-to-Cash (OTC) focuses solely on the fulfillment and invoicing stages, excluding the quoting and contracting phases. QTC encompasses the end-to-end process, while OTC is a subset of QTC, emphasizing order fulfillment and revenue collection.

Updated on 28. November 2023

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