Quote-to-Cash (Q2C) is one of the few processes that touches every part of business. For sales, it incorporates everything from creating initial offers for prospects to collecting cash, as well as the ability to generate a frictionless high-quality quote. For legal, it involves knowing the terms and conditions of every contract upfront. For customer success management (CSM), it incorporates having a 360° view of the customer for subscription or order details, which enhances opportunities to cross-sell or upsell and a frictionless renewal process. 

Finance is involved because they are a key player in determining customer credit worthiness, which impacts sales commission. This also gives them greater visibility into billing terms, cash management and, of course, the chance to get in front of revenue leakage before it actually happens (or gets worse). For leadership, a view into Q2C allows them to influence customer or sales rep behavior towards a favorable outcome for the company. This, in turn, creates a faster deal close and helps to identify high customer value (annual recurring revenue or ARR/monthly recurring revenue or MRR). 

“[Quote-to-Cash] is what pays your bills,” said Venkat Ranga, Head of Business Information Systems at Aryaka Networks. “If you can figure this out and make the process more efficient, you’ve got a bonus waiting for you there,” he joked. This was the topic of the Q2C session at Biz Systems Magic, the first and only conference for Systems leaders. In going over his nearly two decades of experience in the industry, currently at Aryaka Networks and previously at Malwarebytes, VMware and others, Ranga discussed the strategic initiatives for Q2C he’s built at different companies. Towards the end of the presentation, he brought up fellow Systems leaders Chris Blaisure of Elastic and Brian Flood of Fastly to talk about their experiences with Q2C and how they’ve solved unique challenges at their organizations.

The Complexity of Quote-to-Cash

Quote-to-Cash is a layered process that demands efficiency. Each layer or step has its own processes and functions that need to be involved. For the first layer, quote, most companies have to consider SKU pricing models, how to renew/create/amend a quote, as well as discounting and approval flows. This part, alone, incorporates product, sales and sales ops, renewals, and leadership functions. 

Contract management, which involves the creation, negotiation and execution of a contract, plays an integral role in informing a sales team how to protect the IP of a company – what terms and conditions need to be applied, as well as any compliance issues. This involves legal, finance, sales, and leadership functions. For order fulfillment, depending on the type of company, this can either be a simple or complicated process. If you’re a software company, provisioning can be done through a secure email link. But if you’re a hardware company, a number of other steps have to be involved to provision your item, including physically shipping it to you, that impacts billing, renewals and related processes. This involves product, engineering, and technical support functions. 

In terms of billing, there’s different types that can be applied: your finance team may require that the client pay Net 30, 60, 90 upon goods shipment or job completion. They may ask to bill upfront or bill rear. You may offer burstable billing, which allows customers to exceed their bandwidth commitment for brief time periods throughout the bill cycle (5% of the month) without incurring any data charges. This part of the process also involves, of course, invoicing and collection. Functions involved with this include finance, collection and taxation. In recent years, taxation or the expectation of taxation has been required upfront, said Ranga. If this is not done on your end, he said, and you bill rear, the client may have created a PO based on the quote which doesn’t fully cover taxes, which can cause problems down the road.

The last piece of the puzzle is Revenue Recognition (Rev Rec), a generally accepted accounting principle (GAAP) and process for reporting revenues by recognizing the monetary value of a transaction or contract over a period of time as the revenue is “earned”—not when cash is received. For this, you also have to consider one-time fees, recurring fees, vendor-specific objective evidence (VSOE), and ASC 606 compliance, which requires buy-in from finance, leadership and any other required stakeholders to see how this affects the quote and overall Q2C process.

As new standards are being put in place and you’re looking to generate higher cash flow margin, it makes sense to create automated workflows that transfer necessary data between systems and teams so that the process is less error-prone, more efficient and frictionless. Time is money when it comes to closing a deal, said Ranga.

Commonly-Used Systems for Quote-to-Cash (And How They Improve the Process)

In Ranga’s experience, he’s used a variety of systems to handle each step of the Q2C process – including Salesforce and Microsoft Dynamics for opportunity; Apttus, Salesforce CPQ, Zuora, and Oracle (formerly BigMachines) for quote; Salesforce, SpringCM, Conga, Apttus, and Microsoft Agreement Management Tool for contract; Salesforce, Microsoft Dynamics, and Zuora for order and others. He’s also used or considered Zuora, Salesforce, NetSuite, Aria, and Workday for billing; and Zuora and NetSuite for Rev Rec.

In order for this entire end-to-end process to work, however, Ranga says you need an iPaaS platform to integrate the core systems and automate the processes between them so teams can focus on more complex, value-added work and less on the administrative tasks. 

“If you do not have the right iPaaS solution, which is integrating all these systems, you are going to have a problem,” said Ranga. “Find the right fit for you, or else you won’t solve this process, your company will be less efficient, and you’ll be back to where you started.”

In integrating these systems, some of the problems you will solve/features you will allow are:

  • Quote – SKU Pricing Models:
    • Simplify your SKU setup – how are you pricing your SKUs
    • Maintain different pricing for bundles versus individual SKUs
    • Maintain discount structure at partner/reseller/customer level
    • Develop SKU cradle-to-grave process – what to do at end-of-life or EOL
    • Create a SKU Master or template
  • Quote – Quoting:
    • Ability to select different price books while quoting
    • Ensure the system is able to add maximum number of lines needed for your quoting needs
    • Guided selling – create a prompt that asks sales reps about the types of products they want when they’re adding products to a quote. The quote tool in question will then review the answers and then show an Add Products page with a list of products that match the sales rep’s responses (Salesforce CPQ permits this)
    • Identify minimum customer information needed while building a quote
    • Insist on co-term, or adjusting your subscriptions so that they all come up for renewal at the same time – making for easier management
  • Contract:
    • Decide standard and non-standard contract clauses
    • Alignment across finance, legal and sales upfront so T&C can be redlined 
    • Develop separate standard NDA and MSA for direct/partner/reseller
    • Add T&C upon selecting relevant product or service during quoting process
    • Decide contract content repository
  • Order & Billing:
    • Make the order a single source of truth 
      • Must contain all SKUs (billable, non-billable, one-time, subscription, assets)
      • Must contain all billing terms (start date, end date, term) at line level
      • Must contain list price, sale price, discount at line level
    • Agreement for pre-approved billing terms and models
      • One-time versus Subscription
      • Upfront versus Rear
      • Usage, overage and credit
    • Setup SKUs that reflect product group/family and support Rev Rec
    • Identify what to automate (and what not to automate)
    • Enable taxation

Assessing Automation Maturity in Quote-to-Cash

Signs that your automation strategy has reached maturity, according to Ranga, include accurate margin calculations during the quoting process, a comprehensive 360° view of the customer throughout Configure, Price, Quote (CPQ) so that all stakeholders are viewing the same information – which will ultimately lead to faster, more accurate quoting and higher deal win rates. 

For contract management, cross-functional team members should experience real-time processes and consistent legal language across all contracts, electronic signatures and redlinings. They also should be able to control and see whatever is necessary to improve compliance with government regulations, and focus only on exceptions to the process – the rest is automated. 

For order and revenue management, team members should be able to manipulate orders at the line level, see in-flight changes to orders, and change delivery conditions. They should also be able to use asset-based ordering, capture and consolidate orders across all channels, show order status in customer 360°, and enable fast renewals.

Automating Compliance in Quote-to-Cash

For automating some of the compliance aspects of contract and quoting specifically, both Chris Blaisure of Elastic and Brian Flood of Fastly have handled it quite similarly.

By creating an order object in Salesforce CPQ and using custom fields that link SKUs to certain values, Elastic was able to create a dynamic order form that presents the SKUs a customer has purchased with only the terms that are appropriate to those SKUs. “This creates a dynamic form so that at the time that we’re closing the order, we’re only negotiating the items that were bought,” said Blaisure. “This has actually helped us out a lot in streamlining the process and saving cycles on the legal side.”

“We actually building the same process now,” said Brian Flood of Fastly. “But what we also found really interesting is that you can influence a lot of behavior through your Quote-to-Cash process. Like through your approvals, you know where you put your thresholds is where your reps are going to price. The same thing is true with what you present on a sales order versus a MSA. And we found that we can actually generate a more favorable outcome for the company when you put certain things on a sales order as opposed to the MSA – something we’ve observed over time.”

“So we’re trying to put more things on the sales order and creating a lot of functionality around managing different terms for different products, similar to what Chris was describing,” Flood added. “But there’s this sort of behavioral aspect to the Quote-to-Cash process that we found really fascinating.”

Streamlining Quote-to-Cash With Business Systems

When it comes to assessing the maturity of your Q2C process, it all comes down to opportunities for innovation Systems leaders spot and how they work with stakeholders to bring these ideas to fruition. 

“If you’re new at an organization and you’re not integrating any of these systems, introducing automated workflows, or aligning once disparate systems and teams to execute steps, then you have to go in and start making improvements,” said Ranga. “That’s the only way for Quote-to-Cash to thrive and for your company to not fall behind.”

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Pamela Seaton
About Pamela Seaton

Pamela is a journalist and technology enthusiast writing for the growing business systems community.