Understanding the Quote-to-Cash vs. Order-to-Cash Process
4 MIN READ
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Updated on December 1, 2022
We are living in a cloud-first world. According to Allied Market Research, “the SaaS market size was valued at $148.75 Billion in 2021 and is projected to reach $702.19 Billion by 2030.”
Bessemer Venture Partners expects the cloud to penetrate 50% of enterprise software and over 75% of software by 2030. The venture firm also believes that the cloud will transform and grow beyond enterprise software as we now turn to the cloud for education, healthcare, and more.
As traditional businesses transition to the cloud, more and more customers will partner with SaaS software providers to scale their revenue. Even companies like Twitter and BMW are now looking to adopt or at least test the waters of popular subscription models.
With growth, though, comes a lot of competition. Be it billing software or CRM, there are probably 20 other players competing for the same customers in the SaaS world.
So, the question comes down to – why should potential customers choose you?
The trick lies in establishing efficiency throughout the entire sales cycle, from attracting the right buyers to long-term customer retention.
If your team wants to make the most of every sales opportunity, refining and understanding the quote-to-cash process is a great first step. Today, we’re here to help you do just that.
What is the quote-to-cash process?
Quote-to-cash (QTC) is an end-to-end business process that includes all sales processes, the reviewing of contracts and payment terms, order management, invoicing, and the accounts receivable process.
From the first sales order to revenue management, the quote-to-cash cycle even extends to contract renewal. This comprehensive process is key to both a great customer experience and a business’s cash flow.
What about order-to-cash?
There is often confusion between the quote-to-cash (QTC) vs order-to-cash (OTC) processes.
The OTC process defines the company’s order management system and it plays a huge role in the organization’s relationship with its customer.
It begins the moment the customer places an order and continues until the order is received and paid for.
Jacques Beauzile, a strategic account executive for Everbridge, said it best: order-to-cash contains all the actions required to deliver the product or service from customer orders.
That said, the difference between these two processes can be confusing. Understanding both is key to your sales team’s success, so let’s break it down.
Quote to Cash vs Order to Cash: What’s the Diffrerence?
Despite looking similar from the outside, both the processes are quite different.
While QTC spans from a customer’s intent and purchase to realizing revenue, the OTC process includes order fulfillment and back-end ERP like invoicing and recording revenue.
But there are a few more key differences. Here are the top 3 to make sure your sales reps are aware of:
- OTC is a subset of QTC
- OTC leaves out the process of Configure Price Quote (CPQ)
- Contract Lifecycle Management happens outside OTC
Let’s dive a little deeper into each.
1. Order to Cash (OTC) is a subset of Quote to Cash (QTC)
Raymond Juarez, the VP of QTC practice at Blueworld gives the perfect explanation.
OTC is typically managed in an ERP system and starts post-purchase. Whereas, QTC addresses a wider set of business processes where companies leverage insights from a qualified lead through to revenue, guiding sellers to make the best offer at the right price, and removing silos between sales, legal, and finance throughout the customer lifecycle.
By integrating both OTC and QTC, the business can provide a frictionless buying experience for its customers and enhance its sales workflow.
At Chargebee, we have this mantra – “Think, negotiate, convert, and collect with the click of a button,” to show how easy the sales process should be.
2. OTC leaves out the process of Configure Price Quote (CPQ)
Configure Price Quote (CPQ) is the first step in the QTC process. It is a vital step because it includes the configuration of the product or service, price setting, and sending quotes to the customer.
All of these things are done before the OTC process but play a major role in deal size and cycle time. An intelligent CPQ system will guide the sales reps to the best products and pricing for the customer and also help spot opportunities to upsell based on past deals.
3. Contract lifecycle management happens outside OTC
Although OTC works with data from customer contracts, the negotiation and creation of contracts happen outside the OTC process.
QTC, on the other hand, incorporates all the steps in contract management including contract creation, negotiation, execution, and revenue recognition.
Managing contracts effectively in the QTC process helps increase compliance, ensures lower administrative costs, and avoid churn. Plus, the right contract terms let you establish mutual commitment with customers to engage and onboard with your service.
Chargebee’s contract management can help you set, automate, and enforce contract terms from within your subscription management software.
How QTC software solutions optimize the customer journey ?
The right quote-to-cash software can help prevent siloes between teams and aid in closing a higher percentage of deals. Not to mention, it can reduce errors, increase customer satisfaction, and as a result of all this, support revenue growth.
Plus, it can provide more accurate quotes, real-time data, and reporting dashboards that will make your team more productive and simplify the sales journey.
Finally, this software can help connect the back office to the customer-facing teams. That improves communication, and boosts close rates.
Moving forward
A winning QTC process is what every business needs to succeed in the competitive SaaS market.
Chargebee can help with that. Our billing system enables you to align all the activities in your sales cycle to ensure a hassle-free journey for your customers.
In an industry where the competition increases every minute, what investments are you willing to make to give your customers the best experience possible and keep them to you?
