Report: Ensure Your Quote-To-Cash Processes Match Your Evolving Business Model

As business models in the tech industry continue to evolve, PricewaterhouseCoopers (PwC), a well-known consulting company, is urging players at all levels to take a hard look at the full scope of their operational processes.

PwC's report, "Technology Industry at the Crossroads: Transforming Quote-to-Cash Operations," points out a number of salient issues that range from the initial lead discovery to the concluding aspects of paid invoices and satisfied customers.

"Quote-to-cash is not a sexy subject, but it is critical to the survival of the company," said Joe Lo, a partner at PwC who leads the customer competency practice for the technology sector operation. "It basically covers the sales cycle, the fulfillment process, billing and revenue recognition -- all the key pieces to doing business.

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Typical elements of quote-to-cash begin with the procedures around the initial sales quote, just as the term would suggest. They then extend to the activities that lead to configuration, optimization, final pricing and quote acceptance. The transaction then moves into the order management process, including credit check, trade compliance check, etc., at which point it moves to the fulfillment phase. Next steps often include invoicing, collection and recognition of revenue. All of these things need to be done in a way that best matches the business model of the company while the same time meets the needs of the customer and the partner, whether that partner is a channel player or a vendor.

Lo points to three reasons why quote-to-cash processes have emerged as a fundamental C-suite discussion. The first is a higher level of customer expectation around buying what they want, where they want and when they want. While these demands are nothing new in the business world, the evolution of online transactions, combined with the always-on aspect of the Internet, has raised both the game and customer expectations.

"The number two change is the new business models," he said. "Cloud, software as a service, managed services, and the melding of hardware and software are good examples. Companies need to revamp their quote-to-cash processes because their original processes just don't support the new business models. The third reason to examine quote-to-cash [processes] is about mergers and acquisitions. Very often, the quote-to-cash practices of the acquired company are different from the company that is making the purchase. It can be very difficult to integrate these processes because the technology platforms are frequently incompatible. So, they end up either running multiple quote-to-cash processes within the same company, or they are sinking a lot of time and money into getting everything integrated."

NEXT: Cross-Functional Complexities

Regardless of whether acquisition is involved, one of the key challenges of assessing and adjusting quote-to-cash processes involves the cross-functional component.

"Sales is involved because they are the ones who are generating the lead and in adjusting the final pricing," PwC's Lo said. "Marketing is involved because they set the initial pricing and handle the promotion. It also impacts finance because they have to deal with revenue recognition and collection. And then there's the operations piece. They deal with the order; they deal with trade compliance and credit check, plus a host of other functions. Once you add all these components together, it becomes a truly difficult and complex enterprise transformation."

Lo added that finding the ultimate stakeholder can also be profoundly challenging.

"It's not always obvious who would be the overall lead," he said. "We have seen the executive sponsor in the form of the chief operating officer, the chief financial officer, the chief customer advocacy officer, and [in] smaller companies, it can often be the president."

Much of the decision-making process depends upon the strategic imperative of the company. Some companies may be focused primarily on ease of doing business for the customers. Others may be more focused on productivity and efficiency. But, Lo said that it's important to keep the ultimate objectives in mind when you are developing or refining the underlying practices.

"The entire executive leadership team needs to get behind that transformation and communicate that to the organization," he said. "You may even need to segment your customers and come up with multiple quote-to-cash processes in order to properly serve each group. You could have a no-touch process that is suitable for nonstrategic customers who are only spending a small amount of money. These customers might buy online, pay full price and get the order fulfilled without dealing with another human. At the other extreme, you may need a high-touch process to accommodate large, strategic enterprise customers who warrant special pricing in a higher level of support. In those cases, you'll want a process that enables those enhancements. Doing these things the right way has a lot to do with the success and the survival of the company."

PUBLISHED JAN. 25, 2013