Sales teams climb the deal “mountain” every day, reaching the top when the deal is done—with the revenue in the bank as proof.
However, all too often businesses get stalled on the climb, and can’t collect the anticipated cash at the end of the deal. One of the reasons? A disconnected quote-to-cash process.
“Quote to cash” essentially illustrates what happens in the sales process after quote generation, including the steps necessary for companies to collect revenue.
It is clear that the quote-to-cash cycle is anything but simple. For companies with complex product and service offerings, each of the steps in the quote-to-cash cycle requires a system—whether manual or automated—to keep the process flowing.
As mentioned above, In the quote-to-cash journey, one would expect that the ultimate destination would be revenue. However, according to Aberdeen, “enterprises lose 9% of their revenue due to regulatory penalties, missed deadlines, lost sales, maverick pricing and transactional errors.” How is this happening?
CRM systems are most ideally used for sales process steps such as pipeline management, reporting opportunities, and reporting the sales funnel to sales management. CRM systems aren’t meant to handle transactional heavy-lifting. Conversely, ERP systems weren’t designed to be customer-facing (easy-to-use for salespeople or customers), and don’t allow users to take orders. These separate systems are missing a key ingredient: a system that can handle guided selling (think CPQ with a brain). With the connective tissue of guided selling missing, it is significantly more difficult to navigate an entire deal from opportunity to order.
If information in any of the systems mentioned above is incorrect, compromised, altered, or otherwise corrupted, a customer is ultimately going to be shipped the wrong order. Naturally, this leads to a series of new problems. First, customers will ship back the erroneous items, preventing the company from collecting expected revenue on that deal in the timeframe they were anticipating. Second, it does not take much time for a dissatisfied customer to give up on a vendor whose shipments are faulty, particularly when it happens more often than once. It goes without saying that unhappy customers who chose not to engage in business with a vendor represent lost revenue as well.
When sales reps are faced with expansive product catalogs and complex configurations, they tend to offer deals with which they are most familiar. Neither CRM nor ERP systems have the guiding tools necessary to aid sales teams in creating the best deals—including gaining visibility into up-sell and cross-sell opportunities—while simultaneously avoiding maverick discounting, transactional errors, or promising products that manufacturing can’t deliver.
Guided selling software allows salespeople or customers to conduct needs analysis and put together the right product and service combinations. While this type of software benefits companies in a number of ways, it can benefit the quote-to-cash process in particular.
It’s simple: when incorrect data is entered into a CRM or ERP system, incorrect orders come out. Essentially, if you haven’t controlled what information goes into the system initially, it doesn’t matter what happens on the backend. Though companies recognize that this issue leads to revenue leakage, they don’t necessarily have a ready way to fix it. Re-keying information becomes a major problem at this point since every time this is done, the manual action presents an opportunity for a mistake. Glaring mistakes are generally caught easily. But small mistakes—a different number, a different option, etc.—can go undetected causing issues downstream.
By using guided selling software from the very beginning of the process, accurate information is being entered into one system, including rules that ensure that the right people are selling the products that they’re approved to sell—at the correct prices. Data doesn’t have to be entered and then re-keyed to accommodate multiple systems, so updates or changes to products, pricing, or promotions are immediately available to system users. Not only does this keep sales processes flowing, it also ensures that products can be verifiably fulfilled by manufacturing, will be offered at prices that protect company margins, and will satisfy the customers who order them.
If there are manual CPQ processes bridging your CRM and ERP systems, the likelihood of error increases. When all stages of the sales process are automated, the process as a whole becomes more seamless. When revenue is on the line, there’s no room for lag time due to approvals confusion, working out of multiple systems in multiple locations, and lack of visibility into the status of a deal. Connecting and automating the entire sales process ensures that the quote-to-cash process starts sooner than at the pricing stage and that information gathered from opportunity to quote is accurate and readily available.
Dissatisfied customers don’t pay. And, as mentioned before, even when a company finally does get the correct order shipped, a customer will likely seek out a new, more reliable vendor. Using guided selling software in conjunction with CRM and ERP systems, sales reps can easily see quantities, pricing, bundle options, and discounting that they’re approved to offer, ensuring that customers get offered the right deals up front, that those orders are processed and delivered quickly, and that customers pay the agreed-upon amount- and come back for more later.
In order to be able to effectively track and manage orders from opportunity to revenue collection, all systems used to manage a sales process should ideally be in sync. Synchronicity and the spread of consistent sales information can be achieved with guided selling systems, which ensure that what manufacturing can produce on the back end is in sync with what sales teams offer on the front end. Eliminating the tug-of-war between sales and manufacturing creates greater productivity and ensures that customers will be offered what is actually available—on time, and without any “I’ll…get back to you on that” moments for sales. Keep in mind that ERP vendors invented the term “quote-to-cash,” but they can’t help with what happens pre-quote.
The CPQ process itself can sometimes require a mix of disparate or manual systems, increasing complexity in the ideal opportunity-to-cash cycle. Configuration in particular is a step in the process that creates lag time. Combinations of SKUs are entered into the system and remain there, even when the combinations aren’t feasible any longer. Catalog-based searches cannot dynamically create configurations either, leaving sales teams to figure out what can and cannot be offered to the customer. A guided selling system takes traditional CPQ functionality to the next level, serving as a “recommendation engine” for sales teams, and accelerating sales processes. Sales reps at all levels—from beginner to seasoned expert—and in various channels, become more agile and can readily access information to create error-free deals, regardless of the level of intimate knowledge they have about a company’s product portfolio.
A significant part of getting to the cash in the quote-to-cash process involves activities associated with contracts. Consider this scenario from Aberdeen’s research:
“In any enterprise the reduction of sales cycles is critical and through our research we have found that, on average, 18% of an enterprise’s sales cycle is attributed to contract creation, negotiation and approval, which if reduced can have a significant impact. Exploring this further, we concluded that on average a one day reduction in the sales cycle is worth approximately $80,000. For the larger enterprises this is worth over $215,000; in several cases, this number was much larger and the fact is that Best in Class companies have cycle times that are 10 to 15 days shorter than other companies, showing that there is a fairly significant opportunity.”
CPQ software helps plug the revenue leak associated with the quote-to-cash process by reducing operating expenses associated with fixing errors, protecting the integrity of your data, giving sales teams more opportunities to chase orders, and creating orders that make customers happy, thereby increasing the likelihood that they return and buy more.
Every sale is a climb, but the right software can make the mountain feel more like a molehill.
Selectica (NASDAQ: SLTC) develops innovative software that the world’s most successful companies rely on to improve the effectiveness of their sales and contracting processes. Our guided selling, sales configuration, and contract lifecycle management solutions support the Global 2000 and growing mid-size firms in closing billions of dollars’ worth of business each year. Our patented technology, delivered through the cloud, makes it easy for customers in industries like high-tech, telecommunications, manufacturing, healthcare, financial services, and government contracting to overcome product and channel complexity, increase deal value, and accelerate time to revenue.