Order-to-cash and quote-to-cash: what’s the difference?
Gaining new customers for your business is an immense accomplishment and requires a team effort from numerous departments within your company. However, the hard work does not stop once you’ve closed the deal or when a customer makes the initial order. In fact it is just the tip of the iceberg - what comes next can be even more complex. This process is called Order to Cash.
What is order-to-cash?
Order-to-cash, also referred to as OTC or O2C, is the set of business processes involved with receiving and fulfilling customer requests for goods and services.
Simply put, order-to-cash is the actions required to deliver the products and services to fulfill customer orders. The order-to-cash process encompasses the entire lifecycle of order fulfillment, involving numerous strategies such as inventory management, operations, and production. The process begins once a customer order is received. Once the order has been processed, the next steps include strategizing your supply chain on how to get products out of stock or manufacturing, preparing products for shipments, and delivering it to the customer. Once the product has shipped successfully, the final stages of O2C progress through invoicing the customer, collecting payments, and recording the revenue in your general ledger (back end ERP). A successful order-to-cash process is vital to a successful business.
The difference between order-to-cash and quote-to-cash
If the order to cash process takes over after a customer has purchased and progresses through revenue recognition, what makes it different from the quote-to-cash process? Despite some similarities, the quote-to-cash process encompasses a larger set of business processes, which span from a customer’s INTENT to purchase a product or service all the way through the realization of revenue. More specifically, O2C greatly differs from QTC in the following ways:
O2C does not Include the processes of configuration pricing quoting (CPQ)
The processes of order-to-cash do not include any part in the configuration of the product or service, the setting of a price, or the creation and sending of a quote to the customer. All of these things are done prior to the O2C process. Configuration, pricing and quoting (often referred to as CPQ) are the first stages of the quote-to-cash process. Deciding on the best fit of product and service bundles for potential customers requires the communication and generation of accurate pricing and quoting information– aspects that play a major role in deal sizes and cycle times. An intelligent CPQ solution will help drive shorter cycle times and larger deal sizes by quickly directing reps to the best products and pricing, while providing intelligent upsell recommendations based off of passed deals.
O2C does not include the entirety of contract lifecycle management
Contracts are the backbone of your business, and although the O2C process uses data from customer contracts, the creation and negotiation of contracts happen beforehand outside of the typical order to cash cycle. Quote-to-Cash on the other hand, incorporates all contract management processes including, contract creation, negotiation, execution and even revenue management and recognition. Effective contract management in the QTC process can result in shorter contracting cycles, an increased acceptance rate, higher compliance, and lower administrative costs.
Order-to-cash hones in on order fulfillment and how to effectively deliver on customer orders, but it is only one piece of the pie. Quote-to-cash is a much larger process that encompasses the order to cash process, as well as configure price quote and contract management.