Everyone celebrates when the sales team gets a contract signed with a new customer, but the . However, no one celebrates when the accounts receivable team collects the first payment.
Closing a deal with a new account is really just the first step in the financial relationship you will have with the customer. Once the contract is signed, the hard work is over for the sales team, but it is just beginning for the rest of the organization. The customer success and professional services teams have to do the hard work to get the customer implemented/activated and realizing their business goals. The finance and accounting team has to do the hard work of realizing the cash flows and revenue from the customer contract.
The overall process is often referred to as the quote-to-cash (QTC) lifecycle. For traditional product-oriented companies, such as those in the manufacturing and consumer packaged goods segment, the quote-to-cash process occurs with each order cycle. For subscription and SaaS businesses, the quote-to-cash process typically occurs annually with each renewal or more frequently as upsells arise.
Automating and optimizing the quote-to-cash process can be a big challenge for businesses with complex contracts and revenue dynamics. Inefficiencies or mistakes in the quote-to-cash process can lead to delays in incoming cash flows, lost sales due to revenue leakage, and audit problems resulting from inaccurate accounting. For SaaS and subscription companies with ambitions of scaling up, raising outside capital, and exiting via an IPO or M&A transaction, the quote-to-cash process to attain their goals.
What is Quote-to-Cash?
Quote-to-cash starts in the late stages of the sales cycle, when the customer is presented with a formal quote that specifies the products and discounted pricing being offered. It continues after the contract is signed with the invoicing and payment collection process as well as the bookkeeping performed by the accounting team to recognize the revenue in the company’s financial ledger(s). A best-in-class quote-to-cash framework ensures:- Quotes include only products being actively sold with discounts or promotions approved by sales and/or finance leadership.
- Contract signatures are captured electronically and flow directly into CRM, legal, and financial systems.
- Recurring invoices are generated automatically based on contracts according to customer’s selected billing schedule.
- Recurring payments are collected via credit card, ACH, wire or check using auto-pay or traditional accounts payable process.
- Deferred revenue is tracked throughout contract and recognized as performance obligations are satisfied in line with ASC 606 and IFRS 15.
- Renewals are initiated as contract end dates approach. More complex contracts are negotiated by customer success teams. Simpler contracts automatically renew.
Why Quote-to-Cash Matters for SaaS
Quote-to-cash is critical for SaaS and subscription companies seeking to scale up quickly. Best-in-class SaaS and subscription companies can quickly convert signed customer contracts into cash collections and are less dependent on outside capital. They can self-fund more of their growth. Underperformers with immature quote-to-cash processes will struggle with:- Revenue leakage from billing mistakes. Unbilled charges and proration mistakes can compound across thousands of customers.
- Delayed sales bookings. If quotes and contracts are built using inactive SKUs or require email-based reviews, deals stall in the pipeline, and sales velocity slows down.
- Audit and investor risk. Revenue recognition inconsistent with GAAP accounting and performed in spreadsheets create audit risks and can delay funding rounds.
- Customer experience. Confusing invoices or delayed billing adjustments lower CSAT and NPS scores and drive churn.
The Stages of the SaaS Quote-to-Cash Process
For subscription businesses, QTC typically unfolds in eight interconnected stages. Each stage relies on the one before it, so gaps in one area often ripple through the entire cycle.
1. Product and Pricing Configuration
The company’s product catalog is centralized with all available SKUs. Pricing metrics and formulas are defined for each product along with allowable discounting rules
2. Quoting
Sales generates a formal digital quote that includes terms, discounts, and promotions. Customers should be able to approve electronically without delays, shortening the sales cycle.
3. Contract Management
Quotes convert into contracts that specify the products purchased, prices paid, billing frequency, renewal dates, and payment terms. Centralized contract storage ensures the latest version is always accessible and audit-ready.
4. Activation and Implementation
Contract signatures trigger automated provisioning of product offerings or kick start a professional services-led implementation process.
5. Billing and Invoicing
Contract terms are fed to the billing system, which analyzes the products, unit prices, quantities, and discounts to calculate line item charges. Invoices are generated according to payment schedules.
6. Payment Collection
Payments are collected via credit card, digital wallet, bank transfer (ACH), wire transfer, and check. Accounts receivable workflows automatically retry failed transactions and generate customer communications to notify them of late payments.
7. Revenue Recognition
Deferred revenue schedules are automatically created based on the payment terms and performance obligations outlined in the contract. Revenue is recognized each period throughout the contract term and posted to the general ledger.
8. Renewals and Upsells
The quote-to-cash cycle repeats as customers purchase additional products and services and at the end of subscription term when renewals are negotiated.
Challenges in SaaS Quote-to-Cash
Quote-to-cash processes for SaaS companies can be inherently complex. Common challenges include:- Pricing complexity. SaaS companies are using a mix of different pricing models including subscription, consumption, and transaction with a variety of different pricing metrics, discounting models, and promotional incentives.
- Sales quote approvals. Sales quotes may be sent with products that are no longer actively being sold, discounts that have not be approved by leadership, and contract terms that are not agreed to by legal.
- Upsells and Cross-Sells. SaaS companies are measured on how quickly they can grow customers with upsells and cross-sells, most of which happen in the middle of contract terms. These mid-cycle changes require complicated prorations to billing and revenue schedules to ensure payments are collected and bookkeeping is accurate.
Quote-to-Cash vs. Order-to-Cash
Order-to-cash (OTC) starts at the order and ends at payment collection. Quote-to-cash (QTC) begins earlier, with quoting and contracts, and extends further into renewals and compliance. For SaaS, QTC is the more complete framework—because revenue doesn’t stop after the first invoice.
The Role of Technology in QTC
There are two strategies for automating the quote-to-cash process. The first is a best-of-breed approach, in which selecting specialized applications for each different part of the lifecycle. The second approach is to purchase a quote-to-cash suite from a single SaaS provider. With a suite, all the functionality is provided in modules that are tightly integrated using the same database and platform. Regardless of which model you select, it is important to select application(s) which can automate each step of the lifecycle, including:- Configure, Price, and Quote (CPQ) – Configure highly bundles of products, standardize discounting and pricing, and generate quotes for review and signature.
- Billing and Invoicing – Calculation of the line items to appear on invoices and the associated sales or value added taxes (VAT). Once charges are determined, the
- Rating Engine – For usage-based pricing, a rating engine will be needed to determine the billable quantity and prices for consumption.
- Payment Collection – Capture of payments via credit card, digital wallet, bank transfer (ACH), wire transfer or check. Automated collections via auto-pay.
- Revenue Recognition – Automated generation of deferred revenue schedules and journal entries mapped to the chart of accounts and uploaded into the general ledger.
Frequently Asked Questions
What is the quote-to-cash process in SaaS?
It’s the end-to-end revenue workflow: quoting → contracts → billing → payments → revenue recognition → renewals.
How is QTC different from order-to-cash?
QTC is broader. OTC starts at the order; QTC starts with the quote and continues through renewals and compliance.
Why is QTC important for SaaS companies?
Because it ensures accurate pricing, discounting, and contracting during the sales process and speeds up invoicing, payment collection, and revenue recognition.
What are the biggest QTC challenges?
Pricing models are complex. Sales quotes lack approval workflows. Upsells and cross-sells result in complex proration calculations.
What tools help with QTC?
Quote-to-cash suites automate the full lifecycle from the initial sales quote to the final payment collection. Alternatively, there are SaaS applications for each part of the lifecycle – CPQ systems, subscription billing software, payment gateways, and revenue recognition.
How should QTC integrate with other enterprise systems?
Best practice is to connect CRM for quoting, ERP/accounting for revenue recognition, and the SaaS product for usage-based metering data feeds.
Wrapping It Up
For SaaS and subscription businesses, QTC is a critical process to optimize to ensure predictable growth. Done poorly, it results in a productivity drag, introduces audit risk, and creates customer experience issues. Done well, it improves internal productivity, accelerates close cycles, and builds customer trust.
Best Practices Checklist
To strengthen your QTC process:
- Audit your quote workflow. Are discounts, approvals, and pricing rules standardized? Do exceptions require approvals from sales leadership, finance, and legal teams?
- Connect systems. Ensure information about products, pricing, contract terms, and payments flows smoothly through the quote-to-cash system from upstream CRM and product applications and into downstream finance and accounting systems.
- Ensure billing accuracy. Inaccurate billing creates a bad customer experience lowering NPS and CSAT. Regularly audit the most common fail points – prorations after upgrades/downgrades, and usage-based calculations.
- Evaluate payment collection. Automate collections of payments through multiple channels (check, wire, ACH, cards). Offer auto-pay for recurring billing. Set up dunning processes to retry failed transactions and communicate late payments to customers.
- Automate revenue recognition. Avoid spreadsheets. Use commercial software to track deferred and recognized revenue in compliance with ASC 606 and IFRS 15 accounting standards.
- Monitor renewals. Obsess over renewals to minimize churn. Set up workflows for auto-renewals. Build pipelines for customer success to track upcoming contract end dates.
At the end of the day, quote-to-cash isn’t only about collecting money—it’s about ensuring your revenue is predictable and your customers stay for the long run.
The Quote-to-Cash Process for Subscriptions and SaaS
The Quote-to-Cash Process for Subscriptions and SaaS
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