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5 WAYS THAT QUOTE-TO-CASH CAN BOOST
YOUR REVENUE
Revenue Velocity and Its Impact on New Deals and Renewals
APTTUS Corporation | 1400 Fashion Island Blvd. Suite 200 San Mateo, CA 94404 [email protected] | +1-650-539-2052
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Quote-to-Cash
Quote-to-Cash is the end-to-end business process between the buyer’s interest in a purchase and the
realization of revenue.
It typically includes the processes of Configure-Price-Quote (CPQ), Contract Management and Revenue Management. An effective Quoteto-Cash process requires sales, finance, legal, partners and many other stakeholders to optimally quote and price deals, quickly finalize
contracts and intelligently manage ongoing purchases. Companies who have a streamlined Quote-to-Cash process can increase revenue,
shorten DSO (Days Sales Outstanding), minimize risk and reduce overhead.
Sales executives inherently know there are many qualitative benefits of a streamlined Quote-to-Cash process­—such as higher sales
productivity, consistent sales methodologies and lower administration. But many need help quantifying the impact of Quote-to-Cash
on sales revenue.
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Revenue Velocity
Quote-to-Cash helps sales executives accomplish two key objectives: 1) increase revenue and 2) close revenue faster. That’s the concept of
Revenue Velocity. Based on the formula for pipeline velocity, Revenue Velocity can be defined as:
Revenue Velocity
=
Sales Revenue
Time to Close Revenue
=
NxWxP
T
(N) Opportunities per Sales Cycle: The number of opportunities
that a company pursues during one sales cycle
(T) Sales Cycle Time: The average duration of an
opportunity from creation to close
(W) Win Rate: The percent of opportunities that a company wins
(P) Average Sales Price: A company’s average deal size
Therefore, increasing the number of opportunities, win rate or ASP, or decreasing the sales cycle time can boost Revenue Velocity.
Because over 70% of business is often with existing customers, Revenue Velocity needs to be determined for both new deals and
renewals. For new deals, Quote-to-Cash can impact ASP, win rate and sales cycle time, but not the number of opportunities. The number
of opportunities is generally driven by lead generation versus activities like quoting or renewing contracts. For renewals, Quote-to-Cash
impacts renewal contract value (the “ASP” of renewals) and renewal rate (or the “win rate” for renewals). It does not impact the number of
renewals generated nor shorten the time to close a renewal.
Therefore, Revenue Velocity impacts five key factors: ASP for new deals, win rate, sales cycle time, renewal contract value and renewal rate.
The additional revenue velocity from Quote-to-Cash can then be stated as:
∆ Revenue Velocity =
∆Wx∆P
∆T
(for new deals)
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∆Wx∆P
(for renewals)
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Increase Average Sales Price for New Deals
Quote-to-Cash can help increase new deal ASP in three key ways: reducing excessive discounts, adding cross-sell
and upsell products to deals, and ensuring deals are optimally priced and packaged.
Enforced Discount Approvals
Instead of allowing sales reps to manually discount and obtain ad hoc approvals, a standard Quote-to-Cash process can
ensure discounts are consistently approved and eliminate rogue discounting. Approvals can also vary by product line,
region, discount level and other deal parameters.
Recommend Upsell/Cross-Sell Opportunities
During the process of providing a quote, sales reps should automatically be shown predefined bundles, other products and
related services that are a logical cross-sell and upsell for the customer. This is especially true if there are new products
that a sales rep may not be aware of. By adding more products to their deals, sales reps not only increases their deal size,
but will also likely offer a solution that is more beneficial to their customers.
Set Optimal Prices with Guided Selling and Deal Guidance
Guided Selling is a common practice where sales reps can determine which products make the most sense for a customer
based on their needs. Injecting a deal desk into the process can further boost ASP. The deal desk can either manually
or automatically recommend optimal pricing and products based on sales history, previous customer orders, capacity
constraints and other considerations.
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Reduce Sales Cycle Time
Because Revenue Velocity is inversely proportional to the length of a sales cycle, shortening the sales cycle time
can have a dramatic effect on revenue. While certain factors in sales cycle times are almost impossible to change
(e.g., a customer’s procurement process), there are many elements that can be streamlined through a more
consistent Quote-to-Cash process.
Issue an NDA
For industries like high-tech, issuing a simple Nondisclosure Agreement (NDA) can get stuck in legal bottlenecks. Having a
“self-service” NDA process, which still meets legal requirements, can eliminate unnecessary delays in the sales cycle.
Generate and Approve Quotes
Creating a quote can be a tedious process even for the most experienced sales rep. Figuring out the latest prices,
promotions, new products, obsolete products, regional variations and current contract terms can be extremely
challenging. By automating the quotation, as well as the approval process, companies can cut the sales cycle by days or
even weeks.
Finalize Sales Contracts
Getting a customer sign-off on a proposal seems like the end of the sales process. But many companies still need to turn
the final proposal into a legal contract before they can ship products or schedule services. Integrating proposals with the
legal contract process can cut down the number of days needed to finalize contracts.
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Increase Win Rate for New Deals
Everyone in sales wants to win more. And while a better Quote-to-Cash process may not be able to directly help
with competition, executive relationships or product functionality, it can certainly impact other factors that
improve opportunity win rates.
Respond More Quickly with Quotes
Slow response times can lead to losses, especially for more transaction-based industries. So automating the generation
and approval of quotes can help sales teams be much more responsive.
Create Consistent and Professional Proposals
Even the best products can be sabotaged by haphazardly created proposals. But by pulling in consistent branding, pricing
and terms into standard templates, sales reps can easily create polished proposals that merit a large price tag.
Quote More Accurately
Without the right information, sales reps can quote themselves out of a deal. Having the customer’s current contract
terms, prior purchases, latest pricing and regional variations ensures reps aren’t using information that runs against what
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Increase Contract Value for Renewals
Renewals are the most cost-effective way to increase revenue. While Quote-to-Cash may not impact factors like
customer satisfaction, it can help extract the maximum amount of renewal revenue.
Implement Increase Clauses
Many contracts have automatic increase clauses that are typically forgotten when it’s time for renewal. Having a renewal
process that automates this can easily add several percentage points to renewal value with little effort.
Recommend Upsell/Cross-Sell Opportunities
During the process of renewing a contract, sales reps should automatically be shown products and services that would make
sense to a customer during a renewal—such as new products, different pricing based on prior usage, services that would
improve their current products and more. By providing value-added products and services to renewals, everyone benefits.
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Increase Renewal Rate
Customer satisfaction isn’t the only thing that leads to customer churn—sometimes it’s just poor processes.
Quote-to-Cash can help close the loop with renewals, so renewal rate stays high.
Automate Renewals
Despite sales teams’ best intentions, sometimes contracts just expire because of lack of attention. This could be caused by
territory realignment, different distributors or just a high volume of contracts. Automating the renewal process, with defined
escalations, can help ensure no renewal is forgotten.
Use Up-to-Date Contract Information
It seems obvious that a rep should review the existing sales contract when it comes time to renewal. But what happens if
there are multiple amendments to that original contract? What if those changes are in different systems? Having a single
view of the latest contract information is critical. Otherwise, trying to renew a contract with the wrong terms, products and
pricing is a recipe for disaster.
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Summary
A streamlined Quote-to-Cash process delivers much more than just higher sales productivity,
consistent sales methodologies and lower overhead. It can have a significant impact on your
revenue. With a better Quote-to-Cash process, you can increase Revenue Velocity—increasing
revenue and closing revenue faster.
To understand how Revenue Velocity can help you, you need to take a closer look at the
five key Revenue Velocity factors—ASP for new deals, win rate, sales cycle time, renewal
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contract value and renewal rate—and break down the quantitative impact of each on your
sales process. Keep in mind that some factors may not be relevant to your company, whereas
others may have a tremendous impact.
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To learn more about Quote-to-Cash and Revenue Velocity, visit apttus.com.
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