What does quote-to-revenue mean?
You make a sales quote, manage the subscription, bill for the order, and then record the income from the contract. This is called quote-to-revenue (QTR). With the growth of the software-as-a-service (SaaS) business over the past few years, quote-to-revenue has become more critical to operationalize. SaaS companies can’t get paid for their sales until they provide the service. This makes an already complicated business plan even more challenging to understand. Quote-to-revenue combines billing, subscription management, and quoting, simplifying things and eliminating the need to match orders with revenue directly.
Like words
“Q2R” and “QTR”
The Process from Quote to Revenue
A CPQ system helps sales teams set up goods and services and give price quotes based on customer wants. After that, a contract is made based on the price. The customer will sign the contract for the good or service once they agree to it. For SaaS companies, the deal is usually for subscribing to services you use repeatedly.
Taking care of subscriptions
Businesses that depend on subscriptions must manage their subscriptions well to keep customers and ensure they have a steady stream of recurring income. When CPQ and billing are synced with a subscription management system, invoices for subscription contracts are sure to be correct. It also lets the sales and customer service teams change contracts and keep customer credit up-to-date as needed during the contract’s life.
Getting paid
When you sign up for a subscription, you agree to pay for services regularly. Billing in the QTR framework uses a single data source to send bills and accept payments automatically. By combining CPQ, subscription management, and billing on a single platform, you can automate billing in real-time, make sure that income is recognized correctly, and get accurate forecasts and analytics.
QTR can be challenging for businesses with complicated plans, like those based on subscriptions or consumption.
Why it’s Important for CPQ, Subscription Management, and Billing to Work Together in the QTR Cycle
Managing subscriptions, from quote to income, is integral to the process. This is how businesses keep making more regular income.
Part of the quote-to-revenue loop is getting billing information from customers who accept a quote and buy a subscription. This information is then used to set up a membership for the customer. When a customer signs up, the system will track how long their contract lasts and how long it is left. Customers can have their account canceled or stopped if they don’t renew their subscription within a certain amount of time. This is done to stop any fraud or abuse of services.
If a customer changes or renews their subscription, the billing information can be changed to represent any changes in rate or length of time that may have happened since they first bought the subscription. This ensures that customers are always paid correctly and that businesses get the right amount of money from their subscribers every month or year.
Thanks to subscriber management tools, the renewal process can be automated. Customers won’t forget to renew their service subscriptions when prompts and reminders are set up before the due dates. Notifications can also be sent automatically if a customer is late with a payment. This way, companies can follow up with the customer immediately, if necessary, and ensure they get the money they’re due on time.
Syncing contracts and usage data with billing, revenue schedules, and ERP ensures billing is correct and revenue is recognized correctly, which is very important for SaaS companies.
Why Revenue Operations Needs a Single Platform for Quotes to Revenue
As they grow, SaaS businesses using separate CPQ, subscription management, and billing software often encounter problems because their solutions aren’t linked. Usually, a different department controls each part of the process, and data transfer isn’t always practical. A quote-to-revenue tool handles pricing, managing subscriptions, and billing in one system. This unified method makes it easier to see subscription income, eliminates costly data mistakes, and meets the requirements of ASC 606 and IFRS 15.
Let’s examine why DevOps needs a software system that handles everything from quotes to payments.
Ability to Change Quotes: SaaS companies need their pricing system to change quotes quickly. They need to be able to quickly change their prices and products so that their sales team can make quotes without any problems, no matter how complicated the deal is.
Complex Costs
SaaS businesses need to use a unified quote-to-revenue method. They need to send out accurate bills for complicated items like:
- Dynamic deals
- Combundled goods
- Prices that are measured and based on consumption
- Price ranges
Cost and effectiveness
When you use different platforms for billing, income recognition, quoting, and managing subscriptions, you have to pay for many different software. This disconnected method leads to inefficiencies, wrong data, problems with data reconciliation, duplicate data, and wasted time doing jobs by hand that could be done automatically on a single platform.
Multiple catalogs of goods
It’s impossible to avoid mistakes when updating various product catalogs in the CPQ and billing software, and it takes a lot of work to keep up with. Having one central product catalog linked to all three parts is much more efficient and less likely to make mistakes.
Metrics You Can Trust
A single tool for quotes to payments ensures that all data for quotes, subscriptions, invoices, and payments is correct. More accurate data means more reliable measures for pricing, sales performance, payments, meeting contract obligations, and revenue growth.
Keeping track of revenue for SaaS
How a business designs and negotiates sales contracts (like discounts and terms) and billing parameters (like what to bill for and when to bill for it) significantly affect how much income is recognized.SaaS companies need to be able to track income reliably throughout a contract’s lifecycle. By combining quoting, billing, and revenue recognition on a single platform, subscription-based businesses can be sure that their revenue processes are legal.
A unified quote-to-revenue platform lets businesses check that revenue is correctly allocated to contract line items, keep accurate records of the work that needs to be done on each contract line item, and Move revenues around to cover free goods or services.
- Follow the same customer and product information when quoting and billing. ·Keep accurate records of income when contracts are changed.
Problems that come up when you try to use a quote-to-revenue solution
Businesses must use automatic revenue management for the whole customer lifecycle to get the most out of QTR. Finance and sales teams can handle one-time, recurring, and usage-based contracts, make accurate invoices, and accurate reports on revenue recognition and forecasting by using a single-source solution.
However, companies face many problems when using a QTR solution. Often, the technology and resources they have now make it impossible for them to utilize the software’s benefits fully.
Here are some common problems:
Integration with current systems: Creating a new quote-to-revenue platform that works with current systems can be complex, take a long time, and require specific technical knowledge and tools.
Compatibility: The quote-to-revenue solution must work with the company’s current systems and procedures to be fully effective.
Cost and budget issues: putting in place a new platform can be pricey and require a big initial investment, which might be hard for smaller companies.
Adoption by users: switching to a new platform means changing how work is done, and it can be hard to get everyone on board.
Data quality and accuracy: The success of a QTa QTR platform’s success to ensurea is correct and up-to-date. However, businesses may find it hard to keep their data accurate and complete, especially when moving data from different systems to a single platform.
Security risks: Adding an automatic quote-to-revenue solution comes with some security risks, just like any other technology-based solution. To lessen possible threats, like data breaches or fraud involving financial transactions linked through the system, the proper protections must be implemented.
Scalability: As a company grows, its needs may change, and a tool that worked well before might not work anymore. It’s essential to pick a tool that can grow with the business.
