Why businesses must take an integrated view of their entire ‘Quote-to-Cash’ processes and not just CLM alone?

18 April 2017

In this piece of the ongoing series of the articles, we will like to focus upon the value that Integrated Quote-to-Cash has for an Enterprise business. If you have read the earlier articles posted here and here, then you would notice that we are now focusing on the larger picture. I would rather take the liberty to say that now we are going to focus on the Big Picture.

For those who are not aware of Quote-to-Cash here is what Salseforce defines it as ‘Quote-to-Cash is the complete set of business processes involved in selling, from creating initial offers for prospects to collecting cash. Quote-to-Cash begins with Configure, Price, Quote (CPQ)—configuring the offer, developing the appropriate pricing, and creating the quote. It continues on through negotiations, invoicing, payment, and even renewals and renegotiations.’

Below is what a typical Quote-to-Cash ecosystem for an Enterprise looks like

CLM is one of the important blocks in this entire QTC (Quote-to-Cash) ecosystem. It is very important for General Counsels, Chief Legal Officers and Chief Risk Management Officers to have a holistic understanding of the entire QTC ecosystem.

The usual question that is often asked by legal professionals in the Corporate world is “Why should I bother about the entire Quote-to-Cash?” or a statement “My interest is only in CLM because the rest does not impact me and neither do I influence the other components”. The answer to the simple question is “You should bother if you would want to become a C-level executive in your career” and the take on the statement is “Take off your blindfolds because it impacts your work and what you do also impacts other; you are a part of the Ecosystem and not an outsider”.

The evolution of the software landscape in Enterprise has traditionally been around specific functions. Thus, we see multitude of software available for specific needs – Accounting software for financial book keeping and regulatory compliances, Production management systems for ensuring optimal and profitable shop floor operations, Contract Management system for effective automation and administration of contracts in the Enterprise, Procurement management system to ensure effective management of procurement needs. However, a modern Enterprise going through a digital transformation is all about interconnected systems and there is no place for siloed business solutions. Traditional Enterprise software has been siloed and this very silo approach has created significant challenges in terms of making the siloed software interconnected. In the absence of interconnected systems and lack of automation the generation of Business Intelligence for effective business decision making is severely impacted and limited.

Let’s take a simple example to understand why an integrated view is necessary for overall effectiveness:
A prospect is interested in the products/services offered by your Enterprise and requests for a price quote. This leads to the sales generating a quote for the product/services requested by the prospect. What follows are rounds of customary price negotiation between the sales team and the prospect. Once the question around price has been settled then one gets into the process of contracting wherein the agreement is negotiated that has everything in it – scope of the engagement, service/sale conditions and terms, schedule, timelines, payment terms, payment mode, penalties, renewal/cancellation terms and conditions etc. Again, round of negotiation follows and finally one has a negotiated contract in hand to move ahead. Once the contract has been finalized, agreed upon, signed and filed then the process of fulfillment of the contract starts that would require the responsible division (production or service delivery) to be intimated about the schedule and requirements so that they can deliver upon the agreed upon commitments. Simultaneously, Finance would raise an invoice and bill the Client and follow up on payment. Once the payment is realized then it needs to be recognized in the books of accounts as per applicable Accounting Standards.

I am sure that by now you would have realized that having separate solution for each of these pieces would make the entire process a maze of different software that are costly to implement, difficult to manage and overall don’t contribute much to the ROI! The Contract Management Solution only addresses one important piece of the block but it does not address the process of quoting, revenue management, billing, order fulfillment or procurement though the actual value is driven by this entire chain of activities.

Let’s look at all the components of an integrated Quote-to-Cash briefly to understand what they are before we proceed ahead:

  • CPQ – Configure, Price & Quote – Represents all the processes that are involved in putting together a quote for a prospect that starts right with ‘configuring’ wherein the sales person would shortlist the required bundle of services/products and then price them right and finalize the quote and present it to the prospect
  • CLM – Contract lifecycle management – Represents the process of managing contracts from vendors, partners, customers and employees. Thus, the stages involved in the process can be represented as 7 steps:

    1) Request – Business users will get in touch with Legal to request for a contract. This can be of different types – NDA, MSA or One off contract etc
    2) Generate – Legal team would generate the contract. A CLM software automates this process significantly through provision of clause library, internal workflows for approval etc
    3) Negotiate – Negotiations takes place between the Legal of the Provider of Goods/Services and the Client’s legal team
    4) Approval – Approval would be required for successful closure and this can require significant internal coordination between different stakeholders
    5) Execution – This part would deal with setting into effect the process of execution. Each contract has set of obligations that needs to be fulfilled so either party would intimate their respective departments that must fulfil these obligations
    6) Comply – The legal teams would review the contract and make sure that each end complies and the contract is being performed in letter and spirit
    7) Amend – This stage deals with any required amendments to the contract or required changes that are necessitated due to the business condition. Example: Amendment of certain clauses around price and performance may be warranted on renewal of the contract

  • Billing – Customers need to be billed for the products and services that are being provisioned for them. This involves complexities such as billing for different products/services, applicable individual discounts, recurring or one-time billing etc. This also involves drawing up accurate forecast of revenue being generated from billing and then recognizing in the books of accounts as per applicable accounting guidelines. Furthermore, the Enterprise would also administer a rebate program in this phase wherein the applicable discounts, rebate etc. for the suppliers/ sales team etc. would be determined and provided.
  • Deal Management – To ensure fast execution of profitable deals, one requires to provide visibility into key deal parameters to the decision makers. A robust deal management system would allow all relevant decision makers in the process see key deal parameters upfront – discounts, payment terms or risk etc.
  • E-Commerce - The onset of digital age has led to E-commerce taking a center stage for selling. Thus, Enterprise businesses are leveraging E-commerce channel to sell faster and better to the end customers/channel partners. A robust QTC solution would allow an Enterprise to quickly setup relevant microsites for their offerings and make goods/services available for purchase online.

All these components are interlinked and interdependent on each other for value creation. A Contract Lifecycle Management solution would not be self-sufficient if it cannot pull in the relevant price for the products/services, the delivery schedule, discount structure, billing terms and conditions etc. If these are being done manually because of lack of integration then such a CLM software system is ineffective because it leads to higher processing time, chance for errors and rework and overall is ineffective. Similarly, a robust CLM system would be able to distinguish between top suppliers and bottom suppliers by linking contracts to performance rating. This requires integration between CLM module and Supplier module for such performance ratings to become visible to the decision makers in the Legal function in an organization. Furthermore, if Legal must hold Customers/Suppliers liable for their obligations then it also requires an integration between CLM and other modules that deal with billing, Revenue Management and Performance Management because minus such an integration the Legal would never have the insight to initiate the necessary measures to make the customer/supplier accountable. In all the above instances, a lack of integrated QTC system for an Enterprise limits the Enterprise’s ability to generate ROI through holistic management of all the interdependent processes.


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