Finance and Accounting

How quote-to-cash excellence can fuel growth for B2B subscription businesses

The subscription model is gaining popularity in both B2C and B2B models with consumers and businesses expecting anything-as-a-service (XaaS). B2B subscription models offer convenience to both parties. Recurring subscriptions offer companies the opportunity to improve revenue predictability, maintain customer relationships and opportunities to upsell. The subscription-based model for B2B transactions offers customers convenience and flexibility since they can set up payments in increments on an as-needed basis.

There are several B2B subscription models. For example, ecommerce subscriptions for products such as reams of paper or tea bags allow for regular purchase of items, without the hassle of checking stock and placing orders. When it comes to licensing however, monthly or annual software-as-a-service (SaaS) or cloud subscriptions are useful for customer relationship management (CRM) platforms, video conferencing etc. 

For B2B organisations offering subscription models, Quote-to-Cash (QTC) forms the revenue backbone. QTC encompasses all business processes, from the sales team configuring the quote, receiving payment from the customer, to managing the customer journey for renewals. With privacy regulations and policies changing, and limitations to availability of third-party data, B2Bs are increasingly dependent on their own QTC  ecosystem for driving customer acquisition, increasing revenue and improving customer service. In a digital world, these processes are typically linked by a QTC solution that at its very basic form is used for tracking customer data, generating the quote, processing the order, generating the invoice, collecting the cash and analysing the process for improvements. The QTC process also requires coordination between multiple departments such as finance, legal and sales, to name a few. As businesses pursue subscription models, they must optimise QTC to manage internal processes and operations, enhance customer relationships and grow revenue. A hybrid model of subscriptions and traditional sales results in disparate quoting and  invoicing processes.

Navigating QTC

QTC broadly has the following sub-processes: quote to contract, contract to invoice, invoice to payment and managing the customer lifecycle. Each of these sub-processes has steps, some of which can be automated easily, while others involve unstructured data. Businesses thus need to refine the QTC process to achieve an optimum mix of standardisation and customisation. By standardising and automating most of the common QTC processes, businesses can create a robust framework that minimises friction. At the same time, businesses need to provide enough leeway to customers in a way that offers flexibility, but does not compromise the workflow or increase manual work.

Quote to contract processes involve accessing the product catalogue, configuring pricing, generating the quote and signing the contract. The product catalogues must be standardised with active catalogue management, which involve activities such as  eliminating redundant products, adding new add-ons to core products and curating products into meaningful bundles for customers. When it comes to configurable pricing, it might be tempting to have a limitless choice of pricing for different customer segments. However, this can increase complexity for the back office. Instead, by offering a limited number of pricing tiers per segment, businesses can build in some flexibility while adhering to standardised pricing.

Going from contract to invoice includes receiving the order, fulfilling the order and starting the service. Here is where businesses need to decide on how much flexibility they can offer. For instance, businesses can offer limited flexibility to customers who have unique needs, or when there is a need to adhere to internal policies, regulations etc. The subscription payment term length can be standardised, for example, from 15 to 20 days, while keeping the payment terms slightly flexible based on customer need. There must be an awareness that offering too much leeway to several customers can result in increasing complexity for further order management activities, such as collections, back office administration and so on.

Invoice to cash processes include invoicing and billing. Many customers require specific formats, or specific fields as part of their invoices for their internal approvals. By offering flexible invoice formats and payment methods, companies can greatly reduce the friction in the overall QTC process. Billing methods need to be flexible too; they could be pay-per-use, pay-per-user or consumption-based.

The nature of the B2B subscription model is such that there are several touchpoints with the customer even after order delivery. For example, the customer may want to scale up or scale down usage, increase the number of users or renew the contract. By standardising renewal management, businesses can spend less time renegotiating contracts, and instead, make the right technology infrastructure investments or understand customer pain points. Standardised renewal management combined with a flexibility in subscription changes based on customer needs, while adhering to the contract, can help optimise QTC.

By creating a standardised and automated QTC process with some flexibility to accommodate changes based on customer requirements, B2B subscription businesses can achieve operational excellence while staying ahead of the competition.

How can Infosys BPM help

Infosys BPM’s Order-to-Cash Services cater to  both transactional activities and niche areas such as revenue assurance, pricing and industry analytics, fraud management analytics and cash flow analytics. With our specialised services for B2B subscription management, we can transform the order-to-cash business process, offering standardised automation solutions that build in flexibility as required by our customers.

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