The Cacheflow Blog

CPQ vs. Quote-to-Cash

August 22, 2023 11:05 AM

The choice between CPQ (Configure, Price, Quote) and Quote-to-Cash (QTC) solutions has more options than ever. But with so many sub-categories and vendors, it’s more confusing to know where to start. 

Although both play a role in streamlining the sales process and automating financial operations, they serve distinct purposes.

Quote-to-Cash is the combination of technology and manual process for everything that happens from generating the first proposal, to capturing the final payment of a customer. [read more in The Ultimate Quote to Cash for SaaS guide]

CPQ can be considered a part of the QTC process, and is excellent at generating quotes across thousands of SKUs, pricing options and currencies. But when it comes to collecting payment, managing billing, and expanding or renewing SaaS contracts, you’ll need other parts of your quote-to-cash process to effectively manage that work.

What is the difference between CPQ and Quote-to-Cash?

CPQ empowers sales teams to configure products, set accurate pricing, and create compelling customer quotes. However, quote-to-cash is a comprehensive process that involves everything from generating quotes, to processing final payments.

Understanding Configure, Price, Quote (CPQ)

Picture this: You have a powerful tool that can customize products for customers quickly, nail down the perfect pricing, and whip up professional proposals in no time. A tool that makes the first step of deal-closing a breeze.

With the right CPQ on your side, your sales team can respond to customer inquiries with tailored offerings to fit each customer's needs and close faster. 

However, traditional CPQ tools are costly, complicated, and confusing. To make the most out of a CPQ tool, it is essential to understand when and how it can be helpful for your business objectives.

Its key features include:

  • Configuration: CPQ allows sales reps to customize products based on customer requirements, making tailored offerings quick and easy.
  • Pricing: With CPQ, accurate pricing can be calculated instantly, considering various factors such as discounts, taxes, and other geography-based costs.
  • Proposal generation: CPQ streamlines the creation of professional and persuasive proposals, saving valuable time for sales teams.

Integration possibilities: Some CPQ’s can integrate with CRM systems, ERP software, and other customer-facing tools to create a unified RevOps stack.

Benefits of CPQ

CPQ is ideal for enterprises handling high volumes of diverse items. It simplifies generating quotes from a vast product range, offering special pricing, discounts, and multi-currency payment options. It also incorporates standardization control, complex rule logic, and robust safeguard approvals across departments. 

The following are the benefits of having a CPQ system:

  • Enhanced sales efficiency: CPQ minimizes the time spent on manual tasks, allowing sales reps to focus on building customer relationships and closing deals.
  • Improved accuracy: CPQ reduces the chances of errors in configurations, pricing, and proposals, leading to increased customer satisfaction.
  • Faster sales cycles: Quicker generation of quotes and proposals accelerates the sales process, translating to higher revenue potential.

Upselling opportunities: CPQ can suggest complementary products or services during configuration, boosting upselling and cross-selling opportunities.

Problems of CPQ

Currently, sales strategies may evolve before CPQ implementation concludes, raising questions about its adaptability. Large enterprises also face trade-offs with CPQ. While it aids in pricing management for companies with extensive catalogs, it may not significantly impact deal-closing velocity or win-rate. 

Beyond licenses, implementation costs can exceed $85k, along with maintaining a RevOps team for efficient management. The following are the problems of having a CPQ system:

  • Implementation challenges: Integrating CPQ with existing systems can be complex and time-consuming, taking a minimum of 6 months to be effective.
  • Training requirements: Sales teams need proper training to maximize the benefits of CPQ effectively.
  • Initial investment: Acquiring and implementing a CPQ solution may require a significant upfront cost.
  • Maintenance and upkeep: Regular updates and maintenance are necessary to ensure CPQ functions optimally.
  • Scalability: Some CPQ solutions might struggle to handle rapidly growing businesses and evolving sales requirements.

CPQ Benefits and Problems

Understanding Quote to Cash (QTC):

Quote to Cash (QTC) is a comprehensive process using various tools and workflows, from the initial quote generation to the final recurring payment. Having reliable QTC software can help you simplify, standardize, and optimize the entire Quote-to-Cash process and the end-to-end revenue lifecycle.

It involves the following key features:

  • Contract management: QTC ensures smooth contract negotiation, approval, and storage.
  • Order management: Efficient order processing, inventory management, and fulfillment are part of the QTC process.
  • Invoicing/billing process: QTC handles accurate and timely customer invoicing and billing.
  • Integration possibilities: Like CPQ, QTC also integrates with other essential business systems for seamless operations.

Benefits of QTC

An exceptional Quote-to-Cash process leads to increased sales win rates and improved internal efficiency. It also provides a competitive advantage in the customer buying journey, leading to well-deserved ARR. 

By automating admin tasks, teams can ensure consistent deliveries, save valuable time and prevent losses from excessive focus on unprofitable deals. 

The following are the benefits of adapting the Quote-to-Cash process:

  • Better efficiency: QTC streamlines the entire sales cycle, reducing delays and increasing overall efficiency.
  • Reduced churn rate: With smooth operations, customer satisfaction improves, leading to lower customer churn rates.
  • Streamlined buying process: QTC simplifies the buying experience for customers, making it more convenient for them to make a purchase or expansion.
  • Faster invoicing: Timely invoicing and billing reduce delays in receiving payments, positively impacting cash flow.
  • Transparent pricing: QTC ensures transparent pricing for customers, increasing trust and loyalty.

Problems of QTC

A problematic Quote-to-Cash can eat up the time for finance teams by forcing them to follow a manual billing process. It can diminish your sales win rate and result in higher customer churn. 

Even for budget-friendly consumer products, negative buying experiences drive people away, leading them to seek alternatives. With more frequent delayed or uncollected payments, they often go unnoticed until it becomes a significant issue.

The following are the problems of having a bad quote-to-cash process:

  • Implementation complexity: Implementing a comprehensive QTC process can be a daunting task.
  • Challenging integration: Integrating multiple tools and workflows can be complicated. It is often impossible to integrate critical tools and workflows and leads admins resorting to workarounds.
  • Higher billing accuracy demands: Invoicing and billing are part of QTC, and errors can lead to customer dissatisfaction.
  • Pricing challenges: Determining the right pricing strategy for products and services can be complex. QTC solutions often come with higher initial costs due to broader integration requirements. For example, switching to a usage-based pricing. It can affect everything in your quote-to-cash process and change the way you price everything.
  • Scalability: As businesses grow, the QTC process needs to introduce automation to improve rep efficiency, but also guard-rails to ensure proper pricing and compliance. QTC's ability to handle complex deals and accommodate increasing demands could make it the preferred choice for companies with ambitious expansion plans compared to CPQ.

Quote-to-Cash Benefits and Problems

CPQ vs. Quote-to-Cash for SaaS Companies

Both CPQ and QTC are crucial components in optimizing the sales process. CPQ focuses on configuring products, pricing, and proposal generation, while QTC encompasses a broader range of activities, including contract management and order processing.

Understanding your company's specific needs, sales processes, and scalability requirements will guide you in choosing the right solution.

You can now experience the power of CPQ without the complexity. Unlike traditional CPQ solutions, Cacheflow is a single unified platform that adapts to your business size, handling high sales volume while allowing you to maintain a lean sales team.

With no downtime, our seamless integrations ensure a quick setup. Learn more about Cacheflow by scheduling a demo with us today!