Table of contents

Table of contents

A truism on the business landscape is that “cash is king.” However, for services organizations, including standalone professional services organizations (PSOs), embedded services organizations (ESOs), and managed services providers (MSPs) this axiom needs an adjustment. Since there overall the most precious asset is not necessarily capital, it is also cash flow which allows the quote-to-cash process to help obtain this mission-critical resource.

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What is the Quote-to-Cash Process?

The quote-to-cash process is an integrated suite of activities that seek to convert sales opportunities into paying, profitable, and ideally repeat customers. What makes this effort particularly vital and at the same time challenging and complex is that professional services engagements can last for several months, or years.

Services organizations that lack a structured and optimized quote-to-cash process are forced to guess rather than clearly and continuously know if an engagement is profitable, and whether expected margins are realized. Unfortunately for some service leaders, there is much surprise when they realize that what was believed to be a lucrative engagement turns out to be unprofitable.

The best way to avoid this is by maintaining your primary focus on cash flow and investing in a solid financial position as highlighted by Service Performance Insight in its 2021 Professional Services Maturity™ Benchmark:

“Every organization must focus on cash flow to maintain a solid financial position and maximize profitability and liquidity. In service-oriented organizations this process begins with a client quote and ends once payment is received, and the money is in the bank. This macro process of converting sales opportunities into paying customers is often referred to as “quote-to-cash,” and its optimization is essential for financial well-being.”

Who Owns the Quote-to-Cash Process?

One of the defining aspects of the quote-to-cash process and another reason for establishing and optimizing it is quite challenging and complex, is that it is not “owned” by a single division or department. For example, innovating products is the responsibility of R&D, as increasing brand equity is the responsibility of marketing, quote-to-cash ownership follows a similar logic where there is a single owner or department managing the delivery.

The quote-to-cash process is enabled and governed by multiple teams such as sales, delivery, and finance. And while each respective team has a specific role and function, just as the finance team is responsible for accounts receivable and revenue management, all departments must combine their expertise and work together in an efficient and collaborative matter.

The Importance of Efficiency in the Quote-to-Cash Process?

Efficiency has a direct impact on the bottom line, in part because a longer, slower quote-to-cash process takes up more resources, drives up costs, and blocks the ability to predict, monitor, and realize expected revenue from the services delivery. According to McKinsey & Company, your organization’s quote-to-cash efficiency is essential for navigating contract price negotiation.

“Deals that may seem attractive at the outset could end up earning less than expected because of unanticipated costs anywhere along the way. In some instances, a deal may be predicated on shortsighted assumptions about the provider’s ability to deliver. The sales team at one large company negotiated a price for a major contract that it assumed would yield a single-digit profit margin. But the pricing was not calculated properly, and delivery requirements were unclear. After several years, the delivery cost exceeded the agreed-upon price, resulting in a loss.”

A key factor that determines customer retention is whether a services organization builds enough of what researchers call “relationship substance” into the engagement. A dysfunctional quote-to-cash process can convince customers to switch to competitors that promise a better experience. So, how do you avoid these risks or at least stay one step ahead of your competitors? Below, we breakdown six steps for an effective quote-to-cash process that will help drive successful engagements and outcomes.

The 6 Step Quote-to-Cash Process:

Step 1: Opportunity Management

The first step in the quote-to-cash process is opportunity management, and it embraces three core activities: sales pipeline management and forecasting; project scoping and estimation; and proposals and approvals.

Sales pipeline management

Sales pipeline management and forecasting is the process of predicting how sales efforts  will lead to future business opportunities. To conduct this forecasting, services organizations need to develop accurate assumptions of certain sales and business factors, including the number of targeted prospects and estimated success rates for their sales efforts. 

Project scoping and estimation

Project scoping and estimation are performed on an engagement-by-engagement basis, defining a full list of deliverables, deadlines, project goals, and the overall cost of executing the project. Services organizations should  that allow scope-of-work proposals to be quickly created. When this process is streamlined, fewer resources are needed to create accurate and realistic expectations, while shortening the time it takes to submit a proposal to prospects.

Proposals and approvals

Proposals and approvals should be sent to a prospect once they are internally reviewed and approved. Many services organizations require multiple signoffs before proposals can be finalized and delivered, for example:

  • Client services
  • Operations
  • Legal
  • Accounting

Step 2: Contract management

The second step in the quote-to-cash process is contract management. This involves negotiating contract terms with a customer and making agreed-upon changes until acceptable terms are reached. 

Step 3: Project management

The third step in the quote-to-cash process is project management, and it embraces three core activities: project execution; capturing consultant time and expense data; and deliverable/project completion and acceptance.

Effective project execution

Effective project execution depends on work management capabilities where services organizations use multiple delivery models. This makes automation essential in gathering the needed time, expense, status, and progress data from these different work structures. Understanding which engagements are at risk, which are on target, and which are ahead of schedule (and why) helps organizations pivot when needed. This visibility also provides valuable insight back to sales and management for future planning. 

Work management

The ability to meet deadlines is a crucial aspect of successful work management. Using a professional services automation (PSA) tool to track progress and make adjustments to ensure that engagement remains on track is essential.

Consultant time and expense data

Capturing consultant time and expense data is essential for services organizations that need access to accurate information. This improves resource management, enables more accurate pricing, and improves both revenue forecasting and measurement efforts.

Deliverables and project completion

Deliverables and project completion acceptance oftentimes changes to an order or project will be requested during the development process. An efficient quote-to-cash process accounts for these revisions and requests, rather than setting turnaround times and workflows that are not flexible for a customer’s changing needs. Services organizations should have clear procedures in place to:

  • Finalize project details
  • Receive internal approval
  • Deliver finished products to customers

Step 4: Resource Management

The fourth step in the quote to cash process is resource management which is the key to success for any services organization. Resource management planning provides visibility into upcoming demand, so staffing decisions can be made accordingly, so when new projects do hit, there are consultants available to assign to the work. Once project terms are accepted, services organizations need to assign the appropriate resources to an engagement according to the needs of the customer. Understanding resource availability, project timelines, and budget is critical for ensuring profitability, while correctly managing customer expectations.

Read next: Guide to Professional Services Automation and PSA Software

Planview PSA software provides full visibility into resource management planning for your organization
Planview PSA software provides full visibility into resource management planning for your organization

Step 5: Financial management

The fifth step in the quote-to-cash process is financial management, and it embraces three core activities: budgeting, expense management, and billing structure.


Budgeting should include detailed forecasting information to share with customers and promoting internally.

Expense management

Expense Management involves “tightening the grip” on spend and recoup activities through sophisticated business rules, spend control, and plan vs. actual budget reporting.

Billing structure

Billing Structure usually involves the contractual relationship that governs the work that is done on behalf of the organization for the customer(s).  There are several aspects of the billing structure that are important to ensure successful revenue attainment: billing terms, billing types (T&M, Fixed Fee and Mixed T&M and Fixed Fee), currency, billing rates and Roles, and contract limits. 

Step 6: Revenue management

The sixth and final step in the quote-to-cash process is revenue management, and it embraces two core activities: invoicing; revenue collection, and revenue recognition


Invoicing must account for changes in the services charged and services rendered with all invoices. Accurate invoicing is also required to ensure that revenue forecasts are realized. Services organizations should use cloud-based invoicing solutions to expedite invoice delivery and payment, accelerating revenue recognition.

Revenue collection

Revenue collection includes internal accounting teams staying on top of invoices owed to encourage fast payment. Inefficient collection workflows can delay revenue receipt and reduce your company’s cash on hand, which increases the risk of incorrect or incomplete payments and lost revenue.

Revenue recognition

Revenue recognition is the process by with Finance determines the revenue to be applied from an engagement to a given fiscal period. For T&M this is simple and tracks with time billed. There are more complex models like PPC (Physical Percent Complete) and subscription billing that allocate revenue not directly tied to the billing and collection process.

Quote-to-Cash Process Best Practices

The importance of a well-designed and executed quote-to-cash process cannot be overestimated, given how much of a direct and indirect impact it has on everything from customer experience to revenue generation. As pointed out by global consulting firm :

The right quote-to-cash process will be the single most critical process your technology company faces as it encompasses negotiating customer deals and contracting to billing, revenue recognition and collections. The outcome, if done properly, will result in improved controls, better customer relationships and retention, improved utilization of talent, higher valuations, reduced diligence risk, and better collection rates.

Here are some best practices to design, implement and optimize the quote-to-cash process:

Strive to make the quoting process as robust as possible

Streamline your quoting process with up-to-date payment terms, invoice schedules, etc. This will limit the number of changes that delivery and finance teams will face and must fix.

Set contracts with developed terms and conditions

Setting a standard for well-developed contracts with terms and conditions that customers fully understand is essential. Any misunderstandings will inevitably lead to confusion down the road.

Establish a structured approval process

A slow or dysfunctional approvals process can put both an engagement and the overall customer relationship at risk. It is necessary to establish an efficient approvals process that automatically notifies customers and other stakeholders when their attention and signature is required.

Prorate new services into the contract and invoice schedule when necessary

If a customer adds new services during an engagement, then prorate the amount and build it into the current contract and invoice schedule. And unless it is clearly a one-time purchase, incorporate the newly added service into the renewal agreement and fee.

Use reliable professional services (PSA) software

Using reliable PSA software will allow you to streamline, standardize and optimize the quote-to-cash process and overall end-to-end lifecycle. We discuss the role and value of a PSA solution in the next section.

The role of PSA software in the Q2C process

Professional service automation (PSA) software enables organizations to manage the quote-to-cash process effectively and efficiently by:

  • Centralizing key processes and optimizing end-to-end services lifecycle profitability
  • Increase delivery confidence and successfully delivering business outcomes for customers
  • Establishing full visibility that drives decision-making

As highlighted by the Technical Services Industry Association (TSIA) in its 2020 Technology Survey Results – Professional Services:

“Professional services teams are becoming increasingly reliant on technology as a way of boosting utilization, project visibility, and ultimately, project margins. Over the last decade, professional services automation (PSA) platforms have gone from a Pacesetter practice to a common practice, and the majority of companies today embrace some level of PS automation. The focus shifts now from automating core processes — resource management, project management, and project accounting — to more innovative uses of technology.”

Are professional services automation solutions cloud-based or on-premise?

With respect to deployment models, most services organizations are leveraging a cloud-based vs. on-premises PSA solution. As noted by Service Performance Insight:

“Cloud-based [PSA] applications are outselling non-cloud by a factor of ten-to-one. Cloud solutions are especially important in the professional services sector, as today’s virtual consulting organizations may have skilled employees located across the globe, not collocated in physical offices. The cloud has enabled PS executives and workers at all levels greater mobile access to the information they need to improve visibility and management control of resources and projects.”

The Bottom Line

The quote-to-cash process is an organization-wide effort, requiring efficient collaboration and communication from employees across several departments.

The ability to execute a streamlined quote-to-cash process and to optimize revenue generation depends on unifying workers and their job responsibilities through a centralized platform that coordinates these activities and creates new efficiencies in how business is done.

Next Steps

Adopting a PSA solution is not a one-time transaction. Invariably, your leaders and teams will need a full range of support: everything from strategic advice to hands-on adjustments.

Looking for more insights on services automation and professional service automation solutions? Contact us to discuss how Planview can help make your organization’s engagements more predictable and profitable.