One of the major challenges facings enterprises includes the disconnect between the various processes in the quote-to-cash cycle. Often, it’s hard enough to control the transition from step one to step two, but at certain points, new departments need to get involved.
This represents less of a move from step to step and more of a phase to phase approach:
- Phase One: Marketing brings on a lead, the sales team builds a quote, and the customer agrees to the preliminaries.
- Phase Two: Lawyers on both sides get involved to finalize the deal.
- Phase Three: Products or services are delivered, accounting and finance gets involved.
To even get to phase three, information needs to flow from marketing to sales, and then from sales to legal—all before you can deliver the product or service and the transaction enters the books.
Getting from phase one of the process to phase two is often a challenge, with disconnects happening, a lack of standardization in language presenting issues, and additional challenges popping up that throw a wrench in the system.
According to Aberdeen, fragmentation can cause losses for companies as a result of unauthorized discounts or rebates, leading to significant leakage for businesses.
From Quote to Contract Negotiation: Phase Two of Quote-to-Cash
Following our last quote-to-cash blog on the challenges presented in the initial stages of the process—configure, price, and quote—we would today like to turn our attention to the next phase in the equation: Contract Management.
As with the CPQ process, contract creation, negotiation, and execution is one of the most important yet often misaligned processes in the average organization, From roadblocks popping up when people don’t have the right information to inaccuracies and slowdowns as a result of manual processes, a healthy portion of sales get derailed during this phase.
But it doesn’t have to be this way. Companies, empowered by technology, integration, automation, and intelligence, can make these headaches a thing of the past. Let’s take a look at the contract process, discuss how things can go wrong, and explore how to avoid this from faltering.
Contract Creation, Negotiation, and Execution: Phase Two of Quote-to-Cash
Once the quote is sent over to the customer and the process begins to move forward, the lawyers have to step in to iron out the details. A necessary step, getting both sides to agree is even less cut and dry than the negotiations between sales and purchasing.
This creates risk. Sellers may see less revenue or see a buyer walk away entirely if something unexpected is added or removed from the quote. A missing clause or a missed decimal point is all it takes to take a successful deal to an unsuccessful one.
Contract Creation: Planning Terms and Conditions
Details matter, and attorneys on both sides need to come together on them if companies hope to close out a sale. Though there are many issues in this step, one of the most challenging to overcome is that of the lack of standardization used in various documents such as proposals, contracts, service agreements, and the like.
While many terms can protect your company, if terms aren’t standardized, the contract creation process can slog on as both sides try to come to an understanding. Often, these come in the form of unusual order acceptance criteria, extended warranty provisions or commitment to provide free products or services as part of the transaction, but this all depends on the companies working on the contract.
Paired with this, the multi-department nature of these processes also results in issues—49 percent of sales departments are responsible pre-signature, while only 21 are involved after the documents are signed. In fact, approximately 35 percent rely on multiple departments, making communication an imperative.
Potential Cures to the Contract Management Disconnect
Keeping everything connected and communicative matters in this step, and companies often look to the following steps to facilitate the contract creation process:
- Adopt technology that enables more efficient proposal and contract creation
- Integrate contract management solution with CRM
- Focus on risk reduction and mitigation in existing contracts
- Standardize language used in proposals, contracts and service agreements
- Enhance integration between contract management solution and other sell-side systems
- Standardize procedures relating to contract management and quote-to-cash
- Reduce cycle times for proposal and contract creation and approval
- Adopt technology that enables more efficient contract execution and tracking
Once both sides read over the contract, the entire process goes into a negotiation stage. You already know that contracts are living documents and that minute changes could in wording could mean major changes in meaning.
Knowing this, every change needs to be tracked and managed to ensure that each side gets a fair deal. As new iterations take place, visibility matters more than ever to the seller, and automatically tracking and delivering updates can reduce the time drain while increasing accuracy.
Potential for Improvement
This is a stage, that presents an opportunity for improvement, not only on the external side but the internal workflows as well.
- Facilitate internal approval workflows to reduce the amount of time getting from receipt of edits to return.
- Leverage tools that can ensure pricing compliance as the contract comes to fruition.
- Empower the legal department with easy analysis of contracts to reduce unseen changes.
Once both sides have come to an agreement, it’s all sunshine and rainbows, right? Not exactly. How quickly will the signatures come through? How long will it take to finalize a deal and get the signed documents back? No company wants to be known as the one whose clients have to wait weeks for a deal to be finalized.
Effective communication between buyer and seller can improve this, and an easy-to-use e-signature tool can do even more to facilitate this.
Areas to Improve
As with the rest of the contract management process, there are many ways to avoid leakage or facilitate future business transactions:
- Improve standardization and ease of access by leveraging a centralized, searchable contract repository.
- Track the contract activity through a system that keeps your company in check during phase three.
- Ensure compliance and reduce legal blind spots with service agreement management.
- Track revenue and commitments by placing risk values on the various terms, conditions and clauses.
- Avoid blind spots by placing risk values on the various contract terms, conditions and clauses.
- Integrate the contract management system with the financial and transactional systems.
Connection Matters: How Integrated CRM Connects Your Business
With the right technology, this is possible. However, too many companies rely on disparate systems that hold them back. Integrating your CRM with the rest of the business ensures you can easily configure a solution, leverage data to provide accurate pricing, and generate a quote without hassle. From here, you can improve the accuracy in building, tracking, and executing contracts and move all this to service execution with ease.
Businesses of all sizes have turned to CRM software to track, organize, and improve their customer relationships. But those who connect this powerful application (or select a CRM built into the ERP) get even more from their efforts and investments.
As a leading provider of business management software in the New York Metro, we understand how to help your business do more with ERP and CRM solutions customized for your unique business. Get to know more about our company, the work we do with CRM, and contact us for more information.