QTC : Quote to Cash

Overview

SAP Quote to Cash (QTC) refers to the end-to-end business process that encompasses the entire sales lifecycle ecosystem. The quote to cash cycle in SAP starts right from the creation of a sales quote for a product or service and ends with the receipt of payment for the delivered goods or services. 

This process typically involves various stages and activities, including quotations, order processing, contract management, pricing, billing, revenue collection, allocation, and documentation. The goal of the quote to cash process in SAP is to integrate, streamline, manage, and improve upon the various processes of the sales lifecycle, from initial customer interaction to the final revenue recognition.

By harnessing the capabilities of SAP MM, businesses can gain better control over procurement, inventory management, and vendor collaboration. This ultimately drives cost savings and improved productivity. 

In this article, we look at the key considerations, processes, and benefits involved in implementing the SAP MM module. The post also sheds light on the transformative potential it holds for organizations

How does the Quote to Cash process in SAP work?

QTC : Quote to Cash

QTC in SAP ensures that products or services are delivered efficiently and correctly to customers as per specified timelines, and that the associated financial transactions are properly recorded. This leads to improved customer satisfaction, efficient operations, and accurate and transparent financial reporting and governance. 

Here’s a step-by-step overview of how the QTC process in SAP works:

1) Offer Configuration & Quotation creation: The process begins when a potential customer requests a quote for products or services. Sales representatives use SAP’s Sales and Distribution (SD) module to create a sales quote. They input the customer’s requirements, select the relevant products or services, and specify the requisite quantities. It is key to make this quotation quick and error-free.

2)Pricing and Discounts: Within the SD module, SAP’s pricing engine calculates the total price based on various factors such as product pricing, discounts, customer-specific pricing agreements, and any special conditions. This ensures accurate, fast, and consistent pricing across different sales channels.

3)Order Management & Fulfillment: Once the customer approves the quote, the sales representative converts it into a sales order. The order includes detailed information such as the selected products, quantities, pricing details, delivery dates, and terms and conditions.

4)Contract Management: In cases where long-term contracts are involved, SAP’s Contract Lifecycle Management (CLM) module can be used to manage contract terms, conditions, renewals, and amendments. This ensures that the agreed-upon terms are accurately reflected in the sales order.

5)Inventory Check: SAP’s inventory management functionality checks product availability against the sales order. If products are in stock, the system reserves the necessary quantity of the same. If products are not available, the system can trigger the necessary procurement or production processes.

6)Shipping and Delivery: SAP’s logistics and supply chain modules manage and orchestrate the entire shipping and delivery process. The system generates picking and packing lists, coordinates with warehouses, and tracks shipments. Delivery schedules and methods are communicated to customers.

7)Billing: After the products are shipped or services are delivered, the billing process begins. SAP’s billing module generates invoices based on the sales order information, pricing, and terms. Invoices can be tailored to include relevant details and payment instructions.

8)Payment Collection: SAP’s Accounts Receivable module handles payment collection. It tracks customer payments, updates accounts, and generates reports on outstanding balances. Various payment methods, such as credit cards, checks, and electronic transfers, can be accommodated into the system.

9)Revenue Recognition: Accurate revenue recognition is crucial for a company’s financial reporting integrity, as it reflects precise profit and loss numbers and helps in financial forecasting and revenue projections. For organizations that have to adhere to accounting standards like IFRS 15 or ASC 606, SAP’s revenue recognition functionality ensures that revenue is recognized according to a proper process, based on delivery or completion milestones. This aligns financial reporting with the timing of revenue generation. 

10)Reporting and Analytics: Throughout the quote to cash process in SAP, reporting and analytics tools are effectively used to monitor key metrics, track sales performance, analyze customer behaviour, and identify process bottlenecks. These insights help organizations make informed decisions and optimize their operations.

11)Integration: One of the key strengths of QTC in SAP is its integration. Data entered at various stages of the process flows seamlessly between modules, minimizing manual data entry, reducing errors, and improving overall efficiency in functioning.

SAP quote to cash is one of the most critical and complex processes that integrate, align, and streamline multiple sets of activities in an organization.  The terminology and specifics of QTC in SAP can differ based on the organization’s practices, needs, size, industry, and its business SAP system configuration.

The following diagram illustrates the new age, rapidly evolving SAP quote to cash process:

How will BPX help implement the Quote to Cash process in SAP?

Logistics Execution (LE) - How will BPX help Implement

BPX can help you to successfully plan, customize, and execute your QTC in SAP process roadmap. Implementing the quote to cash cycle in SAP consists of several stages, from understanding the existing “As-Is” process to continually monitoring and supporting the QTC cycle in SAP after Go-Live.   

This implementation is generally based on SAP’s ASAP (Accelerated SAP) methodology, which is a structured approach for implementing SAP solutions like SAP QTC. These key steps can be elucidated below, with the execution of each phase suitably explained:

  1. As-Is Process:

During this phase, the existing processes and procedures related to sales, quotations, order management, billing, and other relevant areas are thoroughly analysed. The objective is to understand the current state of operations and identify pain points and areas for improvement. This phase involves the following process stages:

  • Process Identification: Identify all the subprocesses and steps involved in the current quote to cash cycle in SAP.
  • Current State Mapping: Document and record the current processes, workflows, and interactions between various business departments.
  • Gather Pain Points: Collect feedback from stakeholders regarding the things working well and what needs improvement.
  • Data Collection: Gather data related to existing transactions, quotes, orders, invoices, etc.
  1. Business Blueprint:

In this phase, the assimilated information and data are used to create a detailed process plan for the implementation of the new QTC cycle in SAP. The business blueprint phase includes:

  • Gap Analysis: Compare the ‘As-Is processes’ with SAP’s standard functionalities to identify potential gaps, where customization or configuration might be needed.
  • To-Be Process Design: Design the ideal state of the QTC process in SAP. This includes defining new workflows, roles, responsibilities, and interfaces or connections between departments.
  • Fit-Gap Analysis: Document and record the gaps identified during the gap analysis and propose solutions for addressing or remediating them.
  • Business Blueprint Document: Create a comprehensive SOP document detailing the ‘To-Be process’, including configuration and customization requirements unique to that particular organization.
  1. Master Data Migration/Item Master Configuration:

This phase involves preparing and configuring the master data required for the QTC cycle in SAP. This includes:

  • Master Data Identification: Identify the necessary master data, such as customer data, product data, pricing data, and more.
  • Data Cleansing: Cleanse and validate the existing master data before migrating it into the SAP QTC system.
  • Data Migration: Migrate the cleansed master data into the QTC in SAP.
  • Item Master Configuration: Configure items (products or services) in the QTC process in SAP, including attributes, pricing, discounts, and related information.
  1. System Configuration / Realization:

This is the phase where the actual system configuration and customization take place according to the ‘To-Be’ process. It involves:

  • System Configuration: Configure SAP modules (Sales and Distribution, Pricing, Billing, etc.) to align with the defined ‘To-Be’ process.
  • Customization: Develop custom programs, reports, and enhancements to address specific business requirements not covered by standard SAP functionalities.
  • Integration: Configure integration points between different SAP modules to ensure smooth data flow across the QTC process in SAP.
  • User Training: Train end-users on the new QTC process in SAP and its various functionalities.
  1. UAT (User Acceptance Testing):

In this phase, the configured quote to cash process in SAP is meticulously tested by end-users to ensure that it meets the specific business requirements. The steps involve:

  • Test Script Preparation: Prepare test scripts and scenarios that cover various aspects of the QTC cycle in SAP.
  • Testing: End-users execute the test scripts, perform transactions, and validate the system’s behaviour.
  • Issue Identification: Identify and document any defects, issues, concerns, or deviations from the expected results.
  • Issue Resolution: Address and resolve the identified issues in collaboration with the implementation team.
  1. Go-Live Preparation:

Based on the feedback from UAT, make necessary adjustments and prepare for the actual system launch. The procedures followed here include:

  • Issue Resolution: Address and resolve any outstanding issues from UAT.
  • Data Migration: Ensure that the final, accurate master data is migrated to the production system.
  • User Training: Conduct final user training sessions to ensure that users are comfortable using the new system.
  • Documentation: Update documentation, training materials, and SOPs for ready reference, cross-checks, training and development needs, and future use.
  1. Go-Live:

This is the crucial stage where the SAP quote to cash system is officially launched for live operations. The steps involved are:

  • System Migration: Move the finalized configuration and master data to the production environment.
  • Monitoring: Monitor and track the system closely during the initial days to identify and address any unexpected issues.
  • User Support: Provide immediate real-time support to users for any issues or questions they encounter during real-world practical usage.
  1. After Go-Live Support:

After the SAP QTC system is live, ongoing monitoring and support is key to ensure smooth, uninterrupted operations. The procedures here include:

  • Issue Resolution: Continue to address and resolve any issues or challenges that arise in the live production environment.
  • User Training and Support: Provide ongoing training and support to users who might encounter difficulties or roadblocks or require assistance.
  • Continuous Improvement: Gather feedback from users and stakeholders to identify potential areas for further optimization and enhancement.

Throughout all these key phases, effective project and program management, communication, and collaboration among different teams are critical for a successful implementation of the quote to cash cycle in SAP. The process is iterative and agile and aims to align and integrate the SAP QTC system with the organization’s specific customized business needs while leveraging the best practices and functionalities of the quote to cash cycle in SAP.

It is therefore key to work in sync with leading SAP process consultants like BPX, domain and technical experts, and key stakeholders to customize, execute, and streamline the entire QTC process in SAP in keeping with the organization’s rapidly evolving needs. This will help to optimally address its various pain points, issues, and challenges in the course of the QTC cycle in SAP operations.

BPX at a glance

Headquartered in Pune India, Business Process Experts (BPX) is a key enabler in the process management space, a specialist in providing unique, customized SAP quote to cash process solutions. With offices in UAE and other prominent Indian cities, the company was established more than a decade back in 2012. Since then, it has made giant strides and has grown steadily to become a market leader in the SAP quote to cash process solutions landscape. 

Led by a professional and experienced team of engineers, management and finance experts, SAP consultants and problem solvers, BPX and its well-known sister concern YRC are now key strategic, transformation partners for prominent clients worldwide. BPX clientele belongs to key industrial sectors like engineering, automobiles, banks, chemicals, garments and apparel, retail & hospitality, manufacturing, pharmaceuticals, mining, and ITeS.

As your trusted SAP QTC process consulting partner, BPX will seek to understand the dynamics of your organization’s QTC cycle in SAP and customize the entire process roadmap, synced, and aligned to your specific business needs. Our SAP business process experts will handhold and guide you every step of the way, ensuring tangible cost savings and optimal resource utilization and management.

So, if you are an entrepreneur or business owner on the lookout for a successfully orchestrated SAP QTC process implementation, connect with BPX now. We will understand your strategic needs and help you to tap into the various benefits of QTC in SAP, unlocking great value and realizing your true business potential, to help craft your very own success story!

FAQs

The ‘Quote to Cash’ (QTC) process in SAP can be defined as the critical, complex end-to-end business process that starts with the creation of a sales quotation (quote) and culminates with the receipt of payment (cash) for the delivered goods or services. This business process encompasses various stages and activities involved in the sales and order fulfillment lifecycle, i.e., quotation creation, order processing, contract management, pricing, billing, revenue collection, allocation, and documentation. 

SAP provides a comprehensive suite of tools and modules to manage and orchestrate these activities seamlessly. The primary goal or objective of the quote to cash process in SAP is to integrate, streamline, and improve upon the various processes of the sales ecosystem, from initial customer interaction to the final revenue recognition.

The various steps and stages in the quote to cash cycle in SAP can be outlined below:

  1. Customer enquiry
  2. Quotation creation
  3. Quotation review and approval
  4. Quotation communication
  5. Order creation
  6. Order processing
  7. Fulfillment and shipping
  8. Invoicing
  9. Payment processing
  10. Revenue recognition
  11. Accounts receivable management
  12. Reporting & analytics

The key benefits or advantages of implementing the acquire to retire (ATR) process in SAP are as follows:

  1. Efficiency & Automation
  2. Streamlined and standardized workflows
  3. Improved customer experience through accurate & timely responses
  4. Data accuracy and consistency
  5. Real-time visibility into the QTC process
  6. Effective and dynamic pricing management
  7. Optimized inventory management
  8. Integrated and accurate financial reporting
  9. Compliance and Control
  10. Collaboration and Communication
  11. Scalability and Growth
  12. Regulatory compliance
  13. Reduced order to cash cycle time

Quote to Cash (QTC) and Order to Cash (O2C) are both business processes that involve various stages in the lifecycle of a sales transaction. In SAP, these processes are often closely linked to each other and may even overlap, but there are distinct differences between them in terms of their scope of coverage within the sales process.

QTC covers the entire sales process ecosystem, from the initial customer inquiry or request for a quote right down to the payment receipt, encompassing both the quoting and order fulfillment aspects. On the other hand, O2C specifically focuses on the steps involved after the customer places an order, including order processing, fulfillment, invoicing, and payment receipt. It does not include the initial quotation stage.

It’s important to note that the terminology and the specifics of these processes might vary depending on the organization’s practices and the configuration of its SAP system. Some organizations might even use the terms interchangeably or combine the processes in a slightly different way, based on their specific business requirements.

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