Business Processes & Teams

In this section we drill down deeper into the key business processes that make up the quote-to-cash framework.

Quote

The Quote process can be broken down into the following steps:

• Receive RFQ and request quote: customers can request quotes either formally through a Request for Quote (RFQ) process or informally by asking the sales representative for it. Ideally companies manage this process using their front office system (consisting of CRM and/or CPQ).
• Manage internal approvals: as companies grow it becomes more common to route quotes produced by the sales team to a deal desk or approval function which will ensure that the quote conforms to allowable pricing structures and that the individual quotes will yield required margins.
• Present quote to customer: quotes are usually formally presented to customers via email from the rep or delivered directly from the CPQ system following internal approvals. Quotes should not be open ended - it’s best practice to limit the legitimacy of the quote to a period of time that encourages the customer to act quickly and in a timeframe acceptable to the seller. Often, this is used, for example, to introduce urgency and ensure a deal can get done within a specific financial quarter.
• Negotiate quote with customer: most of the time, quotes go through several iterations and often each iteration should go through the same review processes.

Contract

The Contract process can be broken down into the following steps:

• Draft contract and share with customer: this is the electronic (and possibly paper) representation of the final agreement with the customer and it should include all of the commercial terms contained in the final quote (or order) as well as additional customer specific details such as key contacts etc. It should also refer to or contain all legal terms of service associated with the provision of the service. These are standard for most B2B SaaS companies and although deviations are a fact of life (especially when selling to much bigger customers) most companies endeavour to standardise so that they do not have to change from contract to contract.
• Negotiate terms: as per the above, terms outside of the commercial quote will likely require further negotiation, for example, payment terms or specific cancellation clauses.
• Sign contract: once the contract is finalised it should be signed by both parties using approved contract signatories on both sides. For most companies, this is automated through their Contract Management System and email.

Order

The Order process is broken down into the following step(s):

• Create and update order: the order contains the line items and pricing from the final quote that was agreed with the customer and then amends it with some of the key contract terms such as start and end dates. An order is usually created at the same time as a Contract record in the CRM/CPQ.

Fulfilment

The Fulfilment process can be broken down into the following steps:

• Provision services: for B2B SaaS this means giving the end customer access to the platform or service. The complexity of this is tied to the complexity of the platform and there may be multiple steps covering authentication, access control and provisioning of various underlying services such as database service, for example. Usually administrators on the customer side will have the ability to manage access control for their own organisation.
• Record entitlement: the entitlement of the end customer should be recorded somewhere and should reflect the terms of the order. But an order expresses what an end customer has ordered in terms of how the product is packaged and sold whereas an entitlement record should map more closely to how the product is delivered.
• Meter usage: as soon as an end customer starts accessing the platform or service, usage should start getting recorded and sent to the metering and rating solution.

Invoicing

The Invoicing process can be broken down into the following steps:

• Aggregate the usage: this is the process of converting usage data generated by the platform or service into billable metrics that mirror what was included in the order.
• Apply pricing rules: is how billable metrics get converted into dollar (or other currency) amounts which can be invoiced. Often the pricing rules are complex and need to be done alongside the aggregation so that the correct amounts are computed.
• Create or Update invoice: if the back office system is set up correctly, then invoices are usually created automatically as soon as a new billing period commences. Depending on the configuration, line items may be automatically added on invoice creation (particularly for the more simple charges such as simple subscription). The metering and rating process should then either create or update these line items as the billing period progresses.

Payment & Collection

The Payment & Collection process can be broken down into the following steps:

• Issue invoice: most B2B SaaS companies issue invoices electronically. Different companies will offer their customers different methods to pay.
• Manage and process collections: it is common for electronic invoices to contain a link provided by the payment provider to facilitate easy online payment of the invoice. Alternatively payments can be made by more typical methods such as bank wire transfer.
• Dunning: customers typically have an agreed amount of time to pay an invoice which will be specified in their contract (and/or order). Customers failing to meet their payment deadlines need to be chased down. Failure to make payment should invalidate a contract and may lead to the service needing to be shut down for the particular customer and the entitlement revoked.

Revenue Recognition

The Revenue Recognition process can be broken down into the following steps:

• Apply revenue recognition rules: these are usually set up and defined in the ERP during initial set up or whenever a new product is released. Then as invoices are generated with line items mapped to the appropriate rules, the revenue is automatically distributed between the income and deferred accounts appropriately.
• Process accounts receivable: this refers to a number of different steps to ensure that the money in bank accounts matches what is expected based on invoicing and is accounted for correctly in any given accounting period (see Month End Close below).
• File taxes: as companies invoice their customers they inherit tax liabilities across the different jurisdictions they operate in and often these taxes need to be filed within the billing period.

Renew & Upsell

The Renew & Upsell process can be broken down into the following steps:

• Monitor usage: customer success teams in B2B SaaS companies typically provide a wide range of services around activation and support but they should also monitor customers’ usage of the service ensuring it is falling into expected limits and fits within their entitlement.
• Respond to signals: as more and more services are becoming usage based, underlying usage reveals a lot about the overall health of the customer which should also be monitored closely. Often usage signals will indicate if a customer should be upgraded or upsold to or if a customer risks churning.
• Route to sales as required: not all customer success teams are commercial or sales oriented and so they often work closely with sales to respond to the appropriate usage signals.

The Month-End Close

The processes that make up the Invoicing, Payments & Collections, and Revenue Recognition are often arranged into what is termed a month-end close. Most B2B SaaS companies run a monthly finance process regardless of their contract terms to ensure accurate financial reporting, regulatory compliance, and management decision-making. Typically, the month-end close consists of doing the following:

• Reconcile Bank and Credit Card Accounts: Ensure that the bank statements and credit card accounts match what is recorded in the accounting system. This involves verifying that all payments, deposits, transfers, and fees are accounted for and that any discrepancies are investigated and resolved.
• Post All Outstanding Transactions: Record any outstanding transactions, such as manual journal entries, invoices, expenses, and adjustments, that haven’t yet been entered into the system. This ensures that all financial activity is captured before closing the books for the month.
• Accruals and Adjustments: Make necessary accruals for expenses and revenues that have been incurred but not yet recorded. This includes accrued expenses (e.g., salaries, utilities) and accrued revenue (e.g., services delivered but not billed). Adjustments may also include corrections to previous entries or reclassifications to ensure accurate financial reporting.
• Revenue Recognition: In a B2B SaaS company, revenue is typically recognized over the life of a subscription or as services are delivered, in compliance with ASC 606 or IFRS 15. Move amounts from Deferred Revenue (liability) to Revenue (income) for services rendered during the month. Ensure all revenue schedules are accurately reflected and any unearned revenue is deferred.
• Depreciation and Amortisation: Calculate and post depreciation for fixed assets and amortisation for intangible assets. This ensures that the expenses associated with these assets are accurately reflected over their useful life.
• Accounts Receivable (AR) and Accounts Payable (AP) Review: Review Accounts Receivable for any outstanding customer invoices and identify any overdue accounts for potential follow-up or collections. For Accounts Payable, ensure that all vendor invoices have been recorded and paid appropriately. Make any necessary adjustments, such as writing off bad debts or adjusting for discounts.
• Inventory Valuation and Adjustments (if applicable): while not common for most B2B SaaS companies, those that do have inventory (e.g., hardware components sold with the software) should perform a physical inventory count and make any necessary adjustments to reflect inventory shrinkage or obsolescence.
• Reconcile Intercompany Transactions: For companies with multiple entities or subsidiaries, reconcile any intercompany transactions to ensure they balance across entities. This includes eliminating any intercompany profits or duplicated entries to avoid overstating financials.
• Tax Liabilities and Filing Preparation: Calculate and record any tax liabilities, such as sales tax, VAT, or income tax that are due. Prepare for any upcoming tax filings by ensuring all required information is accurate and up-to-date.
• Financial Statement Review: Review the trial balance, income statement, balance sheet, and cash flow statement for accuracy. Ensure that profit margins, expenses, cash balances, and other key metrics align with expectations and investigate any discrepancies. Make final adjustments as needed.
• Close the Period: Once all reconciliations and adjustments are completed, close the accounting period to prevent further changes to the financial data. This step ensures the integrity of the financial statements and locks in the reported results.
• Prepare Management Reports: Generate management reports, such as budget vs. actuals, key performance indicators (KPIs), and financial ratios. Provide insights into the company’s financial health, cash position, sales performance, and any potential issues that need management’s attention. For B2B SaaS companies, month end reporting may include customer retention metrics, such as churn rate, monthly recurring revenue (MRR), and customer lifetime value (CLV), which are important for understanding the company’s growth trajectory.