In our last post QTC: What it is and why it’s Critical for Your Business we discussed the basics of Quote-to-Cash and highlighted some of the competitive advantages that a healthy Quote-to-Cash process can deliver to a business enterprise. In this post we will expand on the topic a bit by providing some insights on Quote-to-Cash KPI’s (Key Performance Indicators).
How do you know if your Quote-to-Cash (QTC) process is “healthy”? What are some primary QTC metrics that can provide quantitative and qualitative insights into the efficiency of your QTC process?
Since the QTC process straddles virtually aspect of your business, the number of potential QTC KPI’s can be almost limitless. If unchecked, this can create over-analysis and lead to the unproductive collection of masses of data that swamps your ability to synthesize and react; data just for the sake of data. Focusing your efforts on a smaller set of critical KPI’s will help ensure that you are maximizing the impact of your analysis.
What are some of the QTC KPI’s that your enterprise should be focused on? Consider the following….
Sales Forecast Accuracy
For many companies, the sales forecast is the driving force behind the planning within individual operational functions, including: inside sales, vendor management, manufacturing, services, delivery, and finance. Accurate sales forecasts provide the bedrock for efficient, and profitable, performance. Conversely, forecasts that are consistently unreliable can create havoc across the entire enterprise.
Accurate sales forecasting is dependent upon the ability to conduct in-depth analysis on forecast data that can be presented in real-time. A highly efficient QTC process will typically be supported by a Sales Forecast Analytics solution that can provide a 360° view of the entire sales forecast ecosystem.
These solutions provide the enterprise with the means for conducting forecast analysis that be segmented at a granular level. This enables real-time monitoring of forecast data and the ability to make adjustments necessary to achieve high levels of forecast accuracy.
RFP’s are valuable and often hard-earned. They can also be extremely competitive. In many cases, the timeliness of the RFP response can be the difference between success and failure. Systematic measurement of RFP efficiency is the first step toward understanding current performance and planning for performance improvement. Some specific QTC KPI’s to measure:
- Average RFP response. Tracking the span of time between receipt of RFP to submission of response.
- RFP response rate. Measuring the % of incoming RFP’s that are being responded to.
- RFP success rate. What is the % of RFP’s that the enterprise is winning? Higher win rates are indicative of a robust RFP process.
The use of RFP templates and the adoption of RFP automation solutions can significantly improve RFP efficiency and business win rates.
Order Intake Efficiency
The ability to process incoming orders quickly and accurately is a critical indicator within the front end of a QTC process. Quick order intake and processing helps set the stage for on-time delivery of orders. Accurate order entry helps ensure that you deliver the right products at the right time.
A highly efficient order intake process is the first step in achieving high levels of delivery performance and customer satisfaction. Typical KPI’s in this area can include:
- Average order entry time. How long does it take to get an order entered into the applicable system?
- Order entry accuracy %. What % of orders are entered 100% accurately on the first attempt?
- % of lost/misplaced orders. What % of total orders get lost/misplaced in the system?
Sales Pipeline Value
The value of the sales pipeline can be directly tied to the health a QTC process. Consistent monitoring of the value of the sales pipeline can provide valuable insights into critical areas such as: sales force performance, order intake efficiency, customer satisfaction, pricing strategies, etc.
Adoption of a customized Sales Pipeline Management solution can enable workflow-based automation of critical processes related to pipeline management. An enterprise-grade solution will provide capabilities such as: real-time analytics, customized dashboards, and cross-system integration.
Few things are more detrimental to customer satisfaction and retention than consistently poor delivery performance. In many cases all it takes is one or two delivery issues to jeopardize a customer relationship. As a result, many enterprises have identified delivery performance as a high-impact QTC KPI. This KPI can be broken down into a few sub-categories.
- % of orders delivered on time and in full (OTIF)
- % of orders delivered on time, in full, and at quality (OTIFAQ)
- % of perfect orders delivered
Average Time from Sales Order to Receipt of Payment
One of the most encompassing QTC metrics is the measurement of the amount of time that elapses between order placement and receipt of payment. Depending upon the type of industry this span of time can be measured in days, weeks, or months. Automated measurement and monitoring of this metric provides the enterprise with the ability to pinpoint process or operational bottlenecks and to take applicable corrective actions.
# of Contract Disputes
Contract disputes can create considerable drain on any business. Litigation costs, internal resource costs, monetary loss, and loss of focus on business growth are all common consequences of contract disputes. Tracking these occurrences, and driving the number of these disputes down to as near zero as possible, is a business imperative.
These efforts can be supported by integration of a Legal Document Management Solution that provides automation of critical document management processes. Automation, visibility, and control of these processes can help reduce the review, revision, and storage issues that can lead to contract disputes.
Profit margins are the bottom-line of all QTC metrics. QTC processes that are poorly managed, overtly manual, and inadequately integrated do not produce healthy financial results. An inefficient QTC process will increase costs and drain margins. The ability to correlate profit margins with QTC performance can provide the enterprise with the insights needed to initiate appropriate process improvements across the QTC environment.
At stated earlier, QTC KPI’s can be sliced and diced in many ways. The number of potentially valuable KPI’s can be quite extensive. As a starting point, focusing on the above metrics can provide the enterprise with a fairly comprehensive assessment of the heath of their QTC process.