Quote to Cash KPIs You Need to Watch
When you have isolated and siloed systems, quotes are more likely to be delivered late, with errors, and no one knows it happened. This is because you have zero visibility into opportunities and how they are progressing through your pipeline. Using these siloed, isolated, legacy systems can cause operational inefficiencies as well as financial risks.
Now, compare that to a sales team that has moved to a standardized quote to cash system. It creates new opportunities for key performance indicators (KPI) to provide insights into the sales cycle. These KPIs reflect how the different departments involved in the sales cycle add value to each stage of a customer relationship.
While there are many KPIs available, the ones below will offer the best return on investment and tell you if your quote-to-cash process works.
Planning your KPIs
When planning your KPIs for a quote-to-cash process, you should start at the top. Consider the mission or goal of your company, and then work through the business drivers and activities that will be required to achieve this goal.
Make sure you are clear on what needs to be measured. After that, look at your existing systems and data sources to determine which data points are available and which ones need to feed into the KPIs.
Here are some of the questions you can ask to help you plan your KPIs:
- Does your organization have a mission statement that everyone can buy into with proper goals and objectives that will help to define KPIs?
- How are you going to react to positive KPIs?
- How will you respond to negative KPIs?
- Can you find KPI anomalies and identify the cause and fix issues?
- Do you have the appropriate technology to provide those KPIs?
KPIs you need to watch
The following KPIs will help you improve sales effectiveness, increase profitability, and improve customer satisfaction:
Average quote value (ACV): this is calculated by adding up all of the active quotes and dividing by the number of quotes. ACV is an effective benchmark of sales effectiveness. It can also be helpful to track ACV by the bundle, product line, sales rep, and customer type.
Percent of opportunities quoted (POQ): this is calculated by the number of quoted opportunities divided by all opportunities. This is an excellent leading sales indicator. It can help you determine if you have at-risk deals in your pipeline and their impact on sales. Unfortunately, some systems integrators see lower POQs than average because the manufacturers don't have adequate tools to track the KPI.
Average order value: when sales reps can recommend complementary products (i.e., upsells or cross-sales), the customer is more likely to increase the value of their order.
Discount performance trend: this KPI is suitable for companies that use pricing discounts. It shows whether offering pricing discounts is improving sales. It is calculated using the difference between the list price and net price and then divide by the list price to get an average. This KPI will also show you which discounts are performing and which ones aren't. You can use this insight to help create more practical rules for discounting.
Quote cycle time: this is the total amount of time it takes to create an accurate quote. You can evaluate quote cycle times by quote type, sales rep, and product line. By reducing your quote cycle time, you can increase your close rates. One way to do this is reducing the barriers to approval by allowing customers to approve and pay directly from the quote.
Profit margins: this can be the ultimate metric for many quote-to-cash organizations and the king of the KPIs. A manual quote to cash process can make getting this information a challenge. Having an inefficient process can increase costs and decrease margins.
Monitor and optimize
Quote to cash KPIs are not a once and done process. As your systems and goals change within your organization, you will need to periodically review your KPIs and replace them with more relevant ones for your organization.
You'll know when a KPI is no longer needed when it's not a good indicator of the company's progress as it moves toward objectives. If you don't periodically monitor your KPIs, it can create over-analysis. This can lead to a massive amount of data with little value that keeps you from focusing on the right things.
This is why all managers and sales reps must share the exact quote to cash selling goals to see how their contributions to the process matter. This will help to increase sales and profits.
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