Opportunity to Order Validation in CRM — When Is a Deal Really Closed-Won?

Modern CRMs such as Salesforce or NetSuite offer much more than traditional sales management (account, opportunity, contact management, etc.).

They are open platforms that can be augmented with additional Quote-to-Cash (QTC or Q2C) functionality such as quoting, order management, service management, billing and others.

As a result, many organizations consolidate their QTC around CRMs. Typically, the first consolidation steps are implementation of CPQ (Configure, Price, Quote) and order management.

Integrating quoting and order management in a single system makes a lot of sense because information required to create an order is available on opportunity/quote and order creation can be fully automated to save time and prevent errors.

In that case, beginning of the Quote-to-Cash process looks as follows:

Lead → Qualify → Create opportunity → Generate & present quote(s)
→ Opportunity Closed-Won → Create an order
→ Start order processing...       

For organizations that require order validation (background/credit check, completing a survey, etc.), the transition from closed-won opportunity to an order is a critical step in the process.

Validation strongly depends on a type of business. High value deals usually require more guardrails, high volume/low value ones — a simpler process. In addition, involved stakeholders may have different viewpoints:

• Sales reps want to close opportunities as quickly as possible (better funnel reporting, quicker commissions) and fix issues later if need be
• Delivery teams want to have a complete order (all forms, signatures, data points, etc.) to shorten processing times and avoid going back to sales for missing information.
• There may be other steps in the process such as financial check that should not stop opportunity from being closed, but the order must not be processed before the check has been completed
• From the customer experience standpoint, it may be desirable to make placing orders easy and gathering the details later in the process

The validation can be performed on the opportunity level (before closing) or on the order level (as the first step in order processing).

Opportunity-level order validation

Opportunity-level validation is applicable when all checks can be performed before an opportunity is closed-won, and the resulting order can be assumed to be correct. Opportunity-level validation can be implemented as follows:

• Ensure that all data points required to close an opportunity are there, add validation preventing transitioning to Closed-Won if they are not provided
• If attachments are required (such as order forms) add attachment checking as well
• Build an approval stage before transitioning to Closed-Won. Rather than have a rep closing his/her own opportunity, direct it to an order validation team and have them transition it to Closed-Won when everything is OK. For example, when modifying a standard Salesforce opportunity add a new stage with 99% probability:
  

  

• When using CPQ, move as many checks as possible to quote validation

Order-level validation

Order-level validation assumes that the cleanup will take place after opportunity has been closed-won.

If, for instance, paperwork is bad and needs to be re-done, the order is put in “On-hold/pending paperwork” or a similar status. Eventually, if problems cannot be resolved, the order is canceled (usually with a reason code capture for analytics). Since sales teams do not work orders, a mechanism of resolving issues between sales and orders needs to be in place.

Opportunity- and order- level validations can be mixed. For example, for Internet service providers, requiring connector type can be ensured on a quote/opportunity. However, service availability at the requested location is usually checked once the order has been received.

Implications on sales funnel reporting and commissions

Order validation has significant implications on sales reporting and commissions. For example, it is not optimal to report new revenue (and calculating rep commissions) from Closed-Won opportunities alone. When orders fail validations and are canceled, this will not be reflected on opportunities. The same is true when orders are modified during delivery (e.g., one line item out of three is canceled).

Multiple data sources are required to obtain accurate reporting:

• Sales pipeline → In-flight opportunities
• Sales bookings → Closed-won opportunities
• Revenue projections → Orders (with a breakdown for ordered, canceled, delivered)
• Actual revenue → Billing

Sales Pipeline → Booked → Delivered → Billed

For accurate commissions, adjustments need to be calculated along the way as the order is progressing from CRM to billing.

Conclusions

Order validation is an important step within QTC. A good implementation can help to:

• Reduce back-office costs (no overhead “cleaning/scrubbing” the order)
• Improve customer experience (shorter time between deal closure and start of delivery)
• Improve sales rep experience (accurate commissions)

Nextian is a vendor of Quote-to-Cash (QTC) software for cloud and communications helping providers accelerate growth and increase customer lifetime value.

Contact us today to find out how we can help you!