Why Businesses Need Solid Quoting Processes

In the B2B space, a seller’s quote is among the most mundane parts of business. They are something you tend to not pay particular attention to. From an Operations perspective, they’re function is well understood. Or so I thought.

A quote serves many purposes, some of which are:

  • Provide buyer an estimate of total cost of a purchase
  • Be specific, providing clarity as to exactly what is discussed
  • Let the buyer compare costs between vendors
  • Establish the terms and conditions of the sale
  • Indicate how long the estimate remains valid

Oddly enough, discovering a quote’s shortcomings are often discovered as they flow backward through a business.  For instance, consider a customer purchase order (PO)  based on an incorrect quote. Finance might not be able to process and they turn to Sales for resolution. This might be fairly quick (days or weeks). Or, the failure might take a full year, discovered when an annual maintenance period needs to be renewed.

Again, while being mundane, quotes can create untold havoc if poorly executed by a seller. One organization’s quotes had several misses.

…discovering a quote’s shortcomings are often discovered as they flow backward through a business.

The organization did not use part numbers nor were individual items broken out on individually identified lines (i.e. item 3 on ‘line 3’).  Everything was lumped together in one line, including quantity, with an extended amount in the right-most column (the only column).  When it came time to quote annual renewals, it was impossible to determine (sometimes years later) how the original pricing had been determined. The impact was often hours of research, often involving exec-level meetings, to determine how to construct a renewal quote. Time, after time, after time.

Something simple like an expiration date did not exist. Leading to customers and partners submitting POs based on quotes over two years old!

My favorite, was a complete lack of terms and conditions.  The T&Cs can be critical as they call out specific limitations, what supporting services may be included, specify if returns are accepted, as well as specific requirements for POs to be accepted.  (Among many other company-specific details).

To address these challenges, the changes were itemized and communicated, along with a deadline for when all prior quotes would no longer be accepted. The change process itself can be cumbersome. When customers and partners have spent years working with a business a certain way, significant change often comes as a shock.

As the business passed the first year mark of making these changes, they noticed several items:

  • Annual renewals became much easier. Sales did not need to spend time deciphering what needed to be quoted.
  • Per item profitability could be determined and reported against (data analytics).
  • Quote expiration could be enforced.
  • Quality of the B2B relationships improved as prior quotes no longer required ‘negotiated understandings.’

So, next time you look at a quote, take a moment and really look at it. Read the T&Cs. See if it informs you of some detail you’d not previously noticed.  You’ll probably find a couple surprises.

Image Credit:
Feature Image – Ashley Batz