30 May Are you suffering from a chronic case of painful billing?
Billing is a key component of your business and allows you to pay for your operating expenses. As a matter of fact, it is just as critical as your sales.
However, most of us rarely spend much time reflecting on our invoicing process and we are even less likely to question whether it is fully optimized. If you don’t have the best set up or are using the wrong tool, billing can really be a painful task from time to time.
Below are three possible cases to consider, which will most certainly be of interest to newbies as well as to knowledgeable readers.
First of all, does your invoicing system allow you to automatically generate estimates and orders and to directly convert them into an invoice down the line? If the answer is no, you should be looking for a technology solution that will eliminate the need to re-enter the same information several times, thereby reducing the risk of errors and saving your staff a great deal of time.
You may already have such a system but are still finding the billing process cumbersome. Do any of the examples below match up with your reality?
- You need to spend hours checking invoice due dates;
- You need to spend time ensuring that you are not omitting an invoice;
- It is difficult to know which invoices have been paid and which have been sent but not yet acknowledged by your clients;
- You have to constantly recompute (in fact, this happens way too often) to keep your accounts payable current;
- You lose track of invoices that are due;
- You find it difficult to identify the items that have already been invoiced.
If one or even several examples listed above are reflective of your daily experience, you can put an end to this chaos by seeking the help of Nubik’s team who are experts in billing system and process optimization.
Let’s now delve into two other interesting cases relative to the billing cycle.
These days, it is not unusual to come across companies with complex invoicing requirements, especially when the business model involves billing for recurring contracts and services. For those organizations, the billing process is one of their most undervalued competitive assets, despite the fact that it is essential to maintaining a sustainable competitive advantage.
Customer relationships based on how a client uses a product or service are becoming increasingly common, especially when the offer includes delivering products and services over a period of time or under the umbrella of an ongoing contractual relationship. If additionally, several pricing and payment plans are available across multiple offers for each client, the invoicing challenge can become overwhelming.
For this type of company, the billing system must be able to handle complex data extracted from various sources and to simultaneously invoice outstanding transactions, prepaid subscriptions and customer services as they are delivered, all within a single invoice.
If that is not possible, these businesses will be faced with competitors who have access to more sophisticated invoicing capabilities and will sooner or later be gaining market share.
That being said, don’t go believing that the streamlining and optimization of your invoicing process is a task that can happen in a vacuum. There are several related processes that must be able to provide the system with the right information if billing is to truly be optimized. Those processes are contract management, pricing, physical count, service delivery and revenue management. None of these key financial activities can be optimized independently of the others, they are all interrelated and must be addressed as an enterprise system.
Unfortunately, very few companies have implemented their ERP system in a way that allows data to circulate directly within their basic financial processes. In fact, ERP systems are rarely designed for the specific needs and requirements of business models based on contracts and recurring services.
As a result, these processes cannot be optimized, resulting in inefficient financial operations. There is even a risk of introducing errors within the financial data.
The management of your financial infrastructure must be approached strategically with a focus on supporting the client relationship as a whole when you assess how your current system can be upgraded. Here again, Nubik’s experts can provide extensive knowledge and expertise in order to assist you!
Let’s take a look at one last possibility, namely the business centered around project management, such as professional services, engineering consultants and consulting firms of all shapes and sizes.
Project Based Invoicing
For companies whose services are invoiced by project, we are dealing with billable time attached to an hourly rate that varies according to the type of work being performed.
While fairly simple conceptually, this invoicing model quickly becomes complex as you add various job categories which all have a specific hourly rate, as well as rate variations based on the expertise and skillset of the resource assigned to the job. Billable work hours accounting also implies a need to fill out time sheets.
Quite often, the tools and processes already in place make the task of entering work hours tedious or confusing, or are not smart enough to prevent data entry errors. Consequently, costly mistakes cannot be avoided. As an example, project costs could be linked to the wrong project or billable hours could be omitted from the system and consequently forgotten when the invoice is generated. In most cases, there is a need to spend time checking for errors. This time is obviously unproductive. If you also have to interrupt your teams during their work hours to obtain clarification, you are hampering their productivity.
The estimate system could also be vulnerable to errors, which will most certainly contaminate the invoicing process down the line. To avoid these kinds of issues, you have to make sure that your billing items can be entered correctly and accurately (without ambiguity) at the beginning of each order cycle and are accounted for at every delivery milestone of the project, until it is time to generate an invoice.
One thing is certain, if your billing system contains errors, there is a good chance that your invoices will be delayed. This will primarily impact your cash flow. The principle is simple: if the invoice is delayed, so will the payment. Secondly, clients tend to have a selective memory. If you are late to invoice, other priorities will start taking precedence. Your customer’s perception of the value of the work you did for them will decrease week by week. Even a small delay can have a huge impact. If you are dealing with large companies who normally issue payments on a fixed schedule, missing their cycle by just one day may mean that you have to wait another month to get paid.
Independently of your situation or business model, if your organization has not integrated harmoniously the actual work performed and the invoicing process, you are involuntarily setting yourself up for a chronic pathology… meaning that you will be regularly recreating unnecessary issues related to duplication of effort, risk of error, delays, lower profitability and quite possibly, be the cause of irritating circumstances for your customers.
Businesses rarely stop to ponder their invoicing process, even less so once it is fully optimized.
Remember that we are ready and able to guide you through this exercise.
By Stéphane Poirier, Marketing Director for Nubik