Improve your customer relationships (and your cash flow) through accurate and timely billing

Customers are the only ones who put money into your company. Everyone else takes it out! With that in mind, how easy is it for customers to pay you? Most billing processes are not customer friendly. Often we receive invoices that are late, contain incomplete information, and don’t have an easy method of payment.

Why change?

Are your customers on the receiving end of a company-centric billing system? If so, here are a couple of thoughts about why you might consider changing it:

1. Happier customers: A clear and accurate invoice is just as important as a high quality product. Both are customer touch points and both convey the image of your company. Make your customers happier by providing an all around positive customer experience. Also, a legible invoice leads to quicker payment.
2. Increased cash flow: Let’s do the math on the importance of reducing your company’s days in accounts receivable. If you had $5,000,000 in gross sales last year, your average daily A/R is $5,000,000 divided by 250 (the number of business days in a year). For every day you decrease your billing/collection cycle, you would liquidate $20,000 in cash!

What can you do?

If these two points got your attention, here are some ideas about how to use technology to improve each step of the billing and payment process:

Generate clear and concise invoices

The more legible and clear your invoices are, the less they will be disputed. Additionally, clients will have a greater understanding about the service provided and/or products delivered. Usually, invoices contain company-specific language that is only understood by staff. They are often not detailed enough with pertinent information to help your clients appreciate the full scope of work rendered or products produced. The best solution is to employ an electronic time tracking/project tracking system. Such a system will:

• Eliminate flipping through timesheets,
• Speed billing by replacing manual compilation with automatic reports, and
• Increase invoice accuracy.

Deliver billing faster

Once you have an easier process to compile your invoices, the next step is to get billing out faster. Most companies send invoices through regular mail. This increases the number of days it takes for your customer to receive the invoice and put it into the company’s payables. Here are two easy ways to eliminate that lag:

• Email invoices directly to the payee. Many accounting and financial programs have an email option. Companies of all sizes are becoming more accepting of electronic invoices.
• Fax invoices. Solutions are available to allow faxing directly from your billing system using either your own fax server or an online fax service such as eFax. Online faxing programs allow users to fax electronic documents eliminating time wasted printing and going to the fax machine. Learn more about eFax.

Receive payment quicker

Now that your accurate and detailed invoice is in the hands of your client the day after the month is closed, it seems like you are at the whim of the payee’s accounting department. Not so. There are a few ways you can receive payment quicker through online banking. An executive for Bank of America says that its percentage of business customers using online banking has tripled since early 2002. Online banking includes receiving e-bills and online bill pay. If your company accepts credit cards, your customers can pay quickly either through their bank or to you directly. How do you accept credit cards?

• PayPal. PayPal is rapidly becoming the standard for online payments. The only catch is both you and the payee must have a PayPal account. There is no charge to set up either a merchant or a payee account and the set up is easy. Learn more.
• Merchant Account. You can set up a merchant account through most banking institutions. With this account, you can accept credit cards and the funds are directly deposited into your account. Setup costs vary.
• QuickBooks. QuickBooks Merchant Service allows users to accept credit cards with a one-time setup fee and a monthly processing fee. Learn more.

With any of the above options, you can place a hyperlink in your electronic invoice that allows customers to payee with one click. No more printing, envelopes, stamps, or mailing! More importantly, you eliminate the time it takes a check to be mailed, received, and deposited.

Offer online statements for big customers

Do you have big customers with multiple open jobs or projects? Consider serving them better by providing an online statement. This would enable clients to view past invoices, current invoices, and up-to-date balances. To create an online statement, you would need to create a password protected area of your website and keep the data current.

Bonus Idea:

Stepping over to the other side of the ledger, you can also increase your cash flow through increasing days in accounts payable without damaging vendor relationships. How? Where possible, pay bills with your business credit card. Why?

• You gain 1 month liquidity on all vendors that accept credit cards. For example if your average monthly A/P is $20,000 and half your vendors accept credit cards, you will gain a one-time liquidation of $10,000 in cash. If done properly, there are no financing charges.
• You earn air miles! Don’t we all need a free vacation?