“Cash is king.” The expression can have various meanings, but when analyzing professional services organizations (PSO), it typically refers to cash flow and its importance to fiscal health. It can be used as a declaration of success, a metric of a well-run business or simple indicator of company growth.
Regardless, the principle is key to all businesses; cash is fundamental to daily operations. It primarily impacts your ability to pay salaries, operating expenses, suppliers, taxes and more.
As a business, you control cash income from invoicing. Having an effective process in place can build a foundation that protects cash flow, increase credibility with suppliers and even bolster investor confidence.
So how do you build a strong invoicing model? It’s not as difficult as you may think. The following presents common problems and effective solutions for you to consider.
Strong commercial terms
The problem: “This isn’t what we agreed” or “This isn’t our process.” This is what happens when your customer disputes an invoice based on their interpretation of the contract or usual business practices. In all likelihood, the person processing your invoice on the customer side is not directly involved in the engagement and will follow their internal processes and review documentation before making payment
The solution: Every sale you make should be linked to unambiguous, clear and achievable terms and conditions (T&Cs) for invoicing and payment. By framing the quote/order form with strong T&Cs, you control the financial engagement, limiting stalling or delaying tactics by your customers.
Proactive not reactive
The problem: “The values are incorrect” or “The invoice has the wrong details.” You hear this when your customer disputes the values or data of the invoice.
The solution: Don’t wait until it is time to invoice before you check orders – validate at the point of sale. This shouldn’t be perceived as delaying sales; it is managing commercial risk and ensuring all data is correct from the start. This includes customer data (addresses, legal name, payment terms), contractual data (quantities, rates, products) and contact information.
Further, having an independent compliance check of a contract can identify any mistakes, irregularities or adverse commercial terms, enabling you to adjust prior to the start of the delivery process.
Automate, automate, automate
The problem: “The rates are incorrect” or “The calculations are wrong.” This occurs when your customer identifies transactional errors and disputes the invoice details.
The solution: Creating invoices is a time sensitive process. When data is manually collected and then manually entered into invoices, there is a significant risk of incorrect values presented to your customer.
Maximize your software to minimize manual mistakes and improve efficiency. Let the software do the work based on the transactional data your team is recording.
When data is validated/approved, the software creates invoices (singular or batches) based on this detail, with no requirement for manual entry or creation. The monthly process is faster because you’ve reduced the risk of incorrect invoices – and clients tend to be happier.
Assurance not processing
The problem: “The transactions are incorrect” or “You didn’t deliver this work.” Customer’s disputing the content of an invoice are common but frustrating.
The solution: Traditionally, invoices are created and processed by the finance team or another back office function. They have no direct knowledge of whether the content of the invoices is correct or not.
Empower your project team to create invoices. This ensures that someone with direct knowledge of the engagement views the invoice at creation and is accountable for the transactional data. The back office team then performs an assurance role, focused on contractual values and acting as a safeguard.
The problem: “I’m not paying” or “I am waiting on dispute resolution.” This is a phrase you don’t want to hear because it means the customer is delaying payment and there’s no clear communication path.
The solution: Emails back and forth to generic addresses, lack of ownership and vague promises from faceless names all contribute to negative cash flow. During the project delivery cycle, your team and the customer communicate, build relationships and interact on a regular basis. Utilize your delivery teams interactions with the customer to aid dispute resolution for the benefit of all parties.
Positioned to rule
Using these principles creates a strong foundation to improve your cash flow, maximize your customer reputation and reduce commercial risk.
To further improve your billing processes, invest in an end to end quote-to-cash software solution, such as a professional service automation (PSA) platform. The benefits this can bring to your invoicing process includes:
- Automation of compliance processes (approvals and audit trail)
- Single source of customer data (quote to invoice)
- Single platform for sales and delivery teams (capacity management)
- Real time data for sales and delivery performance and leadership insights
- Improved employee efficiency (reduction in overhead through automation)
As the saying goes, cash is king. And when you strengthen your invoicing processes, you’ll be in a much better position to rule.
Interested in learning how you can strengthen your quote-to-cash process? Contact us today.