The 3 Requirements in Billing & Collections
Back in 2005, I took a position as a Controller for a small online marketing company. We had some large Fortune 500 clients and were doing innovative client service work. The caliber of the employees was exceptional and entrepreneurial. I noticed quickly that even though there were good Sales and Client Service Processes, there was a basic step in business that was lacking.
There was no consistent and accurate Billing and Collection Process. This was quickly resolved and the business grew quickly and was eventually sold to a large marketing holding company.
1. Develop a Consistent Billing Process
A Billing Process actually starts with the contract with the customer. Then, once an agreement is signed, the Accounting team should be informed. Also, be sure to include the Invoicing Terms in the contract so it is clear as to the timing, payment terms, and even the method of payment. Billing should be consistently performed on at least a monthly basis. The client will come to expect the monthly invoice, and this makes for quicker payments.
2. Automate the System
The more automation in the Billing System, the more accurate and quickly you get paid. With technology today, there really is no good excuse for even the smallest of businesses not to have an easy Billing System. Some quick ideas to consider:
- Set up recurring billing through payment gateways such as Authorize.net or Signapay.com.
- Set up the automatic creation of invoices in Quickbooks Online. It can even automatically email them each month.
- Check out the different Billing Systems for multiple industries and sizes at www.capterra.com.
- Make it easy for clients to pay. Allow them to pay by bank ACH or credit card online. Consider all payment methods.
3. Have a Collection Process on Past Due Invoices
As invoices become past due, you need a good process for following up and receiving payment. Sometimes, the invoice gets lost in email, so a simple follow-up reminder is all you need. As invoices become 30 days past due, you will have to call the customer to get a date for payment. There are multiple things to consider to decrease the cost and time in collecting old invoices:
- Consider collecting some or all up front.
- Negotiate different terms, amounts, and payment plans if you think they are struggling to pay.
- Be consistent and follow up with the client. Don’t let too much time pass.
Billing and collections are many business owners’ least favorite tasks. Also, sometimes having a fractional CFO or accountant do the billing and some collections will help separate the Customer Services employees from the money people. In summary, the key is to set up the contracts, processes, and develop automation so you can avoid old collection issues that keep you doing what you do best.