Cash is king! How to improve cash flow by focusing on your invoicing process.
I've seen it numerous times...it happens in law firms, accounting firms, consulting firms, and any company where employees are the "product" upon which revenues are based.
The problem with the professional services industry is that a large key to success is cash flow management. That means that you must effectively manage the time between when your resources perform the work and when the customer pays. Let's take a look at the whole process.
Part 1 : Time and Expense reporting
To effectively get your personnel to report their time and expenses, it must be simple. Some of the ways to address this are :
- enable your team to enter their time and expenses through a simple to use web portal, or even a mobile device. That way it doesn't take a significant amount of time out of their day to "get their paperwork in".
- set up a process whereby remote users can simply mail their expense receipts to head office (or even scan them into a central server). The receipts should be indexed with the expense report number as well.
Part 2 - billing entry
- the time and expense reports should be approved by a manager, preferably online, and afterwards should move seamlessly into the billing engine
- the billing process should be automated from the time and expense reporting, with minimal, if any, manual intervention. We find in most professional services firms that this is an area where the most manual intervention takes place.
- if the invoices need to be approved as well, this should be done online and with workflow. This step is usually a "crutch" for poor time and expense reporting accuracy, so it's acceptable for this to be part of the process to ease the transition to a new system for management. After a while, however, this approval step should be eliminated.
Part 3 - customer invoicing
- during all professional services systems implementations, I insist on the client providing us 2-3 customers to interview. This is because the #1 reason why bills are not paid on time is because they are not clear and concise for the customers.
- invoices should be standardized, but can also be customized by customer. This is a service I would recommending charging for, but it can also reduce their time-to-pay. The theory is simple: if a customer gets their bill in exactly the format they're looking for, then why would they need time to reconcile it against their records? Provide as much information as possible, presented in a way that they want, and watch your open AR shrink.
So there are some creative ways to affect your cash-to-cash cycle, while improving customer service and reducing costs as well.
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