When seeking to increase profitability and scale growth, business and professional services firms often realize the largest return on investment when they address gaps in the billing to collection process. For example, as many professionals can attest, the process of billing and collection gets tough for many firms. Not only are professionals unable to invoice for the time that it takes to bill, but certain business and professional services practices use manual, paper-based processes that slow things down. In some cases, months can elapse between when work is completed and invoices are issued, further lengthening the time before revenue is received. Thus, the billing to collection process is a crucial yet oft-overlooked element of any firm’s growth.
Our goal with this article is to highlight areas where business and professional services firms can increase profits by optimizing billing practices.
Here is the first question we typically ask: is your billing to collection process doing what it is supposed to do? Revenue leakage can occur at multiple points along this process, including but not limited to the following:
- Inaccuracies between time entry and services rendered
- Revenue received does not accurately reflect the work done
- Inaccuracies in contracts and work in progress (WIP) calculations
- Disconnection between the professional providing the service, the person performing the billing-related work and the person charged with collecting revenue
An accurate and timely billing to collection process is a fundamental aspect of a positive client interaction that leads to consistent referrals and renewals, as well as long-term profitability. No one likes to receive a professional services bill months after the fact. By optimizing your billing practices, your firm supports your clients’ desires to run an efficient and timely accounts payable process and they will be that much more likely to stay with your firm as opposed to jump to a competitor whose billing practices are more predictable.
Scalability and profitability
One of the main pain points we witness in cases where billing processes are not optimized relates to scalability and profitability. When billing practices lag, so does growth. The longer the revenue takes to acquire, the more difficult it is to fund plans for growth. Firms may recoup thousands of dollars simply by streamlining the billing to collection process.
Where to begin
Before beginning improvements, it is essential to understand the current state. This starts by reconciling the existing billing from the time-entry system and the agreed-upon fees, to ensuring that the correct amounts are captured in the invoice and finally also received in payment. If not, begin the step-by-step analysis of your firm’s existing processes and identify possible gaps. Once that is in place, use your analysis to define a road map. This can include strategizing to optimize the use of technology and defining responsibilities. The technology component can include taking an inventory of your firm’s existing tools and streamlining them. Many tools have overlapping capabilities; simplifying, standardizing and identifying redundancies in technology between offices and departments helps firms get the most out of their technology investment.
A regular check-up into your billing and collection systems is highly recommended. If the process runs smoothly, you gain a sanity check and peace of mind. If not, you gain the information you need to improve.
Work with a professional
As busy as professionals are, finding the time to identify revenue leakage, study processes and then find the software necessary to bridge gaps may seem daunting. Consider working with an independent professional who can assess your firm’s systems, analyze its existing processes, and identify what is not working. An outside perspective can help your firm benchmark its performance against leading industry practices. It can also provide recommendations for the process, sub-process, controls, roles, and reporting that need to be in place to improve the billing and collections process and ultimately boost profitability.