Streamline Billing and Collections
Increase Cash Flow by Shortening the Time Between Billing Cut Off and Payment Receipt
By Peter Lyle DeHaan, PhD
As we look at ways to be a responsive answering service, one critical, but too-often overlooked, area is billing and collections. This affects cash flow and is a critical consideration in maintaining the financial viability of your answering service. Each additional day that you wait to receive payment is a day left with you trying to operate without the money that’s due you.
Let’s look at some ways to streamline billing and collections.
Billing Cutoff Date: How close is your billing cutoff date to when you begin processing invoices? The goal is to make it as short as possible. If you bill monthly, what happens when the end of the month occurs on the weekend? What if it’s a long weekend? Do you wait until Monday or the next business day to begin work on billing? If so, that’s one, two, or even three extra days added to your collection cycle.
If you bill every twenty-eight days, you can strategically pick your billing cutoff date to when you can best work on it. This might be on a Tuesday or Wednesday.
Billing Cutoff Time: When do you download or transfer your billing statistics? Though midnight is a logical cutoff time, does that make sense if you won’t start processing information until 9 a.m.? Though nine hours may not seem like much, it represents nine hours of billing that you can collect this billing cycle as opposed to the next one.
Regardless, the goal is to shorten the time between downloading your stats and sending invoices. Strive to make it the same day.
Sending Invoices: Most businesses today email their invoices. Do you? Mailing them adds an extra two or even three days to your collection cycle. Look for ways to get your invoices to your clients’ payables department as quickly as possible. Is texting invoices an option? Most people open text messages within a few minutes. That’s faster than email and much faster than snail mail.
Receiving Payments: Do you have clients mail you a check? That adds another couple of days to your collection cycle. Can you have them pay by credit card instead? Though credit card payments involve additional fees, it may be worth it to collect on time, especially for chronic late payers. What about ACH (Automated Clearing House) and ETF (electronic funds transfer)? These are low-cost ways to collect faster.
Related to credit card and ACH payment is timing. When do you process those payments? Is it when you generate the invoice, at the due date, or sometime in between? Shortening the number of days will allow you to collect faster and reduce your collection cycle. However, don’t change your processing timing without first clearly communicating the new policy to your clients.
Conclusion: Seek ways to shorten the time between your billing cutoff and receiving payment. This will improve your cash flow and increase the health of your answering service. For further information, explore two related accounting principles: average collection period and accounts receivable turnover.
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The 5 Myths of Business Strategy
By Rich Horwath
The most important leadership behavior critical to company success is strategic thinking. As a good strategy is at the core of any organization’s success, it’s important to understand the five strategy myths that may hold back your team from reaching greater levels of success.
Strategy Myth 1: Strategy Comes from Somebody Else: The strategy that you execute should be your own.
Identify the corporate strategies, product strategies, functional group strategies, and your strategies. Then seek alignment.
Strategy Myth 2: Strategy Is a Once-A-Year Process: The number one driver of revenue growth is the reallocation of resources throughout the year from underperforming areas to areas with greater potential. Strategy is the primary vehicle for making these vital resource reallocation decisions.
Conduct a monthly strategy tune-up to review and calibrate strategies.
Strategy Myth 3: Execution Is More Important Than Strategy: The number one cause of bankruptcy is flawed strategy, not poor execution. Strategy and execution are both important, but all great businesses begin with an insightful strategy.
Create strategy first. Then shape an execution plan.
Strategy Myth 4: Strategy Is About Beating the Competition: Attempting to be better than the competition results in competitive convergence. Doing the same things in the same ways as competitors, blurs the line of value between your company and competitors.
Remember that competitive advantage is providing superior value to customers. It’s not beating the competition by being better.
Strategy Myth 5: Strategy Is the Same as Mission, Vision, and Goals: Since strategy is an abstract concept, it’s often wrongly interchanged with the terms vision, mission, and goals. Remember, mission is your current purpose, and vision is your future purpose. Goals are what you are trying to achieve, and strategy is how you will allocate resources to achieve your goals.
Conclusion: If left unchecked, strategy myths can cause you and your business to fail. The number one cause of business failure is bad strategy. Counter these strategy myths with right thinking and decisive action. Then watch your business soar.
Rich Horwath has helped more than 100,000 managers develop their strategy skills through live workshops and virtual training programs. To sign up for the free monthly newsletter Strategic Thinker, visit: www.StrategySkills.com.
Advantage TeleMessaging Turns 25: Advantage TeleMessaging, Inc. celebrated its twenty-fifth anniversary on September 28th, 2019. Since 1994, they have been dedicated to the success of every one of their clients by striving to offer nothing less than excellence in customer service. Advantage TeleMessaging, Inc. has grown from a one-agent, local answering service in West Reading, PA to a multi-award-winning, call management center with over 500 clients throughout the United States and Canada. Advantage TeleMessaging, Inc. would like to express their gratitude to all of their clients throughout the years for helping them achieve this milestone. Here’s to another successful twenty-five years.
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Quotes for the Month
“Do unto those downstream as you would have those upstream do unto you.” -Wendell Berry
“Education is the transmission of civilization.” -Will Durant
“Acupuncture: a jab well done.” -unknown