Many organizations can profit from improving their billing processes. Immediately so by saving costs and avoiding mistakes. Indirectly by improving the results (more revenue), increasing customer satisfaction, accelerating the go-to-market process and by enabling alternative propositions. This is the first part of a series of blogs about the invoicing process. The unifying theme: billing process optimization. In the upcoming blogs we will do a deep dive and analyze the improvement potential for each part of the process. We expect to cover the following subjects:
– Part 2: Data collection
– Part 3: Pricing
– Part 4: Invoice creation and distribution
– Part 5: The collection process
– Part 6: Auditability and compliance
Everyone knows what an invoice is. Wikipedia gives a concise definition: an invoice, bill or tab is a commercial document issued by a seller to a buyer, relating to a sale transaction and indicating the products, quantities, and agreed prices for products or services the seller had provided the buyer. Invoices have a long history. Legible Roman time invoices have been found during excavations. The example below is a invoice from an English carpenter named Jos Shaw, who made this bill in 1756. It is remarkable that the scope of the bill is as clear now as it was then, as long as you know that there are 12 pence to the shilling.
By ‘invoicing’ we mean the process of creating, distributing and collecting bills. It is less rigidly defined what this means exactly. Jos Shaw used a manual process that will have been well in line with his day-to-day practice. Many companies still make use of (partly) manual processes, although these days it is less visible in the form of handwritten invoices.
Legal requirements and compliance
Invoices are subject to requirements by the tax authorities (see Dutch Belastingdienst). The rules for creating invoices vary by country. In general, the requirements to invoices between companies (B2B) differ from the demands made to invoices for consumers (B2C). In most cases billing to individuals is not legally required. The legislation is closely linked with VAT. Requirements also apply to (the quality of) the process of billing. This is where “compliance” comes in. This may be different by industry. Larger (multinational, listed) companies can set themselves stricter rules than required by the legislature. Much more on this in a future article.
The billing process
The billing process is a crucial step in the overall order-to-cash process. Prior to the billing process data is captured or collected. During the billing process pricing (rating or tariffing) takes place, invoice lines are combined into invoices and invoices are distributed to customers. The billing process is followed by the collection process, an element of debt management. If successful, this results in payments (‘cash’).
A good and robust billing process facilitates the surrounding steps and ensures data is optimally transformed into paid revenue.
Billing process optimization: costs and revenue
Billing is more than a necessary evil. Without invoicing no revenue! Less simplistically, the quality of the billing process impacts the result (your revenue), but also affects customer satisfaction. In the third part of this series we will elaborate on this. Less visible but very important is the freedom regarding possible propositions and the time necessary to realize changes. Focus is ususally on the direct costs of the billing process, and indeed profit is to be gained there as well. For clarity’s sake, we are not discussing how to deal with incoming invoices, but how to improve on your sales invoice flow. By streamlining and automating (partly) manual processes the headcount of a finance department can often be reduced considerably. It is surprisingly common that revenue remains ‘on the shelf’ because some usage cannot be invoiced completely. A correct invoicing process also allows full control of what you owe to your suppliers.
Why this series
The FIQAS specialists have a wealth of experience in organizing, executing and optimizing billing processes. The business cases that we see are often narrowed down to one or two of the above aspects. With this series of articles we try to do justice to the bigger picture. In part two of this series we will focus on the processes and best practices concerning data collection.
FIQAS is an authority on invoicing processes, established in 1989, with renowned international customers and operating from Aalsmeer (greater Amsterdam area).