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If the data collection and tariffing are set up well, then creating the actual invoice might not be so complicated anymore. Right?
This conclusion is a bit premature. Even this step in the invoicing process involves its own complexity. Have you ever wondered, for instance, how VAT is calculated, how all the details are neatly grouped, or what needs to happen in the background when a customer cancels their subscription?
This is part 4 of a series of blogs by FIQAS about optimizing invoicing processes.
Generating an Invoice
Once the data is inputted, the consumption is priced, and the invoice lines are generated, the actual invoice can be produced. This document reflects the payment obligation of a customer to a supplier.
Generally, an invoice doesn’t appear particularly unique. But don’t be mistaken; invoices have many requirements. Primarily from the Tax Authority, which dictates the basic data that must always be included on an invoice. Additionally, the supplier themselves aims not only to reflect their branding on the invoice but also present their sold proposition in a recognizable and transparent manner to the customer (and must do so).
Key Considerations
Here’s a selection of many considerations involved in creating and distributing invoices:
- Invoices are offered in increasingly diverse forms. A hardcopy invoice in an envelope, an invoice as a PDF attachment in an email, a message stating that an invoice is available in a client portal, a UBL invoice that can be directly imported into accounting. Invoices are increasingly accompanied by a payment option, such as a payment link in the invoice email, leading to a payment service provider’s site.
- The invoice layout is determined, among other things, by the company’s branding issuing the invoice. The invoice also displays the correct groupings and consolidations that fit its propositions and clients. In a detailed invoice specification, the invoicing party presents data at a detailed level. Tax regulations dictate the minimum data that must be displayed.
- There are differences between B2B and B2C invoices. Invoices for governments are subject to even stricter rules.
- Convergent billing. Different product lines end up on a single invoice. For many systems, this remains a challenge. It becomes extra complex when invoice lines are provided by different systems.
- Usually, only consumption records falling within the invoice period need to be invoiced, but earlier records might also need inclusion. When invoicing for premature contract termination, fixed costs (such as subscriptions) might be proportionally adjusted.
- VAT calculations must adhere to specific rules in each country. Composite propositions might involve different VAT rates. To calculate VAT, the VAT class must be established somewhere, perhaps at the product level, or an automated business rule can be applied..
- It might occur (e.g., in telecom) that there are roundings somewhere in the invoicing process. This affects the amounts on the invoice. Consider where in the process the roundings should occur and how many decimal places should be rounded..
- Payment behavior is influenced by the invoice. Preferences for an invoice layout and/or invoice channel might differ per target group. A/B tests are valuable to determine the optimal combination.
- Financial reporting must seamlessly align with invoicing. Revenue must be recognizable. Where and when is the revenue taken?
From Practice: Generating and Distributing the Invoice
In essence, invoices seem similar. However, everyone wants to imprint their own identity on invoices. Additionally, each party faces its own choices and challenges in the background, which can make creating and distributing an invoice complex. Below are a few examples from FIQAS’s practical experiences.
Correcting Incorrect Invoices
Data from FIQAS’s telecom client’s CRM system is transferred to FIQAS’s billing platform through data transfer. Input errors in the CRM system technically don’t cause problems in invoicing: the data on the invoice matches the data in the source system. But the invoice doesn’t reflect what was actually delivered and thus doesn’t meet the customer’s requirements. Therefore, a credit invoice needs to be created followed by a new debit invoice.
FIQAS resolves this for the client within the web application. Customer service representatives can credit the original invoice and immediately set up a new debit invoice. During the next billing run, two invoices are generated and sent to the customer: the credit invoice and the new debit invoice. The new debit invoice then contains corrected customer data and/or adjusted invoice lines. Naturally, the data in the source system is also updated.
Customized Invoice Layouts for Clients
An energy supplier deals with multisite and single-site customers. Both customer groups receive invoices in their own format. For multisite customers, summary invoices are created monthly, which include amounts billed for sometimes dozens of underlying sites. These invoices consist of many pages of invoice specifics and are complex due to the aggregation of total amounts. Single-site invoices – one invoice per establishment/address – are much less complex and usually consist of 2 or 3 pages.
Invoice Details: Customer Convenience, Lead Time, and Storage Space
Fact: 95% of telecom provider customers are not interested in invoice details and invoice documents. Storing pre-generated invoice documents requires storage capacity, and preparing details for all customers in advance consumes lead time.
FIQAS has organized this process so that data is fetched from the database in real-time only when requested via the web portal. The end customer immediately accesses their consumption data and other invoice information, while the system is hardly burdened. Storage costs are low as a result.
Final Invoices
A customer terminates their contract before the contract end date or gets disconnected due to non-payment. In this situation, a bill may need to be generated up to the end of the contract term, considering legal provisions regarding final invoices. This final invoice may also consider mitigation. In such a case, the customer might be billed only a portion of the remaining term amount.
The Invoice, Almost the Last Step in the Order-to-Cash Process
It may not seem the most challenging link in the order-to-cash process, but generating the invoice also involves complex elements. If this part of the invoicing process is carefully arranged, another important step towards revenue generation has been taken. Then it’s a matter of waiting for your customer to pay. Payment behavior can also be influenced; more on that in our next blog.
Other topics and the purpose of this series:
- Part 1: Invoicing, It Can Be Improved
- Part 2: Data Collection
- Part 3: Tariffing
- Part 5: The Collection Process
FIQAS specialists have a wealth of experience in setting up, executing, and optimizing invoicing processes since 1989. The business cases we see often narrow down to one or two of the aforementioned aspects. With this series of articles, we aim to do justice to the bigger picture.
In the next part of this series, we will delve extensively into the processes and best practices surrounding the collection process. This will cover processing payments, reminder strategies, and debtor management.
Erik Henselmans
Martijn Stengewis
FIQAS has been an authority in invoicing processes since 1989, with renowned clients both domestically and internationally, operating from Aalsmeer.
