Bill Now - Bill Right

There must be a philosophy floating out there in the business world that believes billing for goods and services is unnecessary. If you do the work, perform the services or provide the goods, you will be paid, even if you don’t tell anybody about it. I have mentioned this odd phenomenon before in a previous blog. I described a small building material distributor that was having severe collection problems and I determined that it started with the failure of the corporate office to mail invoices to the customers. I was reminded of this belief in not telling the customer that money is due in exchange for performance recently by my buddy with the collection agency. He has been receiving claims from local trucking companies. They delivered goods but did not get paid, so, in desperation they turned the claims over to his collection agency. The customers of the trucking companies would have paid, had they received invoices. The trucking company believed all that was necessary for reimbursement were their bills of lading. The trucking company had quoted the price and delivered the goods. All the customer had to do was the math and send a check. It would not have mattered if the trucking company told their clients, “pay whatever you want”. Some accounts payable clerk would still insist on an invoice.

There is also a definite correlation between when invoices are sent to the customer and the time it takes to receive payment. The longer it takes to send them, the longer it takes to get paid. It is not rocket science, but companies ignore this all of the time. A concrete supplier saw a fifteen day delay in payments when a computer glitch caused a fifteen day delay in the mailing of invoices. Another company waited until the end of the month to send invoices along with the statement, effectively giving customers an additional thirty days to pay. A lumber company with terms of “invoices due upon presentation” had a mail clerk, trying to save a few dollars, withholding the mailing of invoices until more than one could be stuffed into the envelope. This attempt to save a few dollars was disrupting the lumber company’s cash revenue.

Subcontractors complain that general contractors are slow paying. However, too often it is the subcontractor who loathes the whole billing process and procrastinates, all the time wishing for an improved cash flow. Some subcontractors delay billing until all of their work is done, regardless of interruptions caused by other subcontractors. In some cases several months can go by before the subcontractor submits a bill. When it comes time to pay his suppliers, he insists that he will pay as soon as he gets paid, someday.

It is also not enough to bill promptly. It is equally important to bill correctly. That not only means the billing must be accurate, it must be acceptable to the customer. Framing contractors once called some of the State’s largest developers “sub breakers” because of their payment habits. But it turned out that those subcontractors, who billed in strict compliance with the developers’ contracts, got paid promptly and those who chose not to did not.

Inaccurate billing only gives the customer another reason not to pay. This follows the first standard excuse that the invoice was never received. If the customer can challenge the billing, payment can be extended indefinitely. I have seen collection efforts grind to a complete halt after the customer complains about the bill and it is sent back to the sales department to be fixed. If there is no subsequent follow up, “disputed” billing can languish on the accounts receivable forever.

Much is being written about companies surviving in these tough times. One recent L.A. Times article suggested that many businesses failing today were simply lucky to have survived at all in good times. A robust economy covers up a lot of mistakes. Now, those mistakes can mean the end. Successful businesses will be exceptional. They will not only supply a need, they will conduct themselves with the highest degree of efficiency. An element of that should be in timely and reliably accurate billing. If the customer cannot say the bill was not received and it is not disputed, there are no more reasons not to pay it. Unless, of course, there was a failure to bill and there is no money to spend.

This is where we can help. Strategic Credit Management Solutions will review your current billing system, identify issues that are causing payment delays and propose solutions. Give us a call, delays only cost money. See our website at http://powerscredit.com/. Your comments are welcome.