As the technology support industry matures, managed service providers require greater efficiency and flexibility in their billing. The contract and billing process has become the conduit that allows you to clarify the relationship expectations between you and your customer. The business’s success depends on clearly defining, auditing, and reporting on the services you agree upon.
Knowing what you can deliver to your customers and fulfilling these expectations helps you build loyalty and trust, resulting in a long-term, profitable relationship. The last thing you want is to have your billing process slow your business operations down.
Billing Process Best Practices
To help you and your business get to that point, here are five best practices for your billing mechanism to become a streamlined process and not a bottleneck for your business.
- Know the source of truth – Accurate data is key to the billing process. Ensure that the source of truth for each part of your billing process has been defined. Reconcile and update data on a rolling basis. Vetting all billing records against a source of truth ensures the accuracy of what you’re sending out. Customers appreciate this!
- Automate payments – Cash flow is key. One of the best ways to increase your cash flow is to automate the collection of recurring payments. Take the bottleneck out of the collections process by setting up a payment gateway to process automatic payments.
- Automate contract-related billing – Use automation to control and bill the contract details established with the customer. There is a lot of complexity in billing. You must be on top of services, cloud, and transactional billing. Ensure that you are automatically updating product additions and transaction details so that billing is a snap.
- Your invoices are a window into your house – Keep them clean! Verify that your invoices accurately and positively represent your brand. Most customer finance managers will not visit your office; they will only look at your invoices.
- Reduce risk with down payments – Requiring a deposit for projects and/or large purchases reduces your risk and improves your cash flow.
Tools for a Better Billing Process
Billing is the backbone of your incoming revenue stream and your cash flow. If an outdated billing process is creating extra work and turning your billing into a bottleneck, it’s time to consider how smarter solutions can deliver an automated, cost-effective way to ensure that your invoices are paid on time and delivered seamlessly, so that your finances stay accurate.
1. A PSA Tool
Consolidating information into a professional services automation (PSA) tool helps you keep track of everything from pricing to organization-wide profit and loss.
Because the system relies on a single database to store information across applications, you’ll eliminate the time wasted by double entry and significantly reduce the probability of errors. Most of these tools are web-based systems. You’ll have immediate access to in-the-moment financials wherever you go, making it possible to forecast on the fly and plan like a pro.
Another PSA tool feature to consider is workflow rules. You can use these to set up automatic check-ins to ensure that your invoices are being paid on time, create accountability loops that send alerts to your finance team, and even email your customers once invoices become overdue. There are a lot of moving parts in your billing process, and workflow rules help keep the process moving forward.
Another benefit is that, with the right billing process in place, you can estimate, track, and report job costs, forecast and report on payroll, and even calculate your sales commissions. The level of detail available in your system’s reporting will not only reduce data-entry time but will make it simple to send information within teams and outward to customers and vendors. Full visibility makes it possible to keep your techs more billable and is better suited to making sure you’re not losing revenue to low productivity or untracked time.
2. Cloud Billing
As more customers take their businesses to the cloud, you’re going to need an easier way to bill, manage, and monitor those services. To make it easier on you and your team, finding a PSA solution that includes built-in cloud billing is the place to start.
A cloud solution reduces the complexities of managing multiple services and brings them into one easy-to-use platform. Like other aspects of your business, automation can make cloud billing simple. You’ll remove the manual processes and automate billing for subscriptions and usage, as well as adjust billing and invoicing for clients that come on board in the middle of a billing cycle.
3. User-Friendly Customer Portal
Don’t forget about your customers when you start making improvements to your billing process. You want the process to be easier for them, too.
You can achieve this with a customer portal. This is the one-stop shop for carrying out your most time-consuming customer interactions and putting the end user in control. Customers can submit tickets, check on ticket status, and, best of all for your billing process, easily pay their invoices. Most customer portals are also customizable to represent your brand.
Elevating Your Billing Process
As leadership gets used to relying on integrated reporting, it will be easier to determine costs, spot abnormalities, and provide more accurate cost estimates as expenses arise. You’ll also be able to rely on an optimized billing process to monitor changes, track sales information, and even send statements and invoices to customers.
1. Dashboards
To make the most of all the information you’re collecting, you need to be able to easily access it when you need it. Dashboards put business-critical data, from finance and billing to service, support, and sales, at your fingertips. Here are a couple of example metrics that most PSA tools have that you can use to create dashboards.
For your billing process, two numbers to keep an eye on are invoice counts and invoice hours reconciliation. The invoice count shows you the number of invoices you’ve created in a given month and how many have been sent out or closed. The invoice hours reconciliation compares the amount of time entered by staff against what’s been invoiced.
2. Key Performance Indicators to Watch
Along with your invoice numbers, there are key performance indicators (KPIs) you can use to ensure that your techs’ time is making you money.
The first is the percentage of billable hours. Your goal as a business is to make money, and when your techs are spending time working on non-billable work, you won’t be meeting that goal. This number ensures that our techs are spending the right amount of time on billable work that can increase your revenue. The calculation for the percentage of billable hours is: Employee Billable Hours / Total Hours × 100. You want to be in the 65-75% range, with best-in-class service providers reaching above 75%.
The next KPI is resource utilization. Simply put, you want to make sure your employees are booked up, busy, and working on billable projects. Your employees are one of your most valuable resources, and you want to make sure those resources are being used wisely. The calculation for resource utilization is: Utilized Time / Total Time × 100. Average utilization is anywhere between 50-60%. Best-in-class service providers are hitting marks at 80% and above.
3. Third-party Integrations to Explore
Most PSA systems have third-party plugins with solutions that enhance the power of the platform, and additional features and functionality to help you deliver better customer experiences.Through these integrations, MSPs can reduce risk by allowing customers to save their payment information directly to secure storage solutions, thereby eliminating the risks of handling and storing sensitive information locally. Overall, integrations are designed to reduce customer confusion and invoicing questions to your accounting department, as your customers can view their open invoices and payment history online anytime, day or night.
Conclusion
The invoice and billing process is a complex piece of the MSP business. It’s also one of the most important to get right. If you cannot consistently get your invoices out on time and ensure that your customers are paying them, your business will suffer.
By following the guidance in this article, your billing process will be a strength and not slow you down. Customers appreciate the visibility, promptness, and overall ease of the entire process when it’s run correctly. This, in turn, will grow your business.
Read this free guide to learn more about creating:
- Internal MSP documentation
- Documentation for customers
- Scripts
- Network documentation
