IMGCAP(1)]Cash is on every firm’s mind, and in reality, it’s on every person’s mind. Firms today are looking for any way to improve their realization and accelerate cash flow. After all, strong cash flow is a great way to measure success, right?
Unfortunately, without best-practice billing, inefficiency, inaccuracy or missing information contribute to lost revenue and longer than necessary cash cycles.
So how do you avoid these pitfalls? The first step is to recognize the four most common traps that are most likely to impede your practice’s cash flow.
1. Lack of visibility: Without a doubt, visibility can either make or break your billing processes. You need visibility in order to know not just who to bill, but when to bill. Without that insight, billers run the risk of missing critical milestones and billing later than necessary— keeping much-needed cash beyond their grasp. The fact is, disconnected systems are the main enemy when it comes to knowing when to bill. If your firm is facing this problem, look to integrate your systems to bring together time, engagement milestones and billing requirements. This will highlight the needed visibility of the agreed-upon client billing criteria for improved cash flow.
2. Invoice inaccuracy: Inaccurate invoices are embarrassing, and harmful to your reputation, calling into question any past or subsequent charges. Inaccurate invoicing doesn’t just hurt your credibility with clients, it can also seriously damage your cash flow. Think about it this way: if you’ve already waited 30 days to bill your client, and then have to spend more time correcting your mistake and resending the right bill… well, you do the math when it comes to delayed cash intake and profitability. However, the solution is surprisingly obvious. Connect your systems—which in turn gives your firm the structure, discipline and appropriate alerts—and you will enable billable time to be accurately posted to the right client, engagement or task.
3. Inflexible invoicing: Clients are always going to want different type of invoices for different types of work. You can’t please them all. Or can you? To make sure your client is king, you have two options: you can either spend your time in Excel trying to restructure invoices for individual clients, or you can look into flexible formatting solutions. Taking the latter route empowers your resources to spend more time on value-added work, rather than fiddling around with formatting. Best of all, this ensures that the tailored invoicing is sent to your clients in a timely manner—leaving your clients satisfied and you with a more expedient cash cycle.
4. Inconsistent data: How many meetings, phone calls, and emails does it take to determine the appropriate amount to bill a client, what to adjust up or down, and how many hours to carry forward? Almost always, this type of inefficiency stems from resources across your firm having access to different versions of client milestones and billing data. When that happens, the next step is to spend more time than you want reconciling data to make sure invoicing is accurate. As a result, timely invoicing is pushed out. At the same time, since your resources are spending their time reconciling inconsistent and inaccurate data, they certainly aren’t spending that time on billable, value-added work. This is a lose-lose situation. However, you can mitigate—if not eliminate—this inefficiency by bringing your resources together under consistent, reliable and shared data.
Billing Done Right
All accounting firms are unique in their preferences, especially when it comes to their method of billing. However, one thing stays the same across firms of any size, shape or service line: the goal of improving cash flow. The above challenges can be daunting. But when it comes to profitability, it’s worth the effort—especially when the steps for overcoming them are clear. In order to bring cash into the firm more quickly, consider the following recommendations:
• Integrate your systems: Remember, leveraging a single integrated practice management solution empowers your firm with visibility, invoice accuracy, efficiency and guidance.
• Leverage tools with reliable prompts and alerts: Proactively knowing when milestones are occurring is half the battle.
• Bring your resources together: Under the right system, shared data becomes consistent knowledge, eliminating wasted time on non-value-added work.
Following these steps will make way for higher realization, more accurate planning, streamlined invoicing and higher overall profitability.
Claus Thorsgaard is
