Not only customer meetings and communication are digital these days. Also the invoicing process in many companies needs a digital overhaul. Get three tips, so you can invoice more hours faster.
The Corona crisis tests our processes
Online meetings instead of physical meetings, chat and phone instead of quickly stopping by a colleague’s desk. Virtual Friday bar and online aerobic via Teams. The world looks a lot different these days. We are virtual.
The Corona crisis has made it clear that the digital steps the companies have already taken make a difference for the business. But also something as trivial as connecting us human to human.
TimeLog's CEO Per-Henrik Nielsen has previously described a selection of the digital tools TimeLog makes use of while we primarily work from home.
I want to strike a blow for and call your attention to what I call the consultancy’s lifeblood: The invoicing process.
My experience shows that many companies have not yet met the potential there is in digitalising and automating this process. And therefore lack an overview of whether all hours are invoiced or not, cannot see the expected revenue and waste time on manual processes.
Does digitalisation impact the bottom line?
From SPI Research’ Professional Services Maturity Benchmark analysing 500+ consultancies, we know that:
- Documented, systematic processes
- Digitalisation and use of tools
- Integration of systems providing insights into the company’s most important key figures
... are some of the aspects characterising the best performing companies. And the invoicing process is of course no exception.
And with ”invoicing process” I not only mean the work with setting up and sending the invoices. The process starts way earlier. Actually already before we start the project (but we will get back to that).
First, you get a few examples from the business world of what can happen, if we do not streamline our processes:
Hands in the air, if you have ever experienced that:
- You have won a new project. The customer was offered a fixed price. Everybody works hard, the project is delivered. The customer is happy. But it is not until now you can analyse time consumption, assess the contribution ratio and calculate bonusses. And to do so, you collect data from three different systems and add it to an Excel sheet or in a fourth system. And THEN you know if the project was a financial success (depending on how valid your data is)
- Your account manager finds an old e-mail in the inbox: A customer has ordered a job; the hours are delivered. You don’t know if the customer ever received an invoice
- Your project manager spends lengthy evening hours to go through tasks and hour accounts, because a customer wants documentation and time consumption for specific tasks
- Your accounting department is informed of a new project via mail, post-in note on the computer screen or a fast messages said across the open office space
Scenarios like these do not happen, because we (or our colleagues) are incompetent or do not care. They are a natural and (very) common consequence of us not having streamlined, automated or digitalised our processes before, during and after the invoicing.
What can you do instead?
My experience shows that you gain most value by starting by:
- Automating the process from time tracking → project management → invoicing
- Consolidating all your project data in one place
- Creating a common understanding and framework for how you run projects
1. Save time on your invoicing with automation
Automation is one of the concepts that either fill us with emptiness or brings the biggest smile on our faces.
If you ask me, automation is a vital necessity when it comes to the invoicing process.
Automation ensures that you collect all relevant data, save time, reduce the number of manual errors and invoice even more.
Automation of the invoicing process starts with time tracking
Tracking your work time is the most important data you have in a consultancy. Each time you register one hour, you can right away see:
- Which employee the consumption is linked to
- Which task
- Which project
- If the time is billable or not
Your processes are linked together
But it is not until you start collecting and using the data in a dedicated time tracking system, which also supports project management and invoicing, that you can start to automate your invoicing process.
But what specifically can you automate and what are the benefits? Let me give your four examples of that:
Round up automatically to the nearest 15 minutes
You can secure automatic rounding of your time registrations. You can e.g. always round up to the nearest 15 minutes. In this way, 38 minutes on the phone, automatically turn into 45 minutes on the invoice.
Smooth communication between project and finances
You can create automatic approval flows between the project and finance departments. Thereby, the project manager can simply mark payments and invoice drafts ready for invoicing, and the bookkeeper doesn’t need to ask each month.
You can write internal notes on future payments directly in the system, if there is anything you need to assess before you invoice the payments. It removes a lot of post-its both for the project manager and the bookkeeper and it ensures that everyone can take over, e.g. if someone falls ill right around the change of the month.
Make it easy to get a revenue forecast
You can get a revenue forecast, as you see all future payments on your long-term projects on fixed price, prepaid hours and service agreements. At the same time, you know that the payments automatically show up for invoicing without anyone needs to remember anything.
Cash benefits from automating project invoicing
I have seen companies that with these relatively simple tips have decreased their time spent on invoicing from three full days to just half a day. At the same time, the billing rate is increased and you shorten the time from when you do the work to when you invoice the customer.
This brings me to tip number two:
2. You need to consolidate your data in one place (more or less)
The companies’ use of systems and digital tools increases. We collect more data. And that presents a new challenge for many companies: We need system integrations that seamlessly send data where they are needed.
It is not necessary to run a complete ERP solution or collect everything in one system (that quickly get difficult to deal with).
But without integrations between your essential business systems, you risk spending too much time updating the same data in different systems, losing overview or working overtime just to keep up with controlling numbers, clients, and accounts.
A coherent data foundation means that you are able to
- Ensure that customers get the setup they need and you avoid having to credit and change invoices after the invoicing period
- Minimise the errors on the invoices, as you do not manually need to find and enter the payments. They are already available based on your data. You thereby ensure that you never lose hours and payments that are not invoiced
- Transfer data between your vital systems without fear for manual, erroneous entries. That is not only quality assurance of your salary and invoicing process, but it is also significantly faster
- Make your bookkeeper happy, because the data hits the right accounts in the financial system, so the month-end closing is much faster and the management reporting can be delivered on time
And just like that - we are at the third tip already:
3. Create a common understanding of how you run projects – from contract to invoice
Today, you get the most important thing last. If you really want to optimise your invoicing process, it demands you change work routines and start delegating some of the traditional bookkeeper tasks to e.g. the project manager or the account manager.
As I wrote in the beginning of the article, the invoicing process already starts when we create the project.
You need a shared operational framework
For most companies, the task delegation demands that we increase the communication and at the same time make sure we have a common understanding for how we run projects.
We need access to the same data and the same time, all involved parties need to see the project’s progress, future milestones, payments and much more – in short: We need a shared operational framework.
To some, it will be a new way of structuring the processes. But the benefits in return are that you can:
- Estimate projects correctly and thereby reach a better hourly rate and project margin
- Create invoices at the same time you create the project – Nothing is lost, not even when you are busy
- Add the customer’s agreements and contracts already when the project is created – and based on the relevant contract types – see time consumption, progress related to the budget and invoicing potential on the contract type
- Get notifications if you are close to budget overruns
- Let the project manager prepare invoice drafts, so the bookkeeper have them on time and doesn’t waste time on collecting extra information
Those were the three tips of the day for your invoicing process.
You are welcome to contact us, if you want to learn more.