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Billing and Collections | Engineering Firms

Take Charge of Billing and Collections

Almost every professional services firm has issues with collections at some time or another. I regularly talk with engineering firms who let billing and collections get out of control. At the very least, most firms would benefit from making improvements to their collections processes. So let’s take a look at some different approaches and ideas to see what might pay off best for your firm.

Focus Internally First

If you want to improve collection results, you’ll need to examine your own processes first and be prepared to make some necessary changes or take a different tactic. This is simply good business sense. Someone once defined insanity as “doing the same thing over and over again but expecting different results.” The key is that you control these kinds of changes; asking (or expecting) a customer to make changes is not realistic. So your taking charge is a logical and sensible first step that is sure to yield some positive results.

Start by looking at internal processes. A few simple (and quick) changes and tweaks like these can make a big difference:

  • Bill regularly. I am surprised at the number of firms who delay billing or simply bill irregularly. Your best opportunity to collect is when your service (or product) is fresh in the mind of your customer. Billing quickly and regularly will improve collections and lessen the risk of unknowingly providing additional services to a customer who is unwilling or unable to pay.
  • Fix any problems with your collections system. Flowcharting your billing and invoicing processes will allow you to identify inefficiencies and bottlenecks. Take a look at last month’s billing process, and timeline the steps until the last invoice was mailed. You’ll spot weaknesses and problems soon enough.
  • Set a monthly goal for getting invoices out, and hold yourself and others accountable to meeting that goal. Make the invoicing deadline a top priority—even in the busiest of times.
  • Review invoice formatting. Does the invoice clearly state when payment is due and whom to contact for questions or additional information?

Put Someone in Charge, and Follow Up

Unlike fine wines, receivables do not age well. Don’t wait until an invoice is 90 days past due to follow up.

Generally, there is no follow-up until the customer doesn’t pay and the invoice is past due. That’s mainly because no one owns the process. You have to put someone (make it one person) in charge.

For many firms, that one person might be the office manager. No matter who it is, that person needs to have regular, face-to-face meetings with an owner or supervisor to report on progress. It’s not too much to ask for that meeting to be held weekly. In fact, it’s preferable if you want to make any real and steady progress. If the collections meeting is every Friday, guess when most of the follow-up will get done? Every Thursday afternoon is the correct answer.

Take a Trip  

Several years ago, we had a client who was doing multiple high-dollar projects for a large international company, and collections became a big issue. The customer’s accounting office was several states away, and invoices went unpaid due to improper formatting and poor communications.

When it was clear that emails were not getting the job done, our client had his office manager and receivables clerk fly out and meet with the customer’s accounting staff and take them to lunch.

The result? An open line of communication and better collections. The client’s staff developed a personal working relationship with the customer’s payables clerk, and soon collections were no longer a problem. You’ll never develop that kind of relationship (and results) by trading emails. Put your people and your customer’s people in the same room and have them share a meal! If the customer is close by, it’s easy to make this connection happen. But even if a short trip is involved, it still could pay real dividends.

Would You Lend the Client Money?

Think of yourself as a loan officer when it comes to clients who create collections problems. Would you lend this client money?  This is exactly what you’re doing when you’re not getting paid. If you would not make that loan, maybe it’s time to lower the client’s credit limit or revise payment terms.

I once heard someone say they’d rather go broke fishing and drinking beer all day than doing work with a thin margin for someone who’s slow to pay. If you have doubts about a customer’s ability to pay, take action.  Securing advance payment before beginning any additional work is one way to limit your exposure with a customer that you deem to be a credit risk.

Being on top of collections and contacting a slow-paying customer in a positive, courteous manner not only reflects professionalism, but also it’s another way to demonstrate your company’s competency to the client.

That said, never be bashful about asking for your money. It is, after all, your money.