How To Get Paid Faster By Eliminating Invoicing Friction
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For many consulting firm owners, the end of the month means sending invoices, and waiting on the inevitable emails from your clients’ finance department requesting clarification. Common requests include a breakdown of hours on a specific phase of the project, or additional detail on a task that went over the estimated hours.
Each of these requests represent “invoicing friction”– a mismatch between your internal processes and your client’s needs. This mismatch not only causes delays in your payment, but erodes the trust your client has in your relationship. When the client has to ask for clarification on your invoice, it means they do not have the information they need, and to a certain extent, are not sure they are getting what they are paying for.
The Financial Cost Of Invoice Queries
Invoicing friction isn’t just causing awkward and uncomfortable conversations with your client; it is also a drain on your firm’s liquidity. Every time an invoice is queried, it is pulled out of the normal “auto-pay” queue and sent for a manual review. This leads to back and forth emails or calls, and when the invoice finally gets approved for payment, the delay in payment can easily add up to 2 weeks or more.
For a firm using spreadsheets or Quickbooks for invoicing, a 15-day delay in payment can increase their Days Sales Outstanding (DSO), leading to cash flow problems and reduced liquidity. If these invoicing delays are allowed to persist, the firm could be in real danger of failure due to poor cash flow management.
How To Remove The Friction From Billing
The most effective way to eliminate invoicing friction is by using a dedicated PSA software platform that integrates your time tracking data with custom invoicing templates. Each of your clients can receive invoices in the ideal format for their needs, and since your time tracking data is in the same platform, the extra detail and breakdowns that your clients need automatically flows into your invoices.
Having your time tracking data and invoicing in the same platform not only eliminates invoicing friction, it saves costly hours spent compiling and formatting time data from spreadsheets, and entering it manually into a separate invoicing platform. And since the time tracking data is “live”, you can track and report on project burn rate, keeping your client informed throughout the month. Then, when your client receives your monthly invoice, there are no surprises and approvals become automatic.
Transparency Is The Key To Client Retention
In addition to getting paid faster and reducing your firm’s DSO, providing transparent, detailed invoices to your client is a key way to increase client trust. If you start seeing your invoices as part of the project deliverables instead of just a bill, it stands to reason that you will want to deliver a solution that exceeds their expectations and delivers value. In the case of invoices, the value of a detailed, well-formatted invoice to the client is less administrative review time and less time reaching out to your firm for clarification. Using an integrated PSA software solution for time tracking and invoicing means that your firm will be considered professional, trustworthy and easy to do business with, leading to more renewals, long-term retainers, and happier clients.
If your invoice payments are getting delayed by reviews and emails requesting clarifications, you are already starting to lose your client‘s trust. You can improve your firm’s cash flow and client relationships by signing up for a free trial of Projectworks today, or let us demo Projectworks for you.
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