A Homeowner’s Tale: Too Slow-To-Bill
This winter, I needed a skilled-trades outfit to perform a small but essential fix in my home. So I called Company X, my go-to contractors for this type of work. Company X didn’t dither; they sent a pair of capable technicians who provided quick, efficient service. Company X knows its business, no question, but as someone who thinks about receivables for a living, I was surprised I wasn’t asked to provide a cheque or debit/credit card authorization before the workers left the premises. Instead of securing on-site payment (at the-point-of-sale), Company X was willing to acquire a “receivable” and send me an invoice for a $300 job.
It’s a supplier’s choice to either take payment upon provision of service or invoice later with the customary credit terms. If I were in a strategic role at X’s business, I’d opt for the former, particularly for small, unquoted jobs like mine was. “More cash quicker” is never a bad business motto, especially since suppliers derive no cash benefit from carrying a host of low-value “minnow” invoices.
Managing receivables is an expense; providing credit is never cost-free. Still, not every service business wants its employees taking on-site payments. Company owners may feel it’s outside their workers’ job-descriptions. Or they hope that providing credit on small jobs will prove a competitive advantage over other suppliers that require full on-site coverage. Is this customer relations “bounce” real or imagined? Who knows! Credit, and who gets it, is always a delicate subject.
Being a co-operative customer, I honoured Company X’s way of doing things. I waited dutifully for my invoice. And then I waited some more. After a month, I started to get antsy, so I phoned and left a message with the receptionist. I gave my address, the date of service and confess that I hadn’t paid yet because I hadn’t received the bill. I asked for a callback.
Didn’t happen. Three business days later, I phoned again and spoke with X’s office manager. They admitted that they had been too busy with too many other pressing business tasks to create timely billings but volunteered to prioritize mine because I’d actually taken the time to call. By week’s end, Canada Post delivered the invoice. I had the payment in the mail the very same day.
Remedy: Invoice Sooner Than Later
An invoice is a supplier’s strategic prompt to secure payment from a customer – a customer who’s already had the benefit of the supplier’s goods or services. What does the supplier have? At best, a contractual promise-to-pay. Where’s that payment? Warehoused in the customer’s bank account, for now, is not very helpful.
Suppliers invoice customers so those customers can do what customers are supposed to do: wait for the invoice to show up and pay in-full in accordance with the terms of credit. Until an invoice is dispatched and received, there’s no hope of payment. Incomplete, the sale lingers on the supplier’s expense side in the form of the uncompensated costs of the inventory (eg. parts) and the labour already supplied. The vendor “carries” the sale. Again, not very helpful.
When an invoice is M.I.A., there’s a big roadblock on the cash highway. It’s in the interests of the Companies X of this world to get their billings out the door asap. A busy company will be pedal-to-the-metal 24/7. Its operational “skin” may be stretched to the limit, creating various procedural deadzones. These firms are fighting fires hourly and forced to prioritize their focus. Things get triaged. Sometimes HR pulls the short straw; sometimes it’s health and safety. All too often, it’s invoicing. There are never enough hours in the business day to do everything, and the low-status billing process seems innocuous enough to sideline for a few days – days that turn rapidly into weeks!
What’s the takeaway here? Money doesn’t grow on trees; it grows on invoices. When operating a receivables-based enterprise, cash-recovery is vital. It’s the indispensable cashflow lifeline, so anything that can be done to promote speedy payment must be done. I say: let’s hear a cheer for timely invoicing – because a day without billing is like a day without sunshine!
Blog post submitted by Chamber Member, Stu Woolley from Effective Receivables