Companies need to invoice services monthly, quarterly or yearly. Here are a few examples of such invoicing needs.
- Cleaning or IT-support
- Marketing (e.g. Google AdWords administration)
- Ad spots (e.g. on the side of a taxi or a billboard)
- Electronic services (e.g. e-mail or Internet Connection)
- Security services
A Cleaning company has been contracted to come in once a week and clean the office. This can be charged by the hour, but more often the cleaning is charged with a fixed monthly sum. The same invoice needs to be created and sent once a month.
An IT-company provides different services which are charged monthly. These services can be eg. helpdesk and E-mail. Because the customer company might recruit more employees, these charges will go up since they are charged by an active user count. In this case, the invoice is mostly the same, but units might change from month to month.
Keep in mind, that there are scenarios which are different from the above mentioned:
- A private customer subscribes for an online service or a yoga class
- Services are paid with cash or card onsite
The inefficient way of doing your invoicing
You might use the recurring invoicing feature of an accounting solution such as in Xero (Repeating bill help). Accounting solutions tend to be inflexible when it comes to recurring invoicing. It might work with the first example but not with the second. If the monthly sum or billables change, someone needs to inform the person in charge of billing about the changes via post-it, email or similar.
Unfortunately, not all companies pose even the simplest recurring invoicing tools and the whole process is done manually. The first step is to copy the previous invoice and change the details. These changes are communicated via e-mail, post-it or checked from a second system (such as CRM). One could also create the invoices from scratch and use an Excel (or similar document) to keep your contract details up to date (see picture)
It's not too bad If you have ten or twenty invoices to go through every month. But the more variance and invoices you have the more time it takes and more mistakes are made.
It should be obvious that this is a bad process and leads to typos and mistakes. Sometimes I would just forget to bill a customer.
Bad ways of doing recurring invoicing
- Manually re-create from scratch
- Copy the previous invoice as a base for the new
- Use Recurring billing -function in accounting software
Recurring invoicing in accounting software
The main task of accounting software is to do the accounting part and provide basic invoicing functionality. You can easily do a single invoice but automating the content of an invoice from time tracking, contracts or random billables is next to impossible without proper tools.
Here is a link to Xero's recurring invoicing -function's support page. Don't get me wrong. Xero is great! It just can't do everything that well. The function on Xero uses one invoice as a base to replicate itself. There are, however, several limitations to this method.
- There is no contractual data behind it
- There is no sales process available
- Reporting is invoice based (meaning it is reactive)
- No dynamic content available
Most employees (customer service and sales) cannot access accounting software. This makes the process of editing a contractual invoice a manual one. A salesperson needs to e-mail (or write a post-it note) to someone in charge of invoicing about the changes to a customer's invoice.
Accounting software typically does not have a proper sales process like the one you might find in a CRM software. There is also rarely a "one person checks everything" -process. Meaning that salesmen might actually end up affecting an outgoing invoice without the person in charge of invoicing knowing about it.
The recurring invoicing feature doesn't have any smarts to it. You cannot get good reporting. For example, how has the value of the contracts increased or decreased over time? How does the company know if a customers contract is about to end?
What are subscription based solutions
Zuora and Chargify (among others) are great solutions if you want to provide self-service, subscription-based billing to your customers. The difference is, that the customer is purchasing without the input of a salesperson or customer service agent. This is great if your business works that way! But a lot of small and mid-sized companies have ten, fifty or a hundred customers. These customer relationships are built by interactions by your salespersonel. In these types of cases subscription-based solutions just don't work.
The efficient way to automate recurring billing
How should you organize your billing then? By using the right tools and correct billing methods. We’ve created the Bill Talent cloud service to address the issues I just talked about.The way I see it, is that you need a proper contract management system that automates the creation of the invoices. To create a contract, you need to following basic information.
- Customer information (eg. billing details)
- Products and services (including prices, VAT, units etc.)
- Start date, invoicing period etc.
From this information, we can get automated invoicing, great reporting and a tool that everyone can access, but if needed, only one can inspect and send invoices.
Bill Talent was created for an IT-services company. First features were contract management, automated invoicing and integration to accounting software. All automatically created invoices were transferred to the accounting software and send from there. This literally saves 90%+ of the time spent on recurring invoicing. just click "select all and send".
How to automate your recurring invoice process
Automating your recurring invoicing process consist of three steps:
- Identify your process
- Re-organize your process
- Find and utilize the correct invoicing solution
The internet is full of different kind of solutions that "seem" to offer the right tools for automation. Unfortunately, no software can help you out if your processes are overly complicated and straight up weird. That’s why it is imperative to identify and simplify your process before trying to use something that might not bend to your needs.
This blog post is a part of our Benefits of invoice automation -blog series. Read more about How to automate your recurring invoicing process.
- What is an invoice and why you should automate your invoicing process?
- What is recurring invoicing and How to save 90% of your time
- The benefits of invoice automation and why it matters?
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