When a process in your organization such as customer invoicing is inefficient, you get daily clues. The trouble is we become totally oblivious to these clues when they happen repeatedly, day after day. We simply tune them out.
There are scientific studies about how the human brain selectively ignores repeated stimuli. It’s called the Reticular Activating System (RAS) and it is the part of your brain that enables you to tune out an hourly cuckoo clock or train whistle after repeated exposure.
Unfortunately, when RAS takes over in your business, you and your staff start tuning out information that is vitally important to the profitable operation of your business. In the invoicing process, your clue to inefficiency is credits and rebills. When an invoice is not correctly executed the first time, your staff is forced to spend costly time and materials reversing out errors and regenerating corrected invoices.
The first step to curing this pesky problem is physically tracking the number of credits and rebills required in your operation. This will give you a concrete measure of the inefficiency. In addition, as you conquer errors, a reduced number of credits and rebills can be used as a team goal. It’s amazing how a staff can rally when they know the target.
The next step to invoicing efficiency is to track the causes of all the credits and rebills. For a one month time frame, each person involved in generating rebills should keep a daily tally of the type of invoices processed. In addition, they should denote the type of error (tax error, volume error, price error, etc.).
When implementing this type of log, it’s important to articulate to personnel that the sole use for the log is to improve efficiency. No one will be blamed for errors. It is simply a tool to help them do their jobs better. Savvy managers will explain that the efficiency gained will translate to less stress in the workplace and better customer service. Doing the basic job becomes more pleasant!
It’s important that the invoice information be logged daily, but tracked for an entire month to catch all types of transactions. If a company is seasonal or cyclical, the tracking should be conducted in the busiest month.
By the time a month’s worth of data is collected and compiled, there will be a clear picture of where errors are occurring. Typically, the errors will display patterns. This is valuable information as you strive to solve the problem.
Next comes the tough part — figuring out why the problem is the problem. Perhaps it’s a matter of insufficient training. The root of the problem could rest with sales, customer service, the person inputting the order, the driver, etc. Perhaps the customer’s tax status is set-up incorrectly in the computer system. Once the root problem is determined— through procedural changes, education, or a combination of the two — work on solutions.
Next, monitor your results. Use the tracking form the following month to see if the number of errors begins to decline. Ideally, you should keep using the tracking form even after all the problems are solved. At that point, the company uses the number of occurrences on the tracking form as a goal for improvement.
Consider a small spiff for the group each month that they keep the error rate below a stated threshold. Also consider that zero errors may not be realistic. The goals should be established by the staff involved based upon what they feel is truly achievable.
Once you have the error problem solved, the next step is facilitating customer payment of invoices. First, do everything possible to shorten the amount of time it takes to get the invoice into the hands of the person who pays the bill. If your business involves delivery, consider the following options:
- Truck Technology- drivers should have a smartphone or other device to send information or invoice to the customer, the billing department, or both.
- Invoice emailing – as with mailed invoices, insure your paperwork is getting into the right hands. Most good GL programs now have the ability to email.
As you conquer invoicing efficiency, you will see a remarkable improvement in your cash position and bottom line. Customers pay more promptly, payroll costs decrease and supplies costs improve. If you move to emailing, your postage costs will also decrease. There will also be a side benefit.
Once you turn off the RAS response in invoicing, you’ll start listening to the inefficiency clues in other parts of your business — delivery, inventory, order-taking, etc. Through measurement, analysis and constant improvement, your entire organization will benefit.
