Top 6 Challenges Organizations Face When Billing Their Customers

customer billing challenges

Billing your customers is arguably the most important part of your relationship with them.

When it’s done right, it can build a positive connection, increase loyalty and give your customers a sense that you really care about their needs.

But, when the billing process is full of wrong turns and poor practices, it can drive your customers away. In fact, two-thirds of them would consider leaving you if they face billing issues.

In this article, we will examine six challenges organizations face when billing their customers and what you can do to overcome them. Buckle up!

Separate Invoice Processing Silos

When you hear the word silo, what comes to mind? Most of us picture those tall, monolithic structures that hold grain. But there’s a reason we also use that term in the context of processing invoice information.

When different teams in your company each operate on their own, without much communication with other parts of the organization, we say that they operate within their own information silos.

That lack of a flow of information can occur between departments in your organization, or even between separate teams within one department, and it can pose quite a challenge when it comes to invoice processing. 

For example, in an account receivable department, teams for processing, billing and payment collections can function separately, each inside their own silo.

information silo

Source: Regpack

Therefore, if those teams don’t coordinate their work, problems and miscommunication will arise.

The collections team may have the information that the client isn’t paying on time, the billing team knows that this is because of an error on the invoice, and the cash application team knows the client has actually paid, but the payment was applied to a different invoice.

You can mitigate that kind of confusion by providing your departments and teams with the means to access the same information and to exchange it between themselves.

One efficient way of doing that is by setting up an automated billing solution that integrates with various departments’ systems.

That way, when there’s an update regarding the invoice processing, every department has insight into and knows how to proceed.

regpack billing

Source: Regpack

An automated billing solution like Regpack can link all of your departments, like, let’s say, the Accounting department and Customer Relationship Management (CRM).

That way, when the clients pay their invoices, both of those departments will be in sync, and you’ll significantly reduce any chance of double-billing, failed payments or other errors.

Tearing down those invoice processing silos can be a challenge. It’s key to keep in mind that it’s all about integration, coordination and having one central source of information. That way, the whole organization can become more efficient. 

Tackling our next challenge also improves your efficiency.

Inefficient Manual Invoice Processing

Manual invoice processing is better left as an exhibit in a Museum of inefficient practices. Here’s why.

Processing every invoice manually is time-consuming, expensive, tedious, error-prone, difficult to track—to name only some of the unflattering descriptors that are rightfully associated with it.

That kind of processing is very slow; according to the Institute of Management Accountants, more than half of the companies take ten days or more to process a single invoice manually. Only 46% of them manage to do it in under five days.

time to process invoice

Source: Medium

That can take even longer when dealing with exceptions which the staff needs to examine and take specific actions. 

If you think that exceptions are rare, think again; according to research by Ardent, almost a quarter (24,6%) of all invoices in the last year were flagged as exceptions. Those can be a major time-waster for your organization.

Furthermore, the cost of manual invoice processing can quickly add up. Most experts agree that there’s no one definite price of manual processing because there are many factors at play.

For example, the CEO of Senacea, Michael Sena, puts it between 12$ and 35$, while Willie Greer of The Product Analyst says the average is 10$. However you approach it, it’s a high price for something inefficient and outdated.

The solution for the flaws of manual invoice processing is automation.

It can save a significant amount of time. According to research by Goldman Sachs, automation can drive 70-80% time savings in small and medium businesses.

time savings automation

Source: Regpack

That’s more time to spend on meaningful and important tasks for the betterment of your organization; or more time to spend on playing laser tag with your team. However you use it, it’s more time at your disposal.

Money savings can also be substantial; research from IntelliChief showed that the cost for a single automatically processed invoice is 3$. That’s a long way from the previously mentioned 10$, and even longer from a possible 35$.

Therefore, automation is the sensible way to go.

Most automated billing solutions offer invoice processing; once you set the software up according to your preferences, it can handle many repetitive, boring and cumbersome details you face when billing your customers.

There’s another crucial thing to look out for when it comes to invoices—making sure they reach the right person. We’ll discuss more on that in the next section.

Making Sure the Invoice is Delivered

Maybe it sounds self-evident, but making sure the invoice is delivered to the right customer or delivered at all is crucial to the billing process—without that, you won’t get paid.

Actually, invoice delivery is one of the biggest concerns for companies. According to Perceptional Study from Receivable Savvy, ensuring the customer has received the invoice is the issue organizations mentioned more than any other.

challenge email delivery

Source: Regpack

Furthermore, problems with invoice delivery can cause issues with your organizations’ finances and predicting the cash flow.

For example, suppose you use a due date of 30 days after delivery in your invoices (which is fairly standard).

In that case, it can be a whole month before you see a late payment and begin to investigate reasons for failed invoice delivery. We’ll explore late payments some more in the next section.

Luckily, there are some simple steps to take to overcome this challenge, or at least minimize the chances that it becomes a hurdle in your business.

The first one would be to make sure you’re sending your invoices to the correct address. You’re probably sending them via email, so check if you have a valid email address for your customers.

Even better, if you’re in the B2B niche, don’t send the invoices only to the company’s main email address; send your invoices to the specific person who deals with payments.

That way, you can avoid a dispersion of responsibility—in other words, it’s less likely that everyone will see the email and assume that someone else will handle it.

After that, a good idea would be to set up an email confirmation that notifies you when the customer has opened your message.

You can do that in most email clients, for example, in Gmail. You’ll need access to Google Workspace, where you get the option to turn on the read receipts.

read receipt gmail

Source: mailtrack

Alternatively, if you don’t have Google Workspace, you can use free extensions like Mailtrack or Boomerang that inform you if your email reached its destination and if someone opened it.

Making sure the invoice is delivered is a deceptively simple challenge, but it’s one that you’re very likely facing in your business.

It can lead to other challenges, like late payments; let’s discuss them in the next section.

Dealing With Late Payments

It would be best if you had a way of dealing with the challenge of late payments, so they don’t slow down your business and become an unnecessary hassle.

Every business has to deal with late payments from customers, at least occasionally. Furthermore, the coronavirus pandemic has made late payments even more of an issue.

According to a survey from Atradius, in Western Europe, 47% of the total value of B2B invoices was paid late in 2020. That’s a considerable increase from the year before, when the figure was 29%.

late invoices

Source: Regpack

Let’s be blunt for a moment. When you provide your service, you expect to be paid for it, and late payments are just customers clinging to their money for longer than they should. The challenge here is to get your well-deserved compensation but still be patient and professional towards your customers.

If you’re thinking of threatening calls in the middle of the night—no, that’s not the way, ever, in any circumstance. What you should do, before anything else, is to ensure that you do what’s possible to prevent late payments.

First, it’s good to send a clear, straightforward invoice that the customer can understand without much effort. 

There are several items you should always include in your invoice:

  • An invoice number
  • The date of purchase or the creation of the invoice
  • Business contact information
  • Descriptions of goods and services provided
  • Payment terms

Out of all these items, the payment terms have the most impact on late payments. You can encourage your clients to hurry along with clear payment terms that include an easy-to-understand due date, like “pay within 30 days after the invoice date”.

If the payment is still late, contact your customer and try to solve the problem peacefully.

After all, you want to maintain a good relationship, and there’s a good chance that the late payment happened inadvertently.

Luckily, automated billing systems offer a simple way to track payments, notify you and your customers if they’re late, and establish communication. 

For example, Regpack offers several options to set up reminder or follow-up emails and personalize them for every client. You can also save your preferences, so you don’t have to re-enter all of that information if a payment is late again.

regpack email templates

Source: Regpack

Having all customers pay on time is the Holy Grail of businesses; but, when the payments are late, implement the advice from this section for minimal inconvenience.

Lack of Data Standardization

Many businesses use several invoicing methods; while you might think that doing so improves your chances of getting paid, it can present a different challenge—standardizing the information you get from invoices.

If you’re sending out invoices to some customers electronically, to others on paper, while a number of them pay through an invoice portal, you’re doing yourself a disservice.

Using one standardized method of invoicing means more accuracy.

That’s logical; the more different methods of billing your customers, the more chances of sending inaccurate invoices and complicating the whole process.

Furthermore, lacking data standardization can quickly eat up time; someone needs to check the invoices, collate the data and process it—and that person needs the time to do it. 

It can cost a lot of money, too. For example, a study from the journal Health Affairs stated that standardized medical billing in the U.S. could cut administrative expenses by seven billion dollars. 

It makes sense that data standardization would lead to decreased costs for your business. The more the billing process is standardized, the more accurate it is, which means fewer potentially expensive mistakes.

Also, it means less of a need for human input, which is one more way of saving money.

cost of invoice

Source: Regpack

Everything we’ve mentioned is partly why the trends lean to e-invoicing; as shown above, Sterling Commerce calculated that the cost of manually processing one paper invoice is around 30$, and automatically processed e-invoice costs about 3.50$.

Furthermore, fixing paper invoice errors costs around 53.50$ per invoice.

Also, e-invoicing is the better option because of its data standardization possibilities.

For example, your business can have one invoice template, and that way, you know what kind of data you’ll receive. Therefore, you can set up an automatic billing system to extract and process that data.

With software like Regpack, you can standardize data in your invoices so that the whole process is hassle-free for your customers, and you can count on the same necessary data every time.

regpack invoice

Source: Regpack

Standardization leads to wasting less time and resources, resulting in a more productive team that doesn’t need to worry about collating data from multiple different invoicing methods.

When we sum everything up, the lack of data standardization can be a tough challenge to face, but you can tackle it by simplifying the billing process. The fewer methods of invoice submission and the more automation included, the better for the business.

Too Few Strategic Insights

It would be beneficial for any business to understand its customers, their motivations, preferences, and habits; to have an insight into their behavior. That way, the business could build a better strategy and improve overall.

That’s especially true when billing your customers. The billing process is an important part of the customer experience, and it can make a difference between retaining and losing them.

For example, if your clients are leaving because you don’t offer their preferred payment method, you would want to know that.

According to a Retail Technology Review survey, 50% of customers would leave a service precisely because of that. If you have strategic insight and available analytics, you might be able to analyze that and take proper action.

The point is that there’s potentially a tremendous amount of insight you can collect and use, even in the billing process alone.

For instance, you can see which customers are consistently paying late and offer them more suitable options.

Or maybe some of the customers find your invoices hard to understand and poorly designed; with data just sitting there, you can find that out and implement a better solution.

The potential for improvement is massive, and the only thing standing in your way is the lack of means to leverage the data.

data use

Source: Regpack

For example, as we’ve discussed in a previous section, information silos can be a problem.

When different departments and teams fail to communicate, they have different data available and no way to exchange it effectively. To really have strategic insight, you need the whole picture.

Also, if you’re manually processing data, like invoices, you have virtually no chance of gathering any valuable strategic insight.

It would probably take days, if not even weeks, to manually collect needed information, sort it, analyze it by preferred parameters and draw conclusions from it.

regpack report

Source: Regpack

The good news is that you can lean on automated billing software and its analytics features for these purposes. For example, with Regpackyou can extract information, access registration data and analytics, as well as generate payment and sales reports. 

You can also create graphs, search data, filter it and export it with ease.

With strategic insights gathered from the relevant data, it’s easier to get a glimpse into your customers’ minds, see what’s important for them and how you can improve the relationship you have. It’s a powerful tool, and what a shame it would be not to take advantage of it.

Conclusion

Like with everything else in business, there are two ways of looking at the challenges you face when billing your customers.

On the one hand, billing challenges can impede your progress and present an annoying bump for you to trip over in your relationships with your customers.

On the other hand, they can be a vehicle for improvement. Overcoming challenges like invoice processing silos, manual processing, delivering invoices, late payments, data standardization, and strategic insights can make your business stronger than ever.

The customers will recognize and appreciate your efforts.

About The Author
Asaf Darash
CEO and founder of Regpack

Asaf, Founder and CEO of Regpack, has extensive experience as an entrepreneur and investor. Asaf has built 3 successful companies to date, all with an exit plan or that have stayed in profitability and are still functional. Asaf specializes in product development for the web, team building and in bringing a company from concept to an actualized unit that is profitable.

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