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Fitting the Pieces Together: A Guide to Office Operations for the Liquid Waste, Portable Toilet & Septic Pumping Industries |
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Billing your customer for your services for the small and large business is hard work and takes time, money and good management skills to complete successfully. While the Septic Sewer and Drain business is generally a C.O.D. business, portables is a repeat billing business. Customers rent units for months or years and invoices need to be generated month in and month out. If you looked at the reasons mom and pop businesses do not grow, billing would be near the top of the list.. For any billing system to work, you need to :
Record what service was completed, when it was done, how much material was used, and how much you are charging in detail.
Identify taxable and non-taxable items.
Write these items out in a clear fashion.
Keep a copy of them for your files.
Mail the invoice.
Track the payments against each individual invoice.
Send statements for non-payment of invoices.
Charge late fees for non-payment.
Create new invoices for late fees.
Etc.
It is much easier to do the work and receive immediate payment, with NO PAPER WORK.
The portable toilet rental business has two major classes of customers. The first is regular rentals, i.e., the unit is delivered and billed monthly. These are usually construction sites and seasonal activities, i.e., farm stands, parks, etc. The second is usually handled COD and represents very, very short-term rentals for special events, i.e., weddings, fairs, etc. We are going to look at the types of billing that are common for the first class of customer.
There are several different ways you can invoice customers. We are going to look at some of the most common practices used in the Portable Toilet rental businesses.
This billing method charges a customer for rental from last billing to close or bill date on the invoice. All charges are prorated for the number of days included in the billing period. If this comes out to 4.5 weeks, the customer is billed for 4.5 weeks. If a second unit was delivered during the month, the invoice is generated from the delivery date to the close date and all charges are prorated.
This is an excellent method when you advertise daily charges. If you use weekly or monthly rates, the prorating can lead to different billed amounts per invoice depending upon how you choose your close date.
This is the same as prorated, except you choose a close date that is every four weeks. This way you get the benefit of collecting on mid-month deliveries and avoid the problem of varying billed amounts.
Fixed period billing charges the customer for the same number of days every billing period. The billing process can be run once a month, weekly or daily. Every customer whose unit has not been billed for 28 days since the last billing has an invoice generated.
This called anniversary billing in that if you run the billing process daily, each customer has a invoice generated on the anniversary of delivering the unit to the customer. There are several benefits for the type of billing:
You get 13 billing periods per year, vs. 12 if you do monthly. These means you get your money faster.
Cash flow is improved because you are continuously billing throughout the month.
There are many situations where an invoice needs to be immediately generated for a single customer. Some common situations are:
First time rentals
Specials events
Unit repair
One time extra services
Unit relocation
In any of these services, it is a good idea to either collect the money COD and send a confirming paid invoice, if required, or immediately invoice for services supplied. Remember when you supply a service you are actually making a loan until payment is received. Didn’t know you were a bank, did you?
When you take on a rental customer, it is a common practice to collect the first two to three month’s rental up front. The two to three month’s rental covers the cost of delivery, setting up service schedule and the pickup of the unit. After a unit is delivered, an invoice is generated for the next two to three months rental and immediately sent out.
This is the favorite alternative for the specials and new customers. You arrive on site, drop off the unit and receive payment. You then supply a hand written receipt for the payment. When you return to the shop, the cash and checks are deposited in the checking account, which completes the invoicing cycle. The nice things about this method are:
No paperwork.
Every job is completed in one step.
Cash flow is easy to control.
Outstanding receivables (unpaid fees for services supplied) are always zero.
Like any good thing, there are two sides to this system. Some of the negatives of using COD billing are that it:
Removes you from a large market segment of customers, primarily those who expect to be invoiced at the end of the month for services, e.g., commercial accounts, rentals, etc., those who regulate payments, and those short on cash.
Minimizes chances of working on larger jobs. These usually require you to track material and labor over an extended period. Without an invoicing system, you would have to do this manually and would more than likely miss chargeable items over time and thus not maximize profit.
No paper work means you have to track by memory all your activities and your profits over time. This becomes especially difficult when you gain additional employees whose memory and motivation may not be the same as yours, so you have to remember what has happened for the both of you.
As soon as you have an employee, COD requires extra management to avoid loss of revenue due to dishonesty. There is a story I like to tell about honesty. If you put a fifty dollar bill on a table and never tell anyone that it is your fifty dollar bill, even an honest person will take the money. But, if you say once a day or so that that is your fifty dollar bill, an honest person will not take the money. A dishonest person will take the money even if you nail it down and cover it in plastic. Invoices help honest people stay honest.
The resale value of your business is in your customer base. A prospective buyer buys your equipment, building, land, and customers. With no records of sales or receivables, there is no way to document your customer or sales base for any prospective buyers. Some questions a buyer might ask are:
What percentage of your customers are repeat customers? (A measure of customer loyalty.)
What percentage of your sales come from surrounding counties?
How have your sales changed over the years?
Without invoices, it is hard to answer these and other questions. The buyer may need this information in order to convince a bank to loan him the money to buy your business. Without records of sales, you tend to be in the business of selling used equipment rather than passing on a profitable business.
Usually an invoicing system will automatically maintain a marketing system. This allows you to send out reminders for seasonal service or holiday messages, or just a note so that customers can have your phone number nearby. Without invoicing you need to keep a separate system to do this. Usually, the effort and money used to keep these records up to date is an unnecessary effort if you have an invoicing system. Without invoices, you have manual COD work as well as the reminders, i.e., double the work and half the pleasure.
This is the accepted practice in most businesses. In this system, a customer receives a written record of services and a receipt of payment. An invoice is then used by your company to maintain a record of services rendered and as a tool to resolve any invoicing, payment, or service issues that may come up. Another type of paper work that usually comes with invoices is statements. A statement is a recap of open invoices that your company has for an existing customer. Many customers pay off of statements; in fact most credit card companies work this fashion. When you make a purchase, a receipt is given to you detailing the item and a statement is sent to you at the end of the month requesting payment. Once payment is received, it is posted against the individual open invoices. Benefits of this method of record keeping include:
Complete tracking of sales.
Increased number of possible customers (a greater ease of billing allows more customers to be handled at a time).
Improved value of company by documenting sales activity.
Improved revenue by complete customer invoices.
Improved collection via statements.
Some of the potential negatives associated with invoice/statements are:
Requires the development and implementation of a record system to store and manage invoices.
Can be clerically demanding (most people end up using a computer).
Reduces daily cash flow.
Costs time and money to maintain.
Invoice/statement management is not delivering and servicing portable toilets. It is office work and it can be as hard or harder do perform successfully. It is mastered the same as any skill: causing high stress and being difficult to understand when first getting started, but soon becoming second nature as experience and the selection of the correct tools brings the work under your control.