Want to get paid faster? Here’s how to shorten your service-to-cash cycle
Sales and profits are great, but cash is what really matters. Cash flow problems can put strain on day-to-day operations, stop you capitalising on growth opportunities and ultimately make your job much more stressful than it needs to be. This is why taking control of your business’s service-to-cash cycle is vital.
What is the service-to-cash cycle and how does it impact field service businesses?
The service-to-cash cycle is the process that begins when a field service engineer completes a job and ends when the accounting department receives payment for it.
Field service businesses of all sizes are struggling with a service-to-cash cycle that is too long. Research by Aberdeen Group says that the average service-to-cash cycle is 34 days, and even the top performers have only been able to reduce this to 26 days. Our own research shows that it can take many businesses 14 to 30 days just to get an invoice to a customer after a job has been completed.
The problem with a prolonged service-to-cash cycle is that it puts a huge strain on cash flow. The longer the lag time between the service and the payment, the more difficult it will be to pay your bills and replenish your inventory. If you manage to stay afloat, what cash you do have will be tied up in working capital and you will never have any left over to grow the business.
Furthermore, a prolonged service-to-cash cycle is normally indicative of other problems with your field service operation that could be impacting your profits. It could mean your business is bogged down in manual or paper-driven processes that lack visibility and accuracy, require excessive amounts of administration to maintain, and can lead to lost revenues.
Why are field service businesses struggling with long service-to-cash cycles?
Lack of mobility
Many businesses do not use mobile devices to capture data in the field. Engineers are still having to fill in paper-based service reports and post them to the back office. This creates a delay of several days at least before back office staff are able to input the information for billing purposes. Delays are worsened by back office staff having to call their engineers because they can’t decipher their handwriting or because key information is missing.
Some companies have systems where engineers are required to jot down notes on paper in the field and enter the information in an electronic format later. This might be at the end of the work day, the end of the week, or perhaps never. Often bits of paper scrawled with crucial data end up in engineers’ back pockets and are never seen again. This creates further delays but also means there is a greater chance of inconsistency between you and your customer, and can lead to disputes over invoices. Cue even more delays and, worse, damaged customer relationships.
Lack of visibility and automation in the back office
Back office staff have to manually source data on customers, equipment, service contracts, warranties and discounts in order to generate an invoice. Often none of this data is to hand, easily accessible, or in the same place. The process involves digging through filing cabinets, juggling a slew of spreadsheets and lifting data from various unintegrated bits of software. All of this, just to compile an invoice.
In a lot of cases staff must then generate each invoice manually from scratch. This is slow and vulnerable to human error. Any errors that do occur tie up the payment process in further delays while they are resolved.
How can field service businesses improve their service-to-cash cycles?
In order to accelerate the transformation of service into cash, you need to identify the obstructions in your service chain, i.e. anything that is holding you back from receiving payments promptly and accurately. You can do this by looking closely at your entire service management workflow, from the back office to the field.
What you’re likely to find is a mixture of the problems outlined above. To solve these problems you need to do three things: centralise, mobilise and automate.
All your information should be in one place and easily accessible in real time. Your back office teams need to be able to extract data on jobs, customers, contracts, assets, parts and billing quickly and from a single source. Implementing a dedicated field service management solution like Tesseract, an Asolvi product, is a way of centralising your data so that everything you need is at your fingertips. It makes sourcing information for the purpose of generating invoices much simpler and saves office staff inordinate amounts of time.
Equipping your engineers with mobile devices is certain to accelerate your service-to-cash cycle. It enables them to complete service reports on site in real time using their device, capturing exact times spent, parts used and jobs completed. The back office receives this data instantly and can commence the process of invoicing right away. Engineers can also get customers to electronically approve and sign off work done, parts used and labour time spent, saving time later and reducing the chance of any dispute over the work.
If all the different parts of your service chain are connected via a dedicated field service management solution like Tesseract, it means that any data inputted into the system is automatically fed through to the rest of the chain. It means that your admin teams do not have to spend time manually entering the same information multiple times into different systems, which is slow and error-prone. It also means that your finance teams do not have to wait for information before they can start the invoicing process.
You also need to automate the invoicing process itself. The Tesseract system automatically calculates job costings based on contractual rules and engineer-provided data, processes it and generates invoices pre-loaded with customer information. Not only is this faster, reducing billing time from days to minutes, it’s also more accurate. It means that every opportunity for revenue is captured and nothing gets missed.
Case in point: Planned Lighting Maintenance (PLM)
Commercial lighting solutions provider PLM used to rely on a service management system that was beset with manual processes and a lack of mobility. Tracey Hughes, Business Support Services Director, explains, “The whole system was heavily reliant on paper—handwritten job sheets from engineers that were sometimes unreadable or covered in coffee stains!”
PLM has been able to accelerate its service-to-cash cycle by implementing Tesseract. Tesseract is a fully integrated solution that includes sophisticated contract management tools, fully automated invoicing and Remote Engineer Access, a mobile platform that lets engineers view customer and equipment information and file service reports remotely.
“With Tesseract, there’s far less admin and data entry,” Tracey explains. “We have much better visibility of our engineers and their workloads, and can see what’s been completed and billed and what hasn’t without having to make a ton of phone calls. We also have much faster turnaround on our invoicing. On the old system, it could take up to ten days because we had to wait for paperwork to come in from our engineers. Now that all the information we need is right there on the system, same-day invoicing is the new normal.”