Billing and invoicing aren't sexy words. In fact, you might even say they can be a turn off. In the context of building a successful equipment rental business, however, they do demand attention.
Since the beginning of time for the rental industry, customers have been confused and sometimes irritated by their rental invoices, which are not as simple and straightforward as those resulting from any sales transaction. "Rental transactions are complex by nature," says J.J. Shea, general manager at Solutions by Computer. "It's not like a retail sale, where unit price multiplied by quantity equals extended price. There are many other factors involved in rental, including overtime charges, minimum charges, meter charges and damage waiver. The rates themselves are based on variables such as an X-day week, and an X-week month."
And rental invoices are frustrating for your employees as well. A common complaint centers on the amount of time this task consumes at the end of each month. When the system isn't automated, the size and demands of the task can lead to errors, which in turn, further irritate customers. "Inconsistent and inaccurate billing is a big time waster for a rental store manager," says Greg Bennett, vice president of sales for Point-of-Rental Systems. "Some have told us that they hand check each invoice because they can't rely on their system or employees to properly bill the customers. A rental store needs a system that not only automates this task but also has processes and procedures in place to provide structure and consistency for the operation."
Some operation personnel have already entered customer, job, equipment and period information on the rental agreement, yet billing personnel often have to manually create invoices based on this same information. This results in cumbersome re-entry of ticket/contract information.
"A lot of businesses have a manual folder system or spreadsheet process so they know what to bill," says Michael Saint, president of Corporate Services. "There normally isn't a tie between the tickets/contracts and the invoices unless they are running a package that handles both processes. This leaves a big possible gap and can cause an unknown amount of missed/late/incorrect billings."
Today's leading systems automate many processes to reduce the potential for human error and to increase efficiencies. "With our mass fax and email feature, invoices can be sent automatically to customers at the end of each day via fax or email, with statements sent automatically at the end of each month," explains Bennett. "Auto continuation billing generates cycle bills automatically for all long-term rentals. Complete Contract Maintenance allows the rental store to manage all aspects of the business, from quoting, opening contracts, modifying contracts, closing contracts and cloning contracts. Total customer management allows accounts receivable personnel to manage all touch points with their customer base by tracking customer call logs, quote follow up, open/closed contracts, and cash flow."
Speedy billing leads to fast cash
An automated invoicing system is good from an operational standpoint, since it can free employees up for other tasks, but it also offers another very important benefit, which is speed. The faster you can get bills out to customers, the faster you will get paid, leading to better cash flow, which is extremely important, for obvious reasons. "Paper-based systems consume lots of time and money dealing with printing, stuffing, mailing and more," says Rob Ross, president of Alert Management Systems. "Switching your A/R customers to electronic billing via fax or email (or even through a customer portal on your website) opens up a whole new world of lower administrative cost for your and your customer and accelerated cash flow."
Sending out invoices every day through automation, and statements twice a month or more by separating customers into billing cycles can have a dramatic effect on cash flow, Ross adds. "The faster the invoices and statement get out, the faster the cash flows back. All that being said, having the flexibility to work with your customers on an individual basis is another important tool to maximizing cash flow."
Ross continues, "A general contractor, for example, might be able to plan payments for rental equipment around 'construction draw' payments for completed work on a particular job. Your invoicing system should be able to invoice by job and even help your contractor keep track of equipment being used on multiple jobs. Allowing your customer to 'subscribe' to a daily report on his smart phone, showing equipment out on jobs, is an example of this concept. Many older invoicing systems simply don't provide enough strategies and tools for the velocity of today's rental market."
Effective invoicing is critical to success in all types of rental, especially when you're tracking more complex transactions, Ross notes. "For example, industrial and construction rental for longer terms presents a whole different set of invoicing problems, including keeping up with billing for meter overtime charges, billing for partial returns, billing in advance or arrears, planning for equipment maintenance, tracking location and usage via services from telematics providers, and other mission-critical problems."
Flexibility is appreciated
So much of a rental business' success rests with its ability to provide exceptional customer service, and one example of that is customized invoices. "In some cases, individual companies may request formatting that is unique to them and a good rental management system has to provide a billing engine that supports multiple billing methods and includes a print engine that can be customized to meet a specific customer's needs," says Clark Haley, CEO of BCS ProSoft which supplies the Automated Rental Management program.
Flexibility also relates to the system's ability to address many different types of rental businesses, with diverse customer needs of their own, Shea notes. "It's critical that a rental system accommodates multiple invoice styles, and not be tied to one specific billing method across the board," he says. "For example, scaffolding is commonly billed in advance with a 28-day minimum, whereas other equipment could be billed in arrears on a calendar month basis."
He adds, "Finally, an invoice that is easy to read and understand scores twice: it's a customer service and it's more likely to get paid on time."
Effective management software must be able to handle the complexity of rental pricing, says Patrice Boivin, president of Orion Software. "Most of them calculate the prices manually or in a separate spreadsheet before entering it in their system," he notes. "It's time consuming and error prone. They're also limited to simple prices. For instance, they cannot offer a price per shift which is standard for many types of equipment."
Ross says there are a range of flexible "smart billing" choices that are now available to reduce administrative costs and accelerate payment. "One popular smart billing features is the option to automatically generate an invoice when all the items have reached the maximum four-week or monthly rate. Since this might be as early as 14-17 days into the month versus 28 days, your timely invoice can accelerate early payment. Based on customer preference, the invoice is sent via email, fax or print, and send to the right accounts payable contact instantly," he says.
Another popular new option is automated recurring credit card billing. "Instead of sending an invoice and waiting to be paid, you bill the card as soon as the rent is due," Ross says. "In exhange for a relatively small credit card fee, you can eliminate collection and payment processing costs and accelerate cash flow."
Enhanced customer service
There's no question that simplicity, speed and flexibility are traits of superior customer service in all realms, and invoicing is certainly no different.
Sometimes, superior customer service takes the form of self-service. "[It's] an important trend in customer service in many industries, most notably banking, which pioneered the use of secure customer portals on the web," explains Ross. "In the rental business, web-based customer portals make it possible for your customers to manage their own accounts 24/7, while all you need to do is provide a user name and password. The customer service benefits are tremendous for both parties, actually reducing the administrative load on your back-office personnel. Everybody wins."
Ross notes allowing users to pay by credit card involves some additional costs, but they're offset by lower administrative costs and faster cash flow. "There are other benefits that are less tangible, such as customer loyalty based on superior convenience and being perceived as a technology leader in your market."