The quote to cash process, essentially the way that companies create their revenue stream, is a key part of any business’ daily life. Done well, it supports healthy cash flow; done badly it can result in loss of business and harmful payment delays which can be devastating for small businesses. In this, the first of a blog series on effective quoting and invoicing, we start with an overview of these business-critical operations.
Quotes are the first step in building a last relationship
Quotes, estimates, tenders and bids are all business documents that share the purpose of bringing new business in. In a quote, a business lays out what it can do for the prospective customer and how much it will cost. It’s an important document because it is often the first real step in building a lasting supplier/customer relationship. It establishes a commitment on both sides – if the customer decides to proceed, the company will provide the goods or services as stated in the quote and the customer will pay the price quoted.
The quote provides an early opportunity to impress and to avoid ambiguity. It should provide a sufficient level of detail such that there is no scope for misunderstanding on either side. Although the customer is generally not obliged to go ahead at this stage, the quote helps them – and the supplying business – be clear on what they’re getting themselves into should the arrangement proceed.
Quotes aren’t a priority for many small businesses
In small businesses in particular, this document is often neglected, or at least done on an ad-hoc basis leading to inconsistency instead of following a set process. Verbal quotes and undocumented promises are still given, but both are a bad idea. If there’s no documented proof of what was quoted and a customer later complains that they didn’t get what they expected, or disputes the figure on the invoice they may refuse to pay. They will almost certainly take their business elsewhere next time.
Either way, the company sustains reputational damage. On the other hand, if the company gives into customer demands because it can’t point to evidence of the commitment, then the business stands to lose money.
Invoicing processes need to shorten payment times, not extend it
At the other end of the relationship the invoice requests payment when a job has been completed or goods delivered. It lays out the business’ payment terms and provides details on how to make settlement.
The invoice is important because it triggers payment and all businesses rely on the timely and regular settlement of bills to maintain healthy cash flow.
It is also potentially the final link in a chain of interactions with the customer. How smoothly the invoicing and payment process goes may influence the customer’s decision on whether to continue doing business with the company.
The invoice is also an opportunity for the company to lay out any available preferential terms such as early payment discounts. These work well for some businesses, helping shorten lead to cash timescales.
Consistency to invoice preparation is essential
The invoice is a formal document; it needs to demonstrate professionalism, be logically laid out and branded to reinforce the company’s image. It must unambiguously state terms and conditions of payment, including the settlement timescale. Late payments are a big problem for SMEs; according to Bibby Financial Services’ SME Confidence Tracker (Q2) bad debt affects a large number and 27 percent of SMEs had to write off money in the past year.
This underlines just how important it is for businesses to have an efficient process for raising and tracking invoices, so that due payments can be identified and chased down. For most businesses this means digital invoicing.
In the second blog, we’ll take a look in more detail at the impact bad quoting and invoicing processes can have on business.
Download our whitepaper to discover how electronic invoicing can make a difference to your organisation, http://www.neopost.co.uk/einvoicingwp. For more information on reasons to choose Neopost’s e-invoicing solutions, visit https://goo.gl/6EXoiX