Outsourcing Billing Step by Step – Part 2 of 2

In my last post, I described the steps involved in outsourcing your billing function from the point at which you get started through the point at which you sell the concept internally.  This post focuses on the steps from the point of evaluating outsourced billing partners through the point at which you are up and running with a “live” implementation with your billing outsourcing solution provider.

Step 6 – Evaluate Outsourced Billing Providers.  Establishing criteria for making a decision on which billing services provider to go with is the first step in the evaluation.  Consider criteria such as the level of expertise of the provider; level of support for different billing scenarios required by your company; level of automation to support each scenario; amount of time in business; number of existing customers; financial viability; customer retention rate; and cost of services.  Notice that I haven’t specified a “fit” with your requirements.  The reason for this is that when choosing a provider, it is important to leverage the expertise of the provider, rather than specify detailed requirements for exactly what they must do.  If you are too detailed and rigorous in your requirements, and make potential providers “jump through hoops” to meet them, then you might negate the benefits of highly efficient methods (processes and technology) they may already have in place.  This is not to say that you shouldn’t have requirements, but you should approach this evaluation as if you were selecting a “best of breed” solution, as opposed to a “custom build”.  You will need to identify candidates.  This is perhaps the most difficult step.  In my experience, focusing on those candidates that are specialists in the billing function, as opposed to those that have simply done a lot of outsourcing, is the way to go.  Sending a Request for Information (i.e. “RFI”) to these candidates is the preferred approach; as opposed to a Request for Proposal (i.e. “RFP”) which is generally a more detailed document associated with providers needing to demonstrate that they can meet detailed requirements – not the desired approach as described above.  Obtaining an actual proposal after you have had a chance to interact with candidate providers is the last part of this step.  You should ask for a project plan addendum to the proposal so you know exactly what needs to be accomplished to get up and running from the standpoint of each provider.

Step 7 – Select a Billing Outsourcing Partner.  Those providers who are the best fit against your criteria should make the short list of two or three.  It is important to consider the fact that you probably don’t want this entire process to take too long, so those from the short list that look like they have an excellent handle on the specific steps to get through the process (and can do it quickly) should rise above the others in your evaluation.  At this point you should ask to speak with references.  Make a list of questions to ask the references that are oriented around aspects of what you want your relationship to be like when you are “up and running”.  Example topic areas for questions include: Background Info (duration of existing contract; number of bills processed monthly; etc.); Reasons for choosing the provider; Level of overall satisfaction with the provider; What they like best about the provider; Difficulties they have had (if any) in working with the provider; Level of expertise demonstrated by the provider; Opinion of the technology used by the provider; Accessibility of Senior Management to address issues; etc.  Conduct your reference calls, and be sure to ask if it’s okay if you contact the reference again in the future with follow-up questions.

Step 8 – Establish Metrics and a Service Level Agreement.  The metrics by which the on-going operation will be assessed might have already been defined in the proposal and through earlier discussions.  It is optimal, however, to revisit both metrics and the service level agreement (SLA) at this juncture, because at this point you will have an excellent handle on how you want things to work and an understanding of how your desired provider operates.  Both parties can bring input to the subject of the metrics and process for governing the outsourced billing arrangement.

Step 9 – Plan and Execute the Transition.  The project plan included with the provider’s proposal should provide guidelines on the tasks that need to be executed from their standpoint.  A program plan for the transition should be created which will be “in sync” with their project plan, and which will also address other internal projects that you need to complete.  Each “project” does not need to be a monumental effort, but should be managed tightly to ensure an effective transition.  Your internal project(s) should address: changes to business processes as a result of the new arrangement (consider transactional processes, continuous improvement processes, and management & governance processes); internal systems and reporting changes required; and an organizational transition plan for those individual affected.  Not all of these internal projects need to be fully completed prior to initiating the “production” operation with the billing outsourcing provider, but the activities and required timing should certainly be considered carefully and well-understood by all appropriate internal stakeholders.

Step 10 – Monitor the Process and Enjoy the Benefits!  Monitoring the process and identifying and communicating the benefits internally is an important consideration not to be overlooked.  The metrics and service level agreement defined in Step 8 and the internal management & governance processes identified in Step 9 will help with the structure of this step.  An on-going communication program with all interested parties should be part of this final step as well.  Communication with internal stakeholders, customers and with the outsourced billing vendor should be planned and executed carefully in order to ensure that all concerns are heard in a timely fashion, and that the benefits of outsourcing your billing will exceed expectations of all involved.

Outsourcing Billing Step by Step – Part 1 of 2

This post is the first a two-part summary of the steps involved in determining whether outsourced billing is right for your company, and then moving forward with executing if it is.

Step 1 – Establish Responsibility for Determining Billing Strategy.  Determining who should be responsible internally within your company for assessing the outsourced billing opportunity and defining the billing strategy for the company is an important first step.  A billing strategy should address not only billing process optimization, but also how marketing opportunities can best be realized through innovative use of billing communications.  The definition of some basic objectives for billing, and the subsequent assessment of whether to outsource billing to an expert billing company is something typically best done by the CFO or Controller in a mid-sized organization or others involved in leading order to cash reengineering or information technology in a very large organization.

Step 2 – Define the current process and boundaries for the billing function.  Billing is often part of a larger function within the organization, and the boundaries can be sometimes difficult to define.  Defining the exact activities and who performs them is an important step in the process.  In addition to the activities and the people performing them, it is important to understand the computer systems used, the equipment used and other materials involved in the process.  Be sure to consider the time and effort spent by all parties involved in the current billing process – on your end and on your customer’s end (whether they are other businesses or consumers).  Also, be sure to consider the time and effort currently being spent by your company and your customers in processing payments for the bills you send out, and any efforts you are currently undertaking in moving your customers to an e-billing program.

Step 3 – Quantify the Costs.  Once the boundaries for the current billing process are well-understood, quantifying the costs is a fairly simple step.  If you’ve identified the right person to lead the effort, they will likely have access to information on costs such as people costs (fully-loaded FTEs ), paper costs, postage costs, application development and maintenance costs for current systems used, acquisition and maintenance costs for equipment, etc.  The costs for your company should be grouped separately from those assumed costs of your customers.

Step 4 – Quantify Billing Outsourcing Benefits.  Outsourced billing benefits can be substantial across many areas.  There are “hard” benefits associated with cost reduction in headcount, application development and maintenance, equipment, postage, etc. Reduced days sales outstanding (DSO) resulting from decreased time to generate bills and elicit customer payment is also a very real hard benefit of optimizing billing. And there are “soft” benefits associated with improved customer service and convenience, etc.  Other benefits associated with improved marketing effectiveness through innovative use of bill marketing approaches should also be considered.

Step 5 – Develop the Business Case and Sell It Internally.  Once steps 2 through 4 are complete, it’s simply a matter of “packaging” up a summary presentation and making the decision.  In mid-sized companies, the CEO can make a quick decision most of the time; whereas in larger organizations a steering committee focused on order to cash processes or an IT governance committee can evaluate the business case.  This step will involve a broader group assessing how an outsourced billing solution fits with other major programs the company has underway – such as other broader outsourcing initiatives, ERP implementations, etc.

Outsourcing Billing Step by Step – Part 2 addresses the remaining five steps including:

• Step 6 – Evaluate Outsourced Billing Providers.
• Step 7 – Select a Billing Outsourcing Partner.
• Step 8 – Establish Metrics and a Service Level Agreement.
• Step 9 – Plan and Execute the Transition.
• Step 10 – Monitor the Process and Enjoy the Benefits!

What Percent Of Your Marketing is Being Wasted?

For many companies, this may be one of the most challenging years they have faced.  Many businesses are focused on productivity improvements and ways to get paid faster, while others are implementing new approaches for driving revenue.    That’s where your bill comes in to play.  A surprising fact about your bill.  It can be a powerful marketing vehicle for driving revenue.

One of the most common marketing quotes bantered about is from John Wanamaker, the pioneer of the department store concept.  Wanamaker said, “I know half my advertising money is wasted, trouble is, I don’t know which half.” 

What would Wanamaker have said if you told him he could place personalized messages onto a document that would be reviewed daily by a large majority of his target audience at no additional cost?  You are already incurring the cost of sending your bill.   By adding a marketing message you are simply maximizing the value of your “real estate”.

An InfoTrends 2007 survey found that 95% of bill recipients open their bill and review it for over three minutes.  Imagine if your marketing communication could achieve that kind of a response.  The bill becomes more than a piece of paper that communicates how much your customer owes you; it becomes an opportunity to drive demand by delivering a targeted message to a captured audience.

Rockingham Electrical Supply has been taking advantage of their bill as a marketing vehicle for the past few years.   According to Jim Pender, EVP and COO at Rockingham, “by taking a strategic approach to the messaging we place on our bills, we have been able to achieve double-digit sales increases on key products.”  Rockingham customizes the bill message based on the location of their customer and they rotate the message on a frequent basis.   They have also used the message on their bill to triple the use of eBilling by their customers, resulting in significant cost savings.

With the challenges of today’s economy, it is more important than ever to innovate in all facets of your business to drive sales.  For many distributors, the bill is an underutilized asset with tremendous potential.  Make sure that your bill is getting the “billing” it deserves.

Billing Strategy

The Billtrust blog post by Flint Lane on Making the Move to Electronic Billing does a good job of describing what’s involved in a billing strategy and important considerations in selecting an billing services vendor.  Mr. Lane believes a billing strategy should consist of a comprehensive set of solutions that allow a company to distribute bills and accept payments electronically, along with a comprehensive plan to how to migrate customers to electronic billing.  He makes important points related to economic and marketing considerations which distinguish a solid billing outsourcing provider from standard software vendors and mail-order houses which provide billing solutions.

Cost Savings and Improved Customer Service

This is a good article written by Credit Today that summarizes the benefits of having a well thought out billing process.  The article has many interesting statistics on DSO, billing costs, and managing customer billing issues.

The importance of electronic billing is also discussed.  The report highlights the role eBilling plays within a company beyond cost reductions.  Electronic billing also helps companies get paid faster and satisfies a set of customers that are looking for easier ways to manage and pay their bills.

Lastly, the article goes into the role third party billing companies can play and what kind of expectations a company should have when choosing a vendor.

Here is a link to the article:  http://www.credittoday.net/public/1962.cfm?sd=42