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!

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.