In our frequent talks and training with current and potential customers there’s one thing that Avontus has become quite good at discussing: rental billing methods. The plethora of options to suit the needs of all of the falsework companies out there is the purpose of Quantify. In Quantify, you set up your billing method on each job (which some people call a ‘lease’) as shown below. Once you set these options, Quantify bills everything automatically, you don’t have to worry about when things or due.
So, a little background. A billing method allows you to tell Quantify how and when invoices are created. Quantify has four:
- Lump sum: This is handled straight from converting a quote to an invoice to a customer. You can bill the entire amount up front or you can spread it out into partial bills in variable percentages depending upon your contract. You still use Quantify to ship materials to the job, this way you can continue to track your inventory.
- Arrears: Some people refer to this as ‘Post-Bill’. In arrears the invoices are created and sent out at the end of the period you define. This can be a set number of days (the most common is 28 days but you can set it to anything; 365 would cover a year lease), first of month, last day of month, or a specific day. The invoice represents the actual cost of the materials that were at the site.
- Advance: Also known as ‘Pre-Bill’, these invoices are generated when the shipment goes out, to be paid for by the customer right away. If the equipment is returned early, Quantify has options to issue a credit or not.
- First Advance, then Arrears: This uses a combination advance/arrears. The very first time a shipment goes out, a minimum is billed. After this first cycle (per shipment) the cycle switches to arrears.
So, back to the discussions. One of the more common conversations has to do with billing minimums (for either advance or first advance then arrears billing). The purpose of billing a minimum is to get your cash as fast as possible. The only way to 100% get your money up front is to pre-bill the entire minimum on the day each shipment that goes out, no matter when it goes out. Here’s how it works in Quantify:
- If you have a single or multiple shipments to a single job you have the option of generating an invoice each day for the minimum and sending it out, or you can wait and have all minimums for a particular job appear on a single invoice.
Here’s how Quantify DOESN’T do it. You can use this list as potential ‘gotchas’ when evaluating rental billing software or your internal billing processes:
- Make sure that you bill the entire minimum amount on the day the shipment leaves the door. We’re seeing a lot of systems that bill some of the minimums one one invoice cycle and the rest on the next month or whenever. This defeats the purpose of having a minimum. What’s worse, you might not charge the correct amount if your customer returns the equipment early.
- The billing for multiple shipments to a single jobsite must synchronize on a single invoice. This includes the advanced and arrears portion of your invoice. If both minimums and arrears are due, they should all be on one invoice.
- An invoice should have the option of being available to print on the day your shipment goes out. If you bill the minimum with your shipment you’ll get your cash faster.
- If you elect to bill on every Friday (as an example), make sure that the minimums for the shipments to the job on Monday and Wednesday and whenever, all appear on a single invoice if you haven’t printed them yet. What’s more, make sure that all of the parts are billed for the full 28 day minimum cycle.
OK, now here’s a gotcha for arrears:
- On your invoice line item for an early return in the arrears cycle, don’t issue credits. If the part was on the job for 14 of 28 days, the invoice should have a single line item for 14 days. Yes, the math will be correct if your invoice bills the full 28 day cycle and then issues a credit, but you can be sure that you’ll get a phone call from your customer asking why it’s done that way. In today’s economy, taking care of your customers is a must.
We hope this topic is useful for improving your internal processes. Below is a timeline that you can use as a comparison for First Advance Then Arrears billing.
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