Tag Archives: Billing

Where Do You Find Sources of Capital or Savings? Seven Suggestions

Situation: A CEO closely watches company cash flow so assure that it is enough to fund the company during both upswings and downturns. The company is doing well, but the CEO is concerned about a near-term potential downturn. Where so you find sources of capital or savings?

Advice from the CEOs:

  • In anticipating future cash flow needs, planning to breakeven may not be enough. Anticipate contingencies and cut enough to be profitable. This is particularly true if a downturn is longer than anticipated.
  • Take a close look at operating capacity.
    • Estimate current capacity based on staff count and average billing rates.
    • Forecast best – worst case scenarios given market trends. Compare each against current capacity and evaluate the gaps. This will help set staffing levels to assure that the company is not overcommitted in case of a downturn.
  • Discount future cash flow for non-payables based on experience. This may indicate the need to cut expenses deeper to assure that the company survives an extended downturn.
    • In a recovery, pull back those who were let go.
  • If there is underutilized time from the team, pitch this to investors to obtain equity financing for new IP.
  • Consider selling a key customer on a royalty model. This can be a small royalty – maybe 1-2% of products sold based on the company’s contribution.  This is pure profit to the company, and provides an annuity revenue stream, even if small.
  • Look at banks which are aggressively expanding in the region. If they are hungry for new clients they will offer attractive rates.
  • Companies are better sources of funding than investors. A good client can become a strategic partner. Do some homework before first before making the call to a key contact.
    • Know the level of financing that is needed.
    • Know where it would be used and what kind of return the company can yield on the investment.

How Do You Improve Quote to Collections Flow? Four Tactics

Situation: A company is losing billings because individual billings are getting lost in their process flow. Requests for enhancements come from clients to Project Managers. Project Managers take on development of the enhancements but are sometimes too busy to keep track and don’t report their work to the billing department. How do you improve quote to collections flow?

Advice from the CEOs:

  • It appears that two processes are missing:
    • A formal trigger mechanism to assure that a PO is in place BEFORE Project Managers undertake enhancement work, and
    • Managers are incentivized to assure that the client is billed and revenue collected for the work performed.
  • Formalize the process and do not allow Project Mangers to initiate any work until a work request is logged in the billing system and a PO is received from the customer to cover the expense.
    • Develop a process to track customer requests, estimate development and transmission to billing, forwarding of estimates by billing to the customer with a request for a PO, and upon receipt of PO authorization by billing to initiate work.
    • This can all be tracked and managed by most accounting software packages.
    • This process will:
      • Facilitate tracking of actual expense vs. estimate;
      • Tracking of requests for which no POs are received, for client follow-up; and
      • Tracking of enhancement requests to guide future product development.
  • Compensate Account Managers to track and manage the process.
    • If an Account Manager receives a commission for enhancement work they will have an incentive to keep track of all ongoing work, both for timely delivery and to assure that the customer invoiced for the work.
    • Commissions paid to the Account Mangers will be a small percent of the extra revenue collected.
    • To improve process management, schedule regular meetings to review all enhancement and other work being done for clients. Review and assure that all work has accompanying POs, that the work is being completed on a timely basis and in line with original estimates, and that the company is invoicing and being paid for the work. Empower Account Managers to organize and conduct these meetings. Their incentive will be the commissions they will collect on payment for the work.
  • Build upgrades and a certain number of enhancements into the product price.
    • This enables to company to increase prices and to collect prepayment for enhancements and upgrades that may or may not be requested.
    • Use the process outlined above to track enhancements which are credited against the prepaid accounts, and to assure that enhancements above the prepaid limit are invoiced.

How Can You Accelerate Offshore Learning Curves? Four Thoughts

Situation: A company has an offshore operation with 10 engineers and a good General Manager. They will hire five more engineers in the next month. Their target billing rate is projected to be profitable when they reach 15 engineers. Their challenge is that they need to bear the investment loss to have an offshore capability, but are not sure that they’ll see a pay-off. How can you accelerate the offshore learning curve?

Advice from the CEOs:

  • Given the current situation, give yourself a window of 60 to 90 days. Create a go/no go decision point and let the General Manager know this. It will provide motivation for the off-shore operation to come up to speed faster.
  • Another company projected a 2 year break-even based on others’ experience in the geographic location.
    • They are nearing the 2-year point with the office up and running, on target with schedule, under a General Manager with proven experience.
    • They see payback on their initial investment at the 2.5 to 3 year point, and thereafter duplicating their payback every 6-12 months or better.
  • It is important not to undercharge for off-shore work.
    • One company charges $125 for work done in India that they would have charged at $180 if done in the US – a 29% discount. This is for high billing rates, with spreads even better for lower billing rate work.
    • If a client pushes for offshore rates, bargain for a lower initial discount for off-shore work compared with US-based work, but combine this with an offer to generously share additional discounts as the offshore location improves productivity.
  • Bottom Line: Stay the course. Long-term this investment will pay off.