Contract billing complexity can be caused by one or more of several scenarios. Scenario #1 is based on complexity in the contract itself. For example, there may be multiple milestones, deliverables and/or subscriptions to manage at the same time. Scenario #2 can occur as the result of sheer volume. For example, hundreds to thousands of contracts with a deliverable or two plus subscriptions. Scenario #3 may result from external dependencies for billing, such as customer acceptance or feedback from the customer delivery team. Finally, accountants may simply avoid putting complete contract information in the system because they’re worried about billing accidentally, too early, or at the wrong time. While these manual methods may seem like an acceptable work-around, they often result in costly revenue leakage.
What is revenue leakage and why should you care about it?
Revenue leakage is simply the result of lost invoicing/billing opportunities. This may occur because billable time wasn’t tracked and reported efficiently. Or, it may occur because someone forgot to invoice the customer per the terms of the agreement.
The problem with missing opportunities for billing is that you may never be able to recover the unbilled revenue. Once the missed opportunity has been discovered, it may be too late to bill per the terms of the agreement. And, understandably, the customer may be unhappy to receive an invoice for services performed long ago. So, now you have revenue leakage.
So, what can be done to prevent revenue leakage?
By Bob Scarborough, CEO of Tensoft, a Silicon Valley-based