January 25, 2013 •Brian Watson
The way your billing statements look – and how they're delivered – plays a really big role in how quickly and efficiently you can collect revenue from customers.
Clean, concise, to-the-point statements that are processed and delivered quickly reduce Days in A/R, bad debt and collection costs, and leave your customers feeling positive about the virtual handshake at the end of their transaction.
Then again, do you actually know how effective your billing program actually is?
Sure, you might have an idea of how much customers like your statements. Or a general belief that they reach customers quickly. But without evidence to back up those ideas, they’re really just intuitions.
That’s where testing and metrics can help. By paying careful attention to bottom-line statement processing results, you’re in a better position to understand the overall effectiveness of your billing program. And, better still, you have the tools at your disposal to experiment with everything from statement copy to your online payment platform’s sign-up form in the pursuit of improved results.
But where should you start? Well, you’re in the right place. Read on for a simple guide to measuring the effectiveness of your customer billing program.
1). Statement Effectiveness. Collection speed is important to your financial health. The faster you can turn outstanding debt into cash, the quicker you can put it to use again: paying bills, rewarding employees, reinvesting in new technologies, and otherwise running your business.
Given its importance, you’re probably already paying careful attention to stuff like Days in A/R, organizational cash flow and bad debt.
But –from a statement processing perspective - that alone isn’t enough. We need to know how your statements are doing? Are they improving collection speed? Or maybe bogging down the process instead?
Independent of context, financial metrics are just numbers. Sure it’s good when Days in A/R goes down (and bad when it rises). But without cause-and-effect justification, it’s hard to pinpoint what you’re doing right or wrong.
To gain that kind of billing insight, you need to evaluate consequences. That’s why we always advise businesses to track financial metrics against specific statement improvements. Try out a new statement design? Weigh it against collectability for 90 days. Add a second page with instructions and an FAQ? Measure to see if it affects A/R performance.
Sure it’s not likely to prove causation. (There are a lot of moving parts to the revenue cycle, after all). But it is a good way to tell if your statements are helping your financials trend in the right direction – and what specific billing elements are behind the change.
To get a rough determination of billing effectiveness, we recommend tracking any statement improvements you make with the help of key performance indicators like:
• Days in A/R
• Average number of statements it takes to collect from self-pay customers
• Days of cash on hand
• Accounts receivable aging bucket performance
• Delinquent accounts
2). Customer Satisfaction with Billing. Metrics like Days in A/R and percentage of bad debt give you a good snapshot view of the effectiveness of your statements.
But they’re not 1:1 measurements. Days in A/R, for example, incorporates tons of variables. In addition to statement quality stuff, there are all kinds of extraneous factors, like the time it takes to verify insurance or customer ability-to-pay issues that affect when they can afford to send a payment.
And that makes it difficult to isolate root collections issues or determine how truly effective your statements really are.
That’s where customer satisfaction measurement comes into play. Whether it’s customers calling into your service center with a question (or complaint) about their statements or quick surveys to gauge satisfaction, by engaging customers in the measurement process, you can know for sure just what they think of your bills. (Or at least those that you talk to). We recommend:
• Number of statement-specific service calls your staff fields
• Small-scale focus groups for statement usability testing
• Simple surveying to identify customer attitudes about your statements
3). Mailing Effectiveness. Think about the foundations of a best-practice statement processing platform. Effective statements are certainly a critical element: customer-friendly design, smart data presentment, a simple-yet-readable format.
When it comes to revenue collection, that kind of stuff matters a lot. But so does efficient, timely print and mail operations. After all, what good is an effective statement if it never actually makes it to your customers?
That’s why it’s important to stay on top of the performance of your mailstream operations, too.
Statements that take days (or weeks) to print and process add days to A/R metrics. That’s also true of statements that bounce-back as returned mail (which are also guilty of increasing collection costs).
And breakdowns like these are indicative of bigger problems: mail shop operations issues or address data that hasn’t been properly vetted and verified.
Getting to the root of print and mail processing performance means tracking and analyzing how your statement processing company stacks up on measurements like:
• Average project turn-around
• Return mail rates
• Delinquent accounts
• Number of statements re-mailed
4). Online Billing and Payment Performance. Online billing and payment applications have loads of positives. They help speed receivables, reduce collection costs and streamline common billing and payment tasks.
But one thing they’re not is cheap. And to feel comfortable making the kind of up-front investment that a best-class EBPP platform requires, you’re probably going to want to know that your investment is paying off.
And that means (wait for it) more metrics. But unlike statement or mailing effectiveness, online billing and payment performance is really easy to track and analyze.
That’s because all data moves through a Software-as-a-Service web application. So you can pull up EBPP portal subscribers or total payments processed at a moment’s notice.
To properly evaluate online billing and payment ROI, we recommend you take note of data like:
• The total dollar amount processed by your portal
• Customer EBPP portal adoption rate
• Customer paperless billing adoption rate
• The percent of EBPP sign-ups that have made a payment using your portal
What strategies do you use to determine statement processing effectiveness?