... And Now For The Bill
Typical Problems: Let’s say your technicians do top quality work and your customers admire their skills and service — even their professional demeanor. So what difference could the invoice make in getting and keeping customers and avoiding complaints from spouses when they return home? Surprisingly, many complaints and problems can be traced directly to a company’s invoice and their invoicing procedure.
For example, if your technician completed a repair job in 20 minutes and the cost of the job was $120, the spouse returning from work could quickly (and incorrectly) conclude that the technician was being compensated at the rate of $360 per hour. “Outrageous!” might be the response, before any additional checking is done to determine what was fixed and what it took to fix it.
Sometimes replacing a rheostat is all that is needed, but entering “replace switch” alone on the invoice doesn’t seem to demonstrate much skill or value when it comes time for the customer to pay the bill. This problem is particularly significant when the job is explained to a spouse who wasn’t there when the job was done. They didn’t see the diagnosis, nor do they know how difficult or involved the job was.
Value: Although customers can complain about almost anything, in most cases it’s their perception of what they received for what they paid that bothers them. Let’s call it perceived value. Remember this, regardless of the amount of the bill, customers don’t complain if they believe they got their money’s worth. How can customers be satisfied if they are charged for a job that is described in two words? Unlikely they will be.
How can you increase the perceived value the customer receives? Easy, just share with the customer all the effort that went into solving their problem. You already know that the problem is not very important after it is fixed.
Solutions: There are some easy, low cost solutions to increasing perceived value. First, you’ll need to train your technicians how to properly write an invoice that will eliminate complaints — one that has a high perceived value from the customer’s point of view. From now on, don’t accept one– or two–word, scribbled invoices. If the customer can read those short blurbs, they certainly won’t be impressed with how much work was done, or that any great amount of skill was necessary. Instead, your technicians should be able to describe, in detail, exactly what was examined, diagnosed, serviced, repaired or replaced. That doesn’t mean that extra verbiage is added simply for the sake of increasing the number of words on the bill. It just means that every job, no matter how basic, is fully described on the invoice. Now when the working spouse returns home, they will understand all the work that was performed. It’s right there on the invoice where they can clearly see what every step of the job required.
Asking For Trouble: A sure way to invite the customer, or a returning spouse, to complain is to still be using time and materials billing (T&M). If you list an hourly rate on the bill, you increase the customer’s chance of attempting to second guess the hourly rate. They may complain that the rate seems excessive. (They don’t know how much your overhead, labor rates and taxes are.) Additionally, even if the rate is not specifically questioned, the customer is going to be very aware of how long your technician stayed on the job. And they are going to have repeat their observations to their spouse, who may not be so understanding. T&M billing also requires that you reveal the materials costs. That disclosure alone may encourage the customer, or worse, a spouse to estimate what they could buy the materials for at a local home warehouse. So with T&M pricing you face potential criticism from several directions at once. Solution: switch to flat rate pricing.
Flat Rate: With flat rate pricing it is impossible for the customer to be concerned about how much time your technicians spend on any job because they are not paying by the hour. Also, there are no material costs listed in the flat rate manual, so no one can question any materials cost on the invoice. Even better yet, the flat rate manual thoroughly describes the job, so technicians are not left on their own to come up with a complete job description. Businesses that use the Maio Menu Pricing flat rate system have an additional advantage: the customer sees the job description in the pricing manual before they agree to the job.
Objections Are Eliminated Up FrontValue Rate: With the Maio Menu Pricing Manual™, the customer also sees the difference between standard rate and value rate pricing. We give a discount to service agreement customers; their pricing is value rate, while non-service agreement customers must pay more with standard rate pricing.
Listing the two pricing systems causes customers to inquire about how to get the better price. We even have a column that lists the savings (the difference between value rate and standard rate). The manual practically sells service agreements for you. Plus, it makes it much easier for technicians to price the job, fill out the invoice — and get paid.
First Things First: Often, our technicians request that the customer sign the invoice before the job is started, indicating they approve of the work to be performed and the price to be charged. This simple procedure alerts the technician to any potential problems with the job, the price or any other questions the customer has at a time when they can take some action to remedy the concerns. Otherwise, (trying to correct dissatisfaction after the job is completed) your technician is at a distinct disadvantage — the job is already completed. Try having your technicians follow this technique and see if they don’t reduce complaints and disputes with customers and their spouse over invoice amounts and job descriptions.
Internal Controls: Following proven procedures for invoicing customers improves both customer relations and the percentage of invoiced amounts collected. However, there are more reasons to follow sound invoicing procedures, and that is for improving internal financial controls. I’ll give you some examples. Have you ever had invoices disappear? You may say that it happens all the time, so what? Where do you think they go? Does the term moonlighting get your attention? The only thing worse than not getting paid is to have one of your technicians do a repair job and give the customer one of your invoices, and then keep the money. It can occur if invoices are not tracked.
Accountability: Tracking includes assigning invoices with specific numbers on them to individual technicians, and holding them accountable for every invoice. Those not used on jobs must be returned, or an explanation provided. It is not acceptable for a technician to say, “They’re lost.” When the invoices each technician has are used up, they get new ones, not before.
Such a positive control system for invoices keeps technicians honest (no moonlighting) and improves your record keeping at the same time. Technicians know your company has formal procedures for handling billing for customers.
Automation: If you have computerized your financial systems, you can take the information from an invoice, enter it into the system and have the technician’s pay, the customer’s information and even parts inventory status entered automatically at the same time. Automating your financial data enables you to get better, more up-to-date data and while saving significant personnel costs.
If you have not automated your system yet, getting control of the invoices is an excellent first step, which will make automating your system easier. Besides, every potential moonlighting job will evaporate. You’ll get paid for all the jobs your technicians complete.
An Effective System: By combining: 1) better written invoices; 2) flat rate pricing; 3) a positive control system for invoices, which holds technicians accountable for them and 4) automating your financial systems, you will improve customer service (reducing complaints) and boost your profits. And you’ll enjoy the benefits of better internal financial controls.