Streamline Billing Adjustment Hurdles: Monthly Metric Focus
Effectively handling billing adjustments is essential for any business, but inefficiencies in processes, communication, or policies can render these adjustments time-consuming. Prolonged cycle times for adjustments can create difficulties in finance-related functions such as reporting and forecasting.
Billing adjustments occur for various reasons, including billing errors, delivered products with defects or missing components, or undisclosed discounts. Swift resolution of adjustments is crucial to minimize business risks.
To measure the length of time required to resolve adjustments, the cycle time is calculated from identifying an adjustment to its complete resolution and reflection in the accounting records. Data from cross-industry organizations indicates that the quickest organizations can resolve adjustments within 7 days, while the slowest may take 3 weeks or longer.
A lengthy adjustment cycle time poses multiple risks, including insufficient payments, inefficient use of resources on non-value-added activities like generating financial reports, inaccurate quarterly reports, and complications in forecasting due to delayed communication of adjustments.
Eliminating adjustment bottlenecks requires attention to documentary evidence, communication between key stakeholders, and the implementation of appropriate technology.
Improving documentation includes maintaining accurate and complete claims, using standardized invoice templates, and maintaining detailed records of adjustments. Structured follow-up processes, automated payment reminders, and prompt communication with customers about errors are key to addressing communication challenges. Technology improvements include automating billing workflows, leveraging analytics, offering multiple payment options, and optimizing billing cycles.
These practices help minimize delays, increase accuracy, and enhance communication, thereby lowering enterprise risks and improving financial management. A robust and efficient billing adjustment system relies on automation, standardization, and timely communication.
Perry D. Wiggins, CPA, serves as secretary, treasurer, and a member of the organization at APQC, a nonprofit benchmarking and best practices research organization based in Houston, Texas.
- Inefficient documentation, such as incomplete claims or lack of standardized invoice templates, could extend the margin for billing adjustment errors, creating risks in finance, business, and the potential for inaccurate reporting.
- By implementing technology solutions like automating billing workflows and leveraging analytics, businesses can reduce the risk of prolonged bull runs in finance, improving the efficiency of their business by causing fewer delays and minimizing the potential for inadequate payments.
- To maintain a strong finance function and ensure the health of their business, it's essential that organizations address potential risks associated with billing adjustments by being proactive in communication, implementing standardized processes, and optimizing billing cycles, all while keeping a watchful eye on the margins and risks associated with each adjustment.
