By: Team Anchor
For small businesses, billing their clients is like going to the dentist: unpleasant, time-consuming, painful…and absolutely essential. How many hours were charged? Which rate is applicable? What about the surcharge for that last-minute project? How many additional hours were billed?
The manual cycle of billing and collections drains time, energy, and effort from what’s ultimately more important: Servicing the client — and finding more clients to service.
According to a study by WePay, 39% of small businesses are forced to spend 5 or more hours every week on payments. And mid-sized businesses spend even more.
The only thing worse than buckling down to bill the client is not to do it at all. If you don’t go to the dentist, you wind up with a mouthful of cavities, but if you don’t bill the client, your business turns into a charity. But there is a middle ground — a way to digitize and automate the billing and collections process so that it becomes painless.
Every business owner knows about the direct costs of billing, like AR, collections, and transaction costs. Like how in-house collections activities drain valuable employee or owner time. Like how external collections efforts by agencies will take a 20–50% cut of the amount due. While credit card fees are between 2% and 4%, you get hit with bank fees, and that’s before you’ve tallied up the costs of all the software used in the cycle.
Like many other businesses, you might try to make the billing cycle more efficient by patching together workarounds, like something to digitally sign contracts or collections reminder email systems. But that alone can cost hundreds of dollars. In 2020, the State of Small Business Payments survey found that 61% of small businesses increased the amount they spend on technology in the past two years.
Revenue leakage means that the business is leaving cash on the table — studies show as much as 5% of the total potential top line — by not billing the client for what’s due. Cash flow problems can force a business to take on expensive financing to cover shortfalls. And clients who disagree with what they’re being billed can hurt the relationship (and eventually destroy it altogether).
Delays, mistakes, and problems in billing can hurt the company in a range of ways. Deloitte has calculated that 47% of companies are paid late for their services. According to the State of Small Business Payments 2020 report, 39% of small businesses have faced challenges related to payment speed in the last year — while 25% had cash flow issues in the same period. These problems hurt the business and can derail it altogether.
When billing is unpredictable, your business can’t grow, and your life is more stressful. It’s harder to hire, not knowing if you’ll be able to pay additional employees, it’s challenging to plan for your own future, not knowing what your revenues are going to be, when. When it’s time to plan a vacation or a major life event, like a wedding, you might not be able to forecast reliably enough to make confident decisions. This takes the cost beyond your business and into your personal life.
This is a feeling that doesn’t go away — even if in a given month, you somehow manage to finish the huge amount of work that goes into researching what needs to go into invoices, tracking billable work, getting invoices out on time to make it into the client’s billing cycle, waiting until they’re due, checking the bank every day, making uncomfortable collections calls, looking for solutions on top of a million workarounds.
Nobody really talks about how much of a toll this takes on business owners and managers — and everyone involved in the billing cycle. This is the true, unacceptable, cost of the way billing and collections cycles are handled today.
But there is a way around this. We created Anchor because we believe that the costs of the manual billing cycle are too high, all around. By doing business on Anchor, service providers can dramatically lower the costs of their billing cycle, spend more time doing revenue-generating work, and feel fulfilled in their work. Learn more about autonomous billing today!