Six Sigma Billing
Adrienne, from our staff, has a neighbor with a successful landscaping business. The neighbor loves her business, but felt like all of her employees were making good money and she wasn't.
Adrienne sat down and did a little arithmetic about the differences between her neighbor's purchases and invoices. She quickly discovered that far more plants were purchased than invoiced.
Sheepishly, the neighbor admitted that she bids landscaping jobs with a certain number of plants, but often adds more to create the look she's going for. Clients love her, but her bank account feels a little neglected.
Two things were an issue: 1) estimating jobs and 2) tracking inventory used.
Adrienne helped her friend create simple Excel tracking forms to monitor what actually went in the ground. She also helped her neighbor set up some bookkeeping procedures to detect when purchases exceeded billed plants by some percentage. The neighbor's business quickly became more profitable.
Are you billing everything you should be billing? Or are products and services falling through the cracks?
I do alot of consulting in healthcare, especially in hospitals. In the heat of patient care, clinicians often forget to track all of the drugs and treatments administered. I spoke to one hospital administrator at a recent conference who admitted that his hospital had only been billing for about 60% of the stents used during angioplasty.
These stents cost about $2,500 each. I don't know how many stents they used a year, but 40 stents out of 100 would be $100,000.
Six Sigma Billing
It's simple to figure out if there's a problem in your invoicing or billing.
- Track how many of each resalable item you purchase.
- Track how many of these you actually invoice or bill for.
- The difference is how many you've failed to invoice.
- Track how many items are missed each month and graph them with a control chart.
- Use a pareto chart to determine which items are most likely to be missed (e.g., aspirins or stents).
- Identify the root causes of unbilled items
- Change the system to track and invoice everything used and every service performed.
Grocery stores implemented bar code scanners to ensure that every grocery item gets on your bill. I'm sure that it was difficult at the beginning, but the long term payoff was huge. The same will be true for you.
Here's My Point
In the heat of the moment, in the desire to serve customers, achieve some asthetic end or whatever, we can forget to accurately account for and bill every part, product or service delivered. It's great for the customer, but it's bad for business and bad for future customers.
Isn't time you started Six Sigma Billing?
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