Each year the professional service sector wastes billions of dollars and millions of hours.
They feel like they are “stuck in the mud” with unneeded client tensions, hassles and inefficiencies inherent with operating an outdated “PIP” credit management model. Firms that operate a PIP model are in essence fighting with one hand tied behind their back. And sadly, many firms don’t even know they are doing it, or that there is an alternative.
So, what’s a PIP model? A firm using a PIP model is typically one that gets a new client (or does more work for an existing one), agrees the fees, terms and payment conditions, does the work, sends the bill promptly and then… waits for payment.
Does this scenario sound familiar? You sent an invoice over a month ago, still unpaid – you follow up with the client who says things like:
• “We didn’t get the invoice, can you send it again please”; or
• “The owner is away on holiday, they will pay on return”; or
• “We are waiting for a big customer to pay us – can we push this out to next month?”
These are common excuses heard by firms still using a PIP – “Payer Initiated Payment” – credit management model.
Even though the work is done as agreed, on time (possibly even under budget) and has been accurately billed, you have inadvertently left the power with the client to initiate the payment. They may regularly pay other suppliers on due date, but you are left “chasing” them for payment. Does that seem fair?
This also means the professional service firm has no real certainty of how much will be paid or when. A PIP model leaves the full control and timing of the payment with the client, and that can wreak havoc with your own cash flow planning.
The downsides of a PIP model are numerous. You have all the added hassles, administration, costs and stress associated with chasing overdue debtors. Nobody likes chasing debtors – but if you don’t chase them, some clients might never pay you!
Debtor management doesn’t need to be like that. With changing technology there is now a much better way for professional service firms to manage collections using a “BIP” (Biller Initiated Payment) model. In short – no more chasing clients. You are now in control. Your payments become 80% + predictable and you have much more working capital available. Best of all, clients love it.
Moving from a PIP to BIP model only requires two things: a change of mindset and a roadmap.
Only you can change the mindset, however smartAR can help guide the process with a transition roadmap customised for your firm. If you’re interested to know more, please contact smartAR using this form.