The growing number of start-up and small businesses are recognizing that the correct utilization of resources will reduce your overheads and improve the efficiency of your supply chain. In addition, automating your administration activities and considering regulatory laws will reduce your operational costs while benefiting from governmental tax incentives.
Realizing your Overheads
As your business grows, increasing administrative tasks including creating invoices, maintaining customer details, billing your customers, tracking payments, tracking inventory, reporting on your sales, and accounting (the entire process is referred to as sales management) will become time consuming and costly. So if you are currently using a manual sales system then anticipate that 1-2% of your business day, per customer transaction, will be spent performing administrative tasks such as creating, generating and sending quotes, orders, and invoices. Putting this in perspective, if your business deals with 10 clients per day over a one month (20 working days) period, then your administrative costs equates to 32 hours (2% X 10 clients X 8 hours X 20 days) or 640$ (assuming a minimal 20$ hourly rate) per month. Therefore, do not be surprised if you question your manual system in the first two months of your start-up; by the third month you will recognize your administrative activities will start impacting your focus on core and revenue generating activities. So start considering ways to improve your sales management process by reducing administrative overheads.
Improved Sales Management
As a small business it is important to maximize your resources (meaning reduced invisible and administrative costs) to ensure predominant focus on revenue generation activities such as sales and quality delivery. Therefore, the correct choice and use of sales management systems, processes, and tools will improve the efficiency of your business:
- Maximize cash flow using an electronic and automated invoicing solution. These digital systems eliminate the need for paper invoices, create electronic invoices while on the go, and schedules re-occurring invoices to be sent automatically resulting in an improved settlement process.
- Customer satisfaction and improved accuracy can be achieved by electronic billing systems; save yourself the embarrassment of inaccurate invoices and ensure your accounts are accurate at tax time
- Financial reporting and tax is a typical problem where regulatory and compliance issues can lead to significant penalties due to business using incorrect and inaccurate tax structures and financial activity
- Scale your business by providing standardized document formats that the industry and legislation demands. Get your business ready to deal with larger transaction volumes by automating your invoice and billing process.
Minimizing Barriers to Entry
Minimizing the barriers to trade with business partners and suppliers is vitally important to ensure sustainable and new sales opportunities. Once you have established your operational and marketing model then you will start recognizing the need to maximize your resources. If you are starting out a new business then I recommend that you consider how your governmental legislation can assist you in overcoming the barriers to entry in your target market. In the US and EU governments are promoting electronic billing in order to capitalize on the revenue gains that automated administration generates.
As small or medium size you can benefit significantly by the tax incentives available when aligning to government initiatives says U.S. Deputy Secretary of the Treasury, Neal Wolin “Electronic Invoicing will mean lower costs for taxpayers and faster payments for private sector companies doing business with the federal government,”. Accordingly, the objective is to ensure exclusive electronic transactions between businesses and the public sector by 2012. Similarly, the EU recognizes that paper based invoice is costing business approximately 7-15 Euros as opposed to an electronic substitute cost of 0.4-0.6 Euro per invoice. The Australian Federal government is also investigating e-invoicing in order to avoid a yearly carbon tax bill of 24$million.
So if you are a small business then start planning for electronic invoicing and take advantage of the operational and tax benefits.
Electronic Ordering and Invoicing in Action
All small to medium business process flows includes several supply chain steps:
- The supplier creates a quote for goods or service using an ERP system*
- The Supplier creates a sales and purchase order using an ERP system*
- The service or goods delivery process is followed by the supplier creating an invoice using an ERP system
- The supplier ERP system generates an electronically formatted invoice and ensure an archiving policy complies to your government regulatory and compliance laws
- Supplier send electronically formatted document using online communications
- Customer receives electronically formatted document, authenticates the document origin and authenticity, and imports the details into their system
*Documents are created, generated and sent electronically
Electronic orders or invoices are documents that can be created, viewed and sent to your customers or business partners as digital files. These electronic documents should meet the following characteristics:
- The document is electronic format such as XML, CSV, html
- The document is sent and received via an online communication such as FTP, email, electronic data exchange (EDI), http, or any equivalent 3rd party online medium
- The document includes a digital signature in order to guarantee the origin and authenticity of the artefact
- The document is fingerprinted with an issue date and time stamp
Small business recognizes that efficient supply chains require effective customer and supplier relationships with increased level of collaboration and visibility. In addition, increased regulation associated with tax incentives is causing companies to focus on automating and digitizing their document creation, generation, and communications processes. Therefore, your business growth must consider an online enterprise resource planning system strategy that is scalable, flexible, and configurable; automating and digitizing your business processes will reduce your operational costs and maximize resource utilization.