Many advisers have a tedious and time-consuming bill calculation cycle, often based on Microsoft Excel. This can cause cash-flow delays or create workflow bottleneck problems for the operations team. Billing systems today need to be able to interface with many other systems to ensure a smooth billing process. The more automated the process, the less human error is likely to be introduced.
A billing system needs to integrate with the portfolio accounting system to recognize/create the accounts, households, billing schedules, asset classes, security master, client addresses, etc. Bidirectional synchronization with the portfolio accounting system, financial accounting system and CRM helps reduce data entry errors.
For example, a firm’s CRM adds a new client. The CRM should automatically update the billing system with the new client information, which adviser manages the account, etc. The billing system should alert the billing manager of new clients, so the appropriate billing and fee schedule, asset classes and addresses are set up for the client. When the invoices are ready, they would go through an approval cycle. The appropriate transactional information should be sent to the portfolio accounting system, which in turn, updates the custodians so that the fees are taken from the account. Parallel to this, the financial accounting system needs to receive its set of transactions, and finally the client’s invoices need to be put on the client portal or mailed.
Although it’s possible to do all this with spreadsheets, it may not be ideal. I know of an advisory firm that billed a third of its accounts each month of every quarter (i.e., billing every month). As the firm grew, more and more complexity was added to the firm’s spreadsheets and to their processes that updated their various systems. Eventually, billing time increased to a full two weeks each month for two full-time employees. As a result, for 15 years they could not take a vacation during billing days!
As you think about your firms billing needs, be sure to understand the various touch points involved, including:
- To what extent is my CRM involved?
- What data does my accounting system need?
- What work is involved in getting my portfolio accounting system to integrate with billing?
- Who should have access to billing information? Larger firms need access control to billing software.
- How much flexibility does my billing software need to have?
- Should it handle related households, aggregated for discounted tiers?
- What is my firm’s approval process?
- Can the billing solution split fees and commissions the way my organization wants?
- Can it handle held-away assets?
- Can it create an easy-to-follow audit trail?
- How easy or hard it is to issue refunds, adjustments and issue the one-off invoices?
- How would billing work with my client portal?
I hope this information is useful in selecting the right billing solution for your firm, and we hope your choice will enable you to take vacations without impacting your firm’s revenue collection!
Hemant More, CFA
Arcons Technology Inc.