As a Billing Manager, it’s your job to arm decision makers with all the financial information they need to make effective business decisions. Beyond cash flow and accurate accounting, revenue and collections reports give the decision makers an idea of the financial security of the business.
Accurate reporting helps to proactively identify trends and understand changes in the market. It further aids in creating a detailed understanding of customer churn - the reasons and seasons, in addition to detailing regional product performance.
Over and above the standard financial reports such as income statements, balance sheets and cash flow statements, which report on the financial performance, position and cash flow of the company, there are a few other reports which we recommend are run regularly, each with a very specific function.
Revenue and Collections reports are essential to the financial success of your business
Primarily, a bill run is directly responsible for your business’s revenue generation. If your business is leaking revenue - the decision makers need to know.
Revenue and Collections reports provide valuable information to multiple departments within the company:
- Management will be able to see potential trends within the company, such as: Is there a specific time of year where there is an influx of revenue?
- Management will be able to track the payment habits of your customers
- The Finance team will be able to spot any revenue discrepancies and sort them out as quickly as possible.
- The Collections Team will be able to identify which customers to focus their collections efforts on.
These are the 3 ISP Revenue & Collections reports you should run regularly, and why:
#1 - A Revenue Breakdown Report
A Revenue Breakdown Report is a very detailed report on the revenue recognised over a financial period.
Why is this Important?
Whilst an income statement gives you a high level overview, a breakdown report includes more detailed information. This allows you to track trends and perform variance analysis across any of the included fields. Among others, data fields include sales agents, resellers, geographic splits, ledger accounts and products.
Furthermore, it can:
- Identify how well a particular product is performing, and
- Assists Billing Managers in assessing 'completeness of billing' ‘completeness of billing’ by giving them the exact amounts that have been invoiced.
Break it down even further
There are multiple tools you can use to crunch the numbers and summarise your data in order to fully understand how well your business is doing.
- VLookups: Setting up this tool will save you time (and your sanity) when searching for specific pieces of information within an Excel spreadsheet.
- Pivot Tables: This little interactive tool allows you to summarise and analyse the data in an Excel Spreadsheet or Google Sheet by summing, comparing and finding relationships between various data sets. Instead of spending hours fiddling with complicated equations, Pivot Tables save you time with just a few clicks of your mouse.
- Pivot Charts: Make your presentations kick-ass and insightful with this visualisation tool. Similar to Pivot Tables, you’ll be able to summarise and analyse the data, but through line and bar graphs.
#2 - A Revenue Deferral Report
A Deferral Report gives you an overview of your deferred revenue; it specifies the amount of money that you've received from clients, but not yet earned.
Revenue that is received upfront, or pre-paid for products/services yet to be rendered, needs to be ‘deferred’ to the months in which the actual money is ‘earned’.
Such a prepayment is recorded as unearned revenue - and is thus a liability on the balance sheet. This is because it refers to revenue received that has not yet been earned and represents products/services that are still owed to a customer. As the product/service is delivered over time, it becomes recognised as revenue on the income statement. [Source: Investopedia]
Why is it Important?
- Financial performance: A trend of significant balances of unearned revenue is an indicator of financial performance.
- Overstated revenue: Recording unearned revenue on an income statement (rather than as a liability on the balance sheet) is considered unethical and aggressive accounting - as the net result is that of ‘inflated’ revenue. [Source: Investopedia]
Accurately reporting your deferred revenue is important to the financial health of your business, and thus future decision making.
#3 - Age Analysis Reports
Aging Analysis Reports are used to determine which invoices are overdue and how long they have been outstanding for. Aging analysis can be applied to both Debtors and Creditors:
- Debtors Aging Analysis Report: A single report that tracks which clients have unpaid invoices, what is owed to the company, and the amount of time that payment has been outstanding.
- Creditors or Suppliers Historic Age Analysis Report: Allows you to track how much is owed to your suppliers, and how long the amount has been outstanding for.
Why are these Important?
Both of these reports are useful, as they assist with the analysis and management of your company’s cash flow.
- Debtors: Collections agents use aging reports to focus their efforts, maximising cash flow and minimising revenue leakage.
- Creditors: The reports are used to ensure compliance with contractual obligations whilst managing cash flow.
Cash on hand and positive cash flow are crucial to the success of any business. A business needs cash to pay its bills, employees and other near-term expenses. An age analysis is a tool used for managing cash flow.
Revenue and Collections reports can help you see where your main revenue is coming from, aid you in your collections process and give you insight into where your business is positioned financially. It also helps to proactively identify trends and understand changes in the market. It further aids in creating a detailed understanding of customer churn - the reasons and seasons, in addition to detailing regional product performance.