What causes long service to cash cycles?
As we discussed in the opening feature in this series of excerpts from an exclusive Field Service News white paper, service to cash cycles are a challenge for many field service organisations. In the current challenging economic climate, this challenge is magnified even further…
So let us take a look into some of the most common aspects that could be delaying your payments after delivering service.
Companies have only digitised their invoice workflow, not applied digitalisation
While most field service organisations have moved away from paper-based signatures (although some field service organisations are still to make this transition), this has been a process of digitisation rather than digitalisation for many organisations. While on the surface, many may assume that the difference between the two is one of simple linguistics, they do, in fact, have very different meanings.
To put it simply, digitisation is the simple process of converting an analogue process into a digital one. For example, in our personal lives, many of us will now receive our bank statements as a PDF download from our online banking instead of receiving hard copies in the post.
Digitalisation, however, is utilising digital technologies and data to impact how work actually gets done.
Many field service organisations have merely digitised their paper-based invoice processes yet have failed to take the bigger step to apply digitalisation to these processes. As we explored in the introduction to this paper, digitalisation would allow the invoice to be automatically generated and sent to the customer as soon as the field service technician or engineer has collected the customer’s signature on job completion.
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As any service manager with responsibility for a P&L will likely attest, one of the biggest challenges in keeping a healthy bottom line is avoiding revenue leakage when a field service engineer or technician is on site...
Suppose the move away from paper-based processes is merely one of digitisation. In that case, while the collection of the signature may now be captured on a digital device, the engineer may still have to send the relevant documentation, albeit now in digital form, to a colleague in accounts, who in turn has to then create an invoice, and send this to the customer.
Even if all documentation is digital, the redundant legacy processes of the previous analogue workflow remain – and these add unnecessary delays in getting the invoice to the customer, which result in bloated service to cash cycles.
A lack of visibility into customer and asset data
As any service manager with responsibility for a P&L will likely attest, one of the biggest challenges in keeping a healthy bottom line is avoiding revenue leakage when a field service engineer or technician is on site. Field service engineers and technicians are natural problem solvers. Additionally, they are increasingly expected to delight the customer as genuine ambassadors for our businesses.
Unless we give them clear guidance and visibility into what the client is entitled to within their warranty, we will always be at risk of seeing revenue leakage as they go about their working day. Jobs undertaken out of warranty that go uncharged, of course, directly impact top-line service revenue. Additional maintenance that the customer may request while the engineer is on-site, that our field workers will often provide in line with their remit of delivering high customer satisfaction levels, are lost revenue opportunities and also reduce our technician utilisation rates.
However, through the use of modern FSM systems, we can quickly provide our field service engineers and technicians with a clear, concise view of the customers’ current warranty status. Through clearly defined processes, we can ensure that our field workers have definite parameters around what additional on-site maintenance services they can provide to the customer within the boundaries of the contract and be able to confidently give the customer accurate quotations on-site for work that should be chargeable.
Through effective training, we can help our field service engineers and technicians advise the customer of such additional maintenance (and potential revenue opportunities for the service provider) as part of the service they provide, instead of a sales function. For FSN PRO members, it is strongly advised that you take the Field Service News Masterclass course “Supercharging Revenue Generation from the Field”, which will give you a blueprint of how to introduce such training within your organisation and is included within your subscription.
Assessing how we leverage technology and reviewing our processes in this area can help us avoid revenue loss and boost the top line. However, empowering our field service engineers and technicians with as much information related to the job at hand before arriving on-site can also improve the bottom line by reducing costs, particularly regarding asset data (both historic and, if possible, live data).
As the old adage goes, every time we send out an engineer on a break-fix call, we break even on the service contract. Send them out a second time, and we are losing money. While this might be somewhat overly simplistic, it is not too far removed from the truth of the matter.
The reason why first-time-fix has consistently been the leading metric within field service management is not only because it drives customer satisfaction. The largest cost-line in a service P&L is the cost of a truck roll. If we can improve first-time fix rates, we will reduce this cost line significantly.
Through effective training, we can help our field service engineers and technicians advise the customer of such additional maintenance (and potential revenue opportunities for the service provider) as part of the service they provide, instead of a sales function...
In a world of digitalisation, if we are not providing our field service engineers and technicians with a clear and quickly surfaced overview of both the customer and the asset, then we are restricting their ability to work effectively, efficiently and profitably – all of which adds even greater pressure on service to cash cycle.
Disjointed processes and platforms for spare parts management and ordering
Another critical area where we can see significant impacts on both the top line and bottom line of our profit and loss sheets lies within how well connected our parts management and parts ordering systems are with the Field Service Management tools that our field service engineers and technicians use every day.
As with customer and asset data, this can impact both the cost and revenue lines on our P&L.
For example, a reliable parts inventory solution for field service operations has to be fit-for-purpose. As we have already outlined, field service engineers and technicians are problem solvers. Suppose a particular spare part proves to have an extended lead time when ordered.
In that case, it is the natural inclination of the engineer or technician to order more than they need so that they have it available in their van ready for the next customer that faces this problem.
While such solution-orientated, forward is to be encouraged, it must also be managed. If left unchecked, it can lead to considerable gaps in inventory that lead to a significant drag downwards of the bottom line on the P&L.
Again, through digitalisation, this is easily achieved. One way is to connect the field service engineer or technician’s ability to order spare parts directly to the work order and set parameters on how many of each type of component can be ordered relevant to the asset. This would stop the occasional magpie-like tendency of some of our engineers and technicians from getting out of hand.
Alternatively, we could make sure that all van stock is tracked both on receipt by the engineer when it is placed into the van and when it is then removed. An approach centred around digitalisation could perhaps allow the engineer or technician to authorise the removal of any parts within their field workforce app. Indeed, we could even potentially go as far as automating this process by using relatively low-cost NFC/RFID tags.
Parts management has been for a long time and continues to be very much overlooked within field service management technology discussions. However, it is an area in which there are easy wins to be had both in boosting top-line revenue and improving bottom line profits...
While the solution doesn’t necessarily need to be that complicated, it is clear that via digitalisation, we should be able to track the movement of parts and location of inventory far more effectively – providing improved visibility into one of the most opaque areas of the service P&L.
As Peter Drucker famously stated, ‘we cannot manage what we do not measure’ yet for so many field service organisations managing the parts inventory line on the P&L remains woefully inaccurate – and in a world of digitalisation, where this needn’t be the case, this is somewhat unforgivable.
Similarly, if your field service workers do not have quick, easy access to parts ordering while on-site, not only does this cause delays in service delivery, which, as we discussed above, causes delays in payment for service that has been delivered, but also your organisation could be overlooking a consistent revenue stream.
As discussed in the Field Service News Masterclass course ‘Supercharging Revenue Generation from the Field’, it should be viewed as part of the service your field service technicians and engineers offer to ensure your customers have all of the consumables they need for their assets.
This should not be seen as a sales role but a service role. Your engineers should ensure that your customers will not discover in two weeks that they have run out of the consumable required for the asset that has just been fixed or serviced to continue to work.
However, for field service engineers and technicians to do that and see this as an intrinsic aspect of the service delivery, we need to make ordering consumables as seamless as possible.
Again, this shouldn’t be too complicated to achieve in a world of digitalisation. The technology is essentially there, and technology partners such as Go Mocha can help guide you in how technological dots can be joined.
Parts management has been for a long time and continues to be very much overlooked within field service management technology discussions. However, it is an area in which there are easy wins to be had both in boosting top-line revenue and improving bottom line profits
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