Three Ways to Improve Your Billing Processes to Increase Equipment Rental Profitability

After decades of serving clients in the equipment rental industry, we’ve seen the time and expense that goes into keeping a fleet of rental equipment in tip-top shape. Having the right items available and regularly serviced is important to maintain your bottom line. However, if you’re looking for ways to further enhance your rental profitability, there are other elements of the business that should not be overlooked, including your billing processes.

Trying to optimize your rental business requires focus on several aspects of the organization. Paying attention to how your billing processes are executed can bring in higher profits. Here are a few billing tips to consider.


1. Don’t leave out details you should be billing for

Be thorough in your billing process to maximize your revenue. Consider these suggestions:

• A competitive rental price at the right time of the year in the right location will maximize sales. Prices can vary by time of the week, year, or by location, among other factors. Every dollar you gain here is added to your bottom line. It takes discipline to collect this information and analyze it on an ongoing basis.
• Make Cross-sell & Up-sell the default for additional items added with core equipment rentals. Sometimes they are standard accessories. Make sure you don’t give them away if you don’t have to. Are there specific consumables your customers need with their rentals? Your system should be automated to include this information as part of the sales or rentals kit.
• Don’t be afraid to ship out more capable equipment, even at a discount, if you have a shortage of what the customer is looking for. Equipment on the shelf is not earning you anything. Giving the customer more than what they asked for generates goodwill and may lead to a request for higher-level items in the next rental contract. Specifying appropriate equipment substitutions in your system ahead of time makes this process a lot easier. Using an equipment scheduler tool to know when to make these decisions can empower your staff to get more rentals booked. 

• Establish relationships with your competitors so if they have something your customer needs, you can quickly and easily manage re-rents. In some cases, you may not want to carry some units in a particular product line but can still make them available to your customer through re-rents.
• Sometimes a client may have damaged a piece of equipment and a “sell off” process is required to transition ownership to the client. This means having accurate sales prices predefined in your software system (including loss and damage features). This allows a rental transaction to process both the equipment return (to update your fleet information) and immediately sell the item to the customer - while updating both your rental unit status to inactive and removing the unit from your fixed asset system, while calculating the capital gain or loss on disposal of the unit.
• Continued supply chain pressure causes disruption and unanticipated delays to equipment supply for major manufacturers. Don’t assume you can always buy a highly desirable equipment type on short notice! This leads to disappointment when it’s not actually available from the supplier.
• Reduce barriers of entry to keep sellers productive while also keeping data clean and accurate. This could include having a faster way to access customer credit limit information.

2. Ensure customers are billed as fast as possible

What can be billed without waiting for month-end processing? Here are some ideas:

• Set up your rental invoicing function so that rental invoices can be generated immediately after the final units are returned. Automatic emails remove the delay from utilizing the postal service and risk of lost documentation, or at least the excuse that the invoice wasn’t received.
• Generate invoices immediately without waiting for the rental invoicing function to happen when the customer purchases equipment, parts, or services through a rental contract. These purchases can be in big numbers and doing this will improve both your cash position and also your inventory turnover.
• Generate rental invoices as soon as equipment rental is possible, even if further charges such as charge-backs for equipment damage are expected. A good rental system will re-open the contract and generate a follow-up invoice for the chargebacks.

• Run your batch invoicing function as often as possible. It doesn’t have to be every day, but waiting until the end of the month for rentals that were completed in the first half of the month is delaying collections by up to three weeks.
• Consider using batches in your batch invoicing to target specific customers, customer groups, or locations that could be billed more frequently.
• Reduce the days past the month-end required to get all invoices out for the month. It’s important to get your customers billed before you get all your month-end accounts payable complete.
• Most rental software systems can specify the number of days in advance that invoices can be created. The actual processing date will still be the same, but in this way the invoices can be invoiced immediately because all the administrative work and approvals are complete.
• Telematics can be used to track and retrieve equipment usage. This means usage charges can be billed regularly on longer-term rentals instead of waiting for equipment to be returned.

3. Collect payment as quickly as possible

The third process depends largely on your Accounting Department. Here are some ways to collect as quickly as possible:

• Consider early payment discounts as an option, or other prepayment agreements.
• Stay on top of your overdue or coming due receivables. Invoice analytics can include automations that shows if someone is trending towards paying late.
• Flag customers who are slow-paying to either block new sales or provide warnings to your staff.
• Consider collecting deposits from some or all customers. Although deposits are not exactly the same as a prepayment of an invoice, they can be used to pay down the invoice when equipment is returned and invoices are generated.
• Set up automated payment reminders for customers by text or email from your accounting system.
• Add quick payment links to your reminder texts or emails.
• Offer an online customer portal that is easy to use and offers quick ways for your customers to pay their invoices.

We encourage you to pay relentless attention to your billing details and to use an effective software setup with the automation you need to maximize your profitability. Let us know if you would like to chat about a software system that will help you improve your equipment rental business processes.