Sometimes we too quickly or too narrowly define business problems and the projects intended to solve them. We evaluate how things are and how we want them to be, identify the gap, and assemble a project to close that gap. Because our vision focuses on the problem at hand and our earnest efforts to bridge the gap, we sometimes fail to consider all the consequences of our actions. Does the target solution save time and energy, or simply transfer effort or cost elsewhere?
Analyzing a client's new approach to handle payment for our training services is an interesting case study. Their old process was straightforward, but did not result in timely payment for service. They changed their process, but failed to predict how the "improvements" might affect the whole process.
The Old Way
The process began when the client's training department contacted our company to schedule a class. Then the client's automated class registration system would build a roster from captured enrollment information. The number of enrollees was tabulated two weeks prior to the class. If the roster didn't contain the minimum number of students needed, we'd reschedule. If registration numbers were greater than the minimum, we'd proceed with the scheduled class. After class we sent an invoice to the training department, which they would forward to their accounting department.
The accounting department divided the class costs among the departments that sent employees to the course. Gathering money from each department took months, so we wouldn't get paid until several months after class was completed. No one likes getting paid late, so the client set out to revamp their process.
When reviewing internal processes, the client found the bulk of the delay was the time consuming division of the bill among the participants' departments. To eliminate the tedious and time-consuming task of processing the separate internal charges, the responsibility of paying for the course was transferred to the individual participants.
The New Way
The new process begins just like the old one. The client's training department contacts us to schedule classes; they still provide us with a roster. Instead of sending one large invoice for the class, we send out invoices to each registered participant in advance, meaning we now have to process multiple payments. This introduced a few new steps: our billing team has to deal with more people when resolving outstanding invoices, and cancellations and refunds must be handled case by case. This requires more administrative hours on our end as well as on the part of individual attendees. If people cancel from class, they must contact both our company, and their own training department.
Two weeks before class, the training department verifies that the number of pre-paid enrollees meets the class size minimum. Before class begins, our instructors ensure all attendees present have paid and handle any exceptional cases (People who have paid but fail to show no longer receive refunds). Attendees then receives receipts to be filed with expense reports, which are submitted to their accounting department for processing. Now it's the student who has to wait several months to receive reimbursement.
With this new plan, some problems have been solved. The client's accounting staff does not have to divide the class invoice into fifteen individual departmental transactions based on the training roster. Savings: fifteen work-minutes per class, if we assume one minute per attendee. And the vendor (me) gets paid about sixty days sooner. Savings: roughly 2 percent of fee, about $150 to $200 per class.
Splinters from the Ugly Pony
Unfortunately this new process created some unintended consequences. Individual invoices mean fifteen more payments to process for both the client and us, which amounts to more time and more transaction fees from the credit card company. New expense: Increased labor and fees per class—over $500.
Cancellations require participants to interact with the client registration system and with our company to process credit card refunds. New expense: thirty person-minutes of client time per class, if we assume two cancellations per class.