Plant hire charging and invoicing: Can your ERP manage?

By June 25, 2018March 19th, 2019Blog, Rental Software
meeting over paperwork

For those ERPs with their roots in manufacturing and retail businesses, the plant hire industry is a minefield when it comes to charging and billing. Hire charges are extremely complex: day/week/month charges, minimum hires split into complex daily percentages for short term hires, use of excess hours and shift-based charging, including labour and maintenance within your charging profiles… and that’s just the start of it. Most ERP systems don’t support these complex charging methods right out of the box.

The Traditional ERP Model

The basic problem is that traditional ERPs are developed to address quantity, price, and discounts. They can do some fantastically complex things with those three pieces of information. A plant hire ERP, however, needs to deal with four factors: quantity, rate, discount, and duration. Duration is what makes things very complicated. It’s like adding a 4th dimension to an architectural drawing; it’s not just as simple as multiplying the quantity by the number of days or hours.

Considerations for Plant Hire Charging

Where does your day start? Midnight or 24 hours from the time the hire started? If the customer takes it out on a Saturday for 5 days, is that the same price as if they took it out on a Monday for 5 days? Or, if they take an excavator out for 1 day, do they get charged a 1-day rate or 50% of the weekly rate because you have a minimum charge baked into your calculations?

If you charge in advance, which is prevalent in some niches within the hire industry, what happens if you price for 4 weeks and the customer brings it back after 2? If you charge in arrears and the customer takes 3 deliveries during the course of a month, do you try and pro-rate them all to a nice, neat end-of-month single invoice, or invoice them separately on their individual anniversaries? What happens if there is a bank holiday mid-month and the customer doesn’t expect to be charged for holidays?

Complex Charging Rules

When your customers are large enough to demand their own special charging rules, life gets even more complicated for the ERP. If your business thinks in terms of 6-day weeks, but your customer wants a 5-day charge, or wants consolidated billing across all job sites and all contracts on a specific day of the month, how do you handle it?

Building Your RFP

We regularly receive requests for proposals (RFPs) from plant hire companies looking for software. As a result, we often see hire charging as relegated to just a few questions. This is particularly true if it was put together by external consultants. Charging your customer and getting billing right is the most important things that your system must be able to do. This absolutely fundamental building block needs to be in place from day one. Else, you may need extensive development and extremely pricey customisation.

So if you’re exploring different ERP options, make sure you include very specific examples in your RFP. Don’t assume that a generic ERP analyst will understand what you mean if you simply use generic industry terminology. The chances are they won’t. We would strongly advise devoting an entire section of your RFP to charging and invoicing. Be sure it’s at a level of detail that prevents the vendor from just answering “yes” to a generic question.

For more on the differences of a Plant Hire ERP vs a broad-spectrum ERP, download this Executive White Paper.

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