Cost rationalizing innovation: billing unit (one day) adjustment


Company: INA-industrija nafte d.d.


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 As specified in service contracts, various types of services are billed in days, i.e. with one day as the billing unit; even when the works last more than half a day, be it just 30 minutes more, one full day is billed, and this does not reflect the service provided realistically.

To make the billing more realistic, the unit – full-day – would have to be divided into 24 parts, and 1 hour of work would then be billed as a twenty-fourth part (1/24) of the day, i.e. 0.041 of the unit.

As the services provided are typically not billed in this manner and the contracts do not provide such a billing method, the services are charged per billing unit, i.e. one full day, regardless of the actual duration of work. The amount due is sometimes calculated using half-days, i.e. 0.5, but, in most cases, one full day is charged even if the work lasted just 2 or 3 h, while only 0.041 or 0.083 of one full day should be billed; however, since the hourly billing method is not in use, the company keeps losing significant resources.

Also, due to the limitations of the IT software, entry into the SAP is not possible because it does not support small decimal numbers, such as 0.004, or fractions, and this is an important billing problem.

According to this innovative concept, all items would be billed in hours, or even minutes (which may be too demanding); billing by the hour would be acceptable. In this manner, the collection system would reflect the actual measurements and would be easier to monitor, and the supervisors would not need to convert hours of work into twenty-fourth parts of the day as billing units.