Keep Your Cash Flow Moving and Your Clients Happy
Billings can be a complicated aspect of your accounting practice. But, since they're the way you get paid for what you do, they're essential. Plus, the way they're handled is important to accountants risk management. There are many other reasons that the billing process is critical to the long-term success of your business. If you begin with the end in mind, pay attention to planning, and communicate with your team and clients the whole way through, you can make the billing process the successful conclusion to a well-executed project. Otherwise, watch out. It will be the dreaded monthly undertaking that no one looks forward to.
1. Fixed Fee Engagements
Fixed fee engagements require upfront planning so that you can get a good feel for the scope of the project and how long it will take to complete. But, that's generally a positive. That planning allows you to find areas that might take additional time, especially if this is a recurring engagement that you've completed many times over the years. You can discuss these areas with the client and determine what additional fees or fee range should be included. Then, agree up front as to what the total project cost will be. From there, you should be able to hand off the billing responsibility to someone else, maybe even your assistant. Clients are much happier paying you for your planning time than for your billing time.
2. Cash Flow Generation
Completing the billing process on a regular basis is important. Just like any other service business, you want to keep your unbilled time to a minimum. An excellent practice here is to invoice half your fee up front, at the time of engagement. Significant efforts and costs go into a project even before receiving client information. Help clients to understand this if needed.
Then, have the billing process consist of an advance fee after the planning is complete and the fee range is determined. It will help your cash inflow and your client's cash outflow to have the charge be broken up into pieces. If the project is lengthy and lasting over several billing cycles, include a billing schedule as part of the initial agreement on the job. Then, stick to the plan and your client won't be surprised about the invoices received.
3.Communicate, Communicate, Communicate
The key to success with billings is to make sure that your team knows to communicate early if there is an unanticipated issue with a project. That way, they can stop incurring time while an agreeable resolution can be decided. And, the less time that's charged after the issue is found, the easier it is to discuss with your client and get paid for the additional work if that's the right way to head.
If they should be included, get your client involved in the decision about best next steps. It may be that they can't do anything but tell you that they'd like you to take care of resolution. Plus, this method to scope expansion results in additional fees much more often than the alternative. An easy way to a dissatisfied client and no ability to bill extra work is to keep the client in the dark about unanticipated hiccups.
4. Get Paid What You're Worth
If you've done your planning and communicated early when an additional issue has been found, don't just eat the extra time (and cost). Make sure that you understand the problem and how it occurred. If the reason for the increased time and effort is due to an issue on the client side, have a conversation with your customer to go over what was involved and how to resolve it. But, be clear about the additional time and billings that will be required.
Help your client to understand the importance of discussing unusual items with you at the time they occur. Or, better yet, before they happen, if that's possible. This can sometimes be tricky, but if you practice proper planning and effective communication, most clients understand when a scope expansion needs to happen.
5. Fee Disputes
Even if you've instituted these best practices, sometimes a fee dispute can still happen. But, that doesn't have to mean a long-term client problem. A best practice here is to start with a discussion. Do it early, as soon as you know there's a problem. Often, the dispute is just a misunderstanding and can be quickly resolved.
Other times, the solution can be more difficult. Let's face it; some people are just harder to deal with than others. If you have the conversation and can't reach a resolution, maybe there's someone else in the office who is better equipped to handle the situation.
Is this a client that's been handed over to you, perhaps from a partner that's retiring or working part-time? If so, that person might be perfect to help with the resolution. Getting out in front of fee disputes when they happen and working hard to manage them quickly and amenably is a vital billing best practice, even if it's after the fact.
Getting a handle on billing procedures is an important aspect of good practice and accountants risk management. Besides the obvious need for cash flow to the business, billing best practices can help solve a myriad of potential challenges. Fixed fees can help you to get good at planning projects. But, they also allow for the movement of billing responsibilities to other team members. This potentially gives you time to focus on more profitable endeavors.
Advance fees help to keep unbilled time to a minimum. Good communication helps to keep up positive client relations. It also allows for more relaxed discussions when project challenges arise. When those challenges are client-sourced, discussions and billable scope increases can be easier.
And, finally, if a fee dispute does occur, getting it handled quickly can help with both client retention and client relations. Don't wait until the end of a project or the end of the month to think about your billings. Begin with the end in mind, institute billing best practices. You'll see you bottom line you go up, and your stress level go down.