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Monthly billing?

Looking to change clients to monthly billing rather than billing once the work is complete

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I currently invoice clients once the work is complete, but I am looking to implement a monthly billing system instead, and looking for some advice.

What do you do for clients that sign up part way through the year?  Do you bill for the 6 months that have already passed at the beginning and then monthly from then on?

If a client doesn't pay their monthly bills, do you refuse to do any work until they have caught up?

If a client moves accountant part way through the year do you refund any amounts that haven't been used. eg. you only prepare year end accounts for them but they leave 6 months in to the year and so you haven't prepared the accounts but they have paid for 6 months?

Do you do monthly billing for all clients including the small personal tax returns?

Thanks in advance for your responses.

Replies (15)

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By Mr_awol
21st Aug 2019 10:18

Where clients want to pay monthly I take standing order payments on account and bill as usual on completion of work. As such, if someone leaves, they get the same bill for WIP on the card as they always would have, and end up with money due to or from them. It's by far the fairest way in my opinion.

It also cannot be argued to fall foul of The Institutes code of ethics (240.2a) which states that fees shall be determined by a number of factors, including seniority of staff and time spent.

Regardless of the ICAEW position, I think it is unethical and unprofessional to retain monthly payments where little or no work has been carried out - regardless of whether such an arrangement is laid out in an engagement letter. I once mentioned this was 'approaching scam territory' and upset rather a lot of people with that comment- a few of whom claimed that their monthly bookkeeping service was almost to accs prep level anyway, but I kind of doubt that and think it's an excuse trotted out by people to defend sharp practice.

Why do you want to move to this system anyway - is if because you think it is better for you, better for your clients, or have your software supplier suggested it? Mine were keen to push me into set monthly fees, gold/silver/bronze (yuck) packages including the software, etc - which they would be as it enables them to sell me a bulk licence and encourages me not to actually monitor the costs to me. Just palm it off on the client in my shiny new billing structure.

I can see the attraction for smaller firms or for those firms that don't have the working capital to operate on a more traditional basis, but as you can tell I'm not a fan.

Thanks (4)
By Lisa Prodger
21st Aug 2019 10:26

Thank you.
My reason for looking into changing is because I am a small practice, so thought it would be easier on a cash flow and credit control basis. It would allow me to know exactly what income I have coming in to the business each month, rather than relying on when clients send there information in etc.
I also have clients that pay on a standing order basis at the moment, so thought monthly billing might suit both parties.
I too was concerned with the ethics of monthly billing, when I wouldn't necessarily be doing work for them every month, so was just looking for some input to aid my decision.

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Replying to Lisa Prodger:
By Accountant A
21st Aug 2019 11:40

"Billing" suggests that you are making a charge for work done rather than taking payments on account of the work to be done over the year.

Payments on account are not intended to reflect work done (I would have said). The work ultimately billed will be more or less than the payments on account and the appropriate adjustment will need to be made. It's like your utilities standing orders.

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By Maslins
21st Aug 2019 11:36

I don't get the arguments or monthly fees being unethical. If both client and accountant like it, nobody feels ripped off, what's the issue? Guessing you don't feel it's unethical if a month goes by when you barely use your gym membership or mobile phone, despite still paying the monthly fee.

In answer to the OP's questions, you will find firms deal with these in different ways, there's not one "right" answer. For us:

1) clients joining part way through year (or indeed sometimes after year end has passed, but still requiring us to do figures for the historical year), we agree a one off separate fee. For us this would typically be broadly half what the monthly fees would otherwise have been. This reflects fact we haven't been paying for the FreeAgent account, filed payroll, or giving guidance during that period on things like VAT etc...but we're still going to be looking into most of the figures in some detail, to do year end work.

2) case by case basis. To be honest we don't often find this too much of a problem. As they're getting lots of small invoices, it fairly quickly becomes apparent if they're not planning on paying. Less of an issue than if you do all the work agreed, send a big invoice for it all, then they decide to not pay.

3) doesn't happen often, but on occasion we've done a goodwill partial refund. A bit like in (1) above, this wouldn't be everything they'd paid since the last year end, as we'd still have been incurring costs along the way, FreeAgent account, payroll/VAT filed etc.

4) we only have a handful of legacy "personal tax only" clients. Some of these are on monthly DD, some not. Where fees are very low, the admin hassle and cost of invoicing/collecting trivial monthly amounts can make it not worthwhile.

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Replying to Maslins:
By Mr_awol
21st Aug 2019 12:10


Guessing you don't feel it's unethical if a month goes by when you barely use your gym membership or mobile phone, despite still paying the monthly fee.

No - but I am running a professional firm providing professional accountancy services, not offering a subscription to a helpline, running a gym, or providing access to a mobile phone network. You cant compare terms that are acceptable in one industry to another completely different business.

As for the ethical argument - I suspect that you do see it, at least partly. That's presumably why you would offer leavers a 'goodwill credit' - to reflect that fact that it would be unfair/unethical to keep money if you haven't earned it. Unfortunately not all firms whom have adopted the 'subscription model' have the integrity to offer a partial refund, and I have picked up clients who have been most unhappy to be told they should stay for another three/four months or lose the payments they have made.

Thanks (1)
Replying to Mr_awol:
By Maslins
21st Aug 2019 14:46

I guess I take issue with the comment "haven't earned it". That's extremely subjective. Doing timesheets and invoicing based on 6 minute that any better at demonstrating what's validly earned?
- What if the staff member wasn't very efficient and took ages doing what should be an easy/quick task?
- Or they noticed there was plenty of slack in the budget for this client, whereas they were running over on another client, so they adjusted their timesheet entries accordingly?
- Does the client perceive you've earned it if you quoted £1k but the time on the clock that you have good reason to bill ends up being £1.5k?

My point being, no system's perfect, and I don't think fixed monthly invoicing is inherently less ethical than timesheet based charging. Both can be exploited.

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By accountantccole
21st Aug 2019 11:38

I used to do monthly s/o - told the clients we aim for 1/2 in advance and 1/2 in arrears so we share the cash flow advantage. Main bill raised when the year end accounts were produced.
Those who join part way get told they will have to make a top up when the bill is issued.
Just make sure your paperwork is clear that this is just a mechanism for smoothing the cashflow and not necessarily indicative of the final bill amount, particularly for new clients

Thanks (1)
By Mr_awol
21st Aug 2019 11:43

It certainly aids cashflow and credit control - but no more so than monthly POAs really.

It could give you more certainty over your income but I think that only applies if you intend on keeping any excess payments. If you are going to credit them back in any case, to be refunded then actually it just becomes more hassle.

I suppose it might make it easier to justify the time you do charge for on disengagement - rather than raising an invoice to claim part of the POAs you have received you are raising a credit to 'give back' overcharges which is a slightly better PR spin. I'm not wholly convinced though and I would suspect/hope that as a small practice you wont be having too many clients want to leave, and this might not crop up too often (if at all) anyway.

The key thing, I guess, is being open and honest at that start and then applying a 'fairness over-ride' if your standard terms end up providing you with income you don't feel comfortable keeping.

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21st Aug 2019 12:33

We charge monthly fees from day one and have been doing so for about 5 years, I have never had a complaint, in fact most clients have told me they prefer it.
We or the clients have no problem at all with a letter of engagement that states they pay us x amount per month for our accountancy support services whatever we may or may not do for them in that month, we used to use the POA method and it was just far too messy.
Most of our costs are fixed monthly so why should we not charge fixed monthly.
I would add that once we went down this route a few years ago it totally changed my life, gone are the days of waiting for and chasing debts, being in the overdraft one month and having loads of cash the next but knowing we need to make that last.

When we implemented it we started payments 6 months after the date they usually paid us.

New clients pay from month 1, sometimes if we know there will be little to do for 3/6 months we will offer a discounted price to get them started. Either way we start work from day one safe in the knowledge we are getting paid.

Once a year at the same time very year we review fees and at least increase by inflation.

We collect using Go Cardless, very very rare to get a bounced payment. We use automatic invoicing, easy peasy stress free

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By Moonbeam
21st Aug 2019 17:25

I've been on monthly billing for Ltd co tax clients from the start. All my people pay by standing orders. The problems start when you need them to change the so's. I may start using the Go cardless option at some stage. It does mean that I still bill what I would have billed in arrear. It's just that I don't have to chase for money. And if someone leaves mid year, I tot up my timesheets, that I still keep and present them with a statement and generally speaking, a refund.
I highly recommend this option compared to invoicing people later. Moving people over initially is a bit time-consuming, but if you are determined and clear, no problems should arise.
Tesco's don't give us any credit. Why should we give credit ourselves?

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By spilly
21st Aug 2019 22:35

We offer both annual and monthly fee billing and find that most clients prefer to make regular payments.
If we have a new client starting on the monthly fees halfway through, we bill the first 6 months at double-rate, then drop down to the normal fees after that. Saves clients paying an upfront fee.
We would consider refunding fees if a client leaves, but would take into account any work done to date, any ad hoc support given, and whether there had been over-run from the last accounts prepared.

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By marks
23rd Aug 2019 02:04

We have collected monthly by DD via GoCardless for a number of years so by the year end the client has paid their fee for that.

Re your queries

1. We give them different options. Pay the 6 months in one go. Pay the full year over the next 6 months. (so double the normal monthly amount for 6 months). Pay the first 2 years over the next 18 months. Pay the first 3 years over the next 30 months.

2. Yes. If DD stops then we stop doing any in year recurring work eg payroll, bookkeeping, managements accounts, VAT returns. If you stopped paying for anything that was a monthly payment your supplier would also stop supplying. Accountants are in the service industry so why should we be any different. If the payments stops so do we as I dont work without getting paid.

3. If dont get asked then dont do anything. If do ask then would look at costed time on clock and refund any excess paid. Although we charge fixed fees this is where we would use costed time to bill.

4. If small personal tax returns happy to go on monthly DD then we will. Some clients pay £15 per month for their tax return. If not then we will either bill annually once tax return done and approved but before submitting or if due a refund from HMRC will deduct our fee from refund before paying over to client. We request refund to our clients funds bank account.

Generally if the fee is more than £1k and they dont want to pay monthly DD in advance then we dont take them on. Would rather not take on client than do work and not get paid for it. Never had anyone object to paying by monthly DD in advance. We live in an age where everything is paid monthly so clients are used to this philosophy. They also like it from a cashflow viewpoint as just becomes one of a number of monthly costs they are incurring.

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By pauljohnston
27th Aug 2019 10:47

Do it the amazon way. Up front every time.

We have monthly billing we used Practice Ignition. The changeover was the most stressing for cashflow.

However we still have one-off projects that are billed in arrear.

We tell every client it is a 12 month minimum period thereafter a months notice

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By Vallery Lee
27th Aug 2019 10:50

All sounds a bit complicated - for VAT Clients we do the books, prepare and submit the return and submit an invoice. At the year end, once the accounts are submitted, the client gets a larger invoice including the VAT work and the accounts; all calculated on a time basis.
Payroll is a flat rate system which we usually charge on a 13-week basis.
Once a year clients - usually accounts only, get a larger invoice because the accounts take longer where the client has done his/her own bookkeeping.
Again SA returns are once a year clients, do the prep and charge on a time basis.
All clients get a schedule of work carried out. If someone does not pay their account, a payment in advance is requested.

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By RobbyDobby
27th Aug 2019 17:44

My thought on this is that you need to decide what you want and then make this all very clear in your agreement with them on this is how you do business. You can of course have different agreements with different customers but I have always found the KISS theory very useful.

I know it does not answer completely but only you can decide on this.

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