Hi
Hoping everyone is fine and surviving the heat.
After seven years being in practice;I am currently reviewing my current fee structure (by the way have not done fee review ever) and the way I invoice my clients. I had a huge bad debt of over 9K just in last year. It impacted me to a great extent not only financially but also psychologically.
Therefore, I have decided on few things one is to review my current fee structure and second to choose most efficient and effective invoicing model. I have done the necessary research on the fee side but need some help in evaluating different models used by other peers. I contacted few of my contacts and was surprised to find a real-mix in their approaches.
A- Charging per month (with no upfront) 12 month contract and one month notice afterwards + No Free Consultation + Letter of Engagement signed up in first meeting
B- Sends an invoice every month in advance and charges % of annual fee upfront to cover initial administration costs (their wording) 6 month term + early termination fee of up to £150 + one month notice after minimum term + 30 minute Free Consultation + Letter of Engagement sent within 7 days
C- Send an invoice for each service separately with payment terms 50% in advance and 50% due after works are completed but before submission of any work to HMRC/Companies House + 30 minute Chargeable Free Consultation + Letter of engagement sent in 14 days
I would like to find out how the AW members feel and think about this as it may help not only me but many others who may need some help.
Client Type - LTD
Fee - £1440 (assumption)
Services Required - Quarterly VAT Returns + Monthly Payroll + Secretarial Services + Year-End Accounts + CT600 + Self-Assessment of Director
A/R is 31/01 and VAT for PE 30.06 and SA for Sole Director (17/18) are outstanding.
How would you invoice this customer?
Appreciate your help for taking time to read this post and sharing your valuable thoughts.
Regards
Replies
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We pretty much do your "A". Never get any objections. We don't even have a 12 month minimum contract length...though if for example a client joins right near the end of their accounting year (or indeed after it and wants us to the do accounts/CT return) then we would agree a separate one off fee for that.
We’re an “A”, potentially with a “catch-up” fee if they join part-way through their accounting year, typically 50% of their monthly charge, but open to negotiation.
We tend to have a 3 month notice period & no refunds policy.
I’ll have a meeting / 1-2 phone calls of a basic consultation, whatever I need to do to get the sale over the line really, without giving away too much info.
Also, I advise you get everyone to sign a GoCardless DD mandate - your bad debt will(should) disappear.
I am now using Gocardless and quite happy with this. However, one client recently sent an email refusing to pay via DD he wrote in his email that it seems a bit loose in its controls, allowing you to charge and take 'any' amount from my bank account automatically.
Re: allowing you to charge and take 'any' amount from my bank account automatically
He should get an email notification from GoC about 3 days prior to ANY money being taken following your request which will allow him time to 1. do nothing (if he agrees it), 2. make sure sufficient funds in account or 3. cancel it if he disagrees. IMO he has more control over a GoC dd than say his utilities - does he pay them by dd?
Plus he does still have the DD guarantee.
“However, one client recently sent an email refusing to pay via DD he wrote in his email that it seems a bit loose in its controls”
Did you reply and say doing the work without an guarantee of payment seems a bit loose in terms of bad debt control & the other option is payment up front?
Simply tell your client that those are your terms and that, if he is not willing to pay by monthly direct debit, he should look elsewhere for a new accountant.
You own your business and you should run it the way you think best for you. And, as others have said, there are plenty of controls and safeguards when paying by DD. Explain those safeguards and your client may well change his mind.
I do a variation of option A.
But, WHATEVER way you end up invoicing your clients, make them pay by monthly GoCardless direct debit. That way you'll never have a £9k bad debt again. And don't be persuaded to allow them to set up a standing order; that way you're not in control. A direct debit allows you to amend the fee where extra work is involved.
Again, option A and GoCardless.
Do you usually get engagement letter signed up during first meeting or email them afterwards?
Again go for A. If client does not like DD how about he pays all upfront and you give him a 5% discount?
Many of our clients are happy with this suggestion.
For those using option "A" when preparing the practice accounts what are you doing for Revenue Recognition/Accrued Income/WIP at the Practice year end?
Well,I did not see this coming....
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