Billing and late payments: The acountant’s enemies

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In my last blog post, I explained how many accountants don't follow their own advice when it comes to managing their own cashflow issues.

In this post, I'd like to offer a few pointers for practitioners (based on my own experiences in practice and now as a professional practice consultant) to help with managing billing effectively and dealing with clients who persistently delay their payments.

Effective billing
Gone are the days when firms billed annually or quarterly. The number one criticism clients have of accountants is the way they bill! Not only do clients hate receiving large irregular bills, it also plays havoc with your own cashflow and you rarely get full recovery on the time you have spent. Once you raise bills in this fashion you then have to wait sometime for them to be settled whilst you have probably started on another year's work for the client. This is madness from a business point of view.

Try and change your attitude and culture. So many practitioners undervalue what they do and don't feel proud of the value they are providing to clients. This results in not charging for the work you do or not getting full recovery. Again, try and implement the mindset that you always have a discussion with a client before you do the work which is outside of your fixed fee agreement and agree the fee for all work before you start it.

Deal with late payers
Late payers are a real headache. Of course, once you have the above in place they will be a thing of the past. In the meantime, you need to decide on a policy to deal with such offenders. For some reason, accountants hate chasing in their own cash and shy away from talking to their clients about monies owed. It is often helpful to get someone other than yourself to act as credit controller. All debtors should be given clear settlement terms and followed up weekly by phone as a minimum. Ask a local solicitor to send a 'seven day warning of legal proceedings' letter where appropriate for clients who have not kept their word. Once the warning time has elapsed, then follow up with action.

Looking at late payers will make you think about whether they are the right kind of client for your business. This is part of the client grading process that all firms should do on a regular basis. If a client is late paying you and won't agree to a fixed fee agreement then you need to think of sacking them so they can go and cause havoc in someone else's business and not yours. You will often find it is the late payers who are not ideal clients and they are always late in getting information to you, very demanding of your time, unpleasant to act for and never appreciate what you do for them - so why act for them in the first place?

"I need the fee and can't afford to sack clients!" I hear you cry. In reality if you look at your recovery on these clients you will often find that you are actually losing money and would be better off not working for them in the first place. In my experience, you will also find that you could better use your time doing extra work for good clients who appreciate what you do and are happy to pay you - this is the direction you want to be going in.

Got any questions or comments on this topic? Post them below.

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26th Feb 2010 12:25

One solution worked for us overnight

If you agree the year's fee upfront with the client, then send the bill s/he's already agreed and ask them to pay now or (more usually) set out the standing orders you want, all you have to do is monitor the money coming into the bank and, if there's a problem it's with a 10th or 12th of the bill and if they don't pay or miss payments you don't start work till they pay.

Time sheets, credit control, wip, grief, bad feeling all replaced by bank rec (or ex-client).

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26th Feb 2010 12:54

Fixed fee and SO

I do the same as Paul.

In addition to improving cashflow it saves a huge amount of admin time for sole practitioners like me. The only client who refused standing order preferred to pay the whole bill up front. No need for credit control let alone 7 day letters.

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By Anonymous
26th Feb 2010 19:09

late payers

 so how do you deal with a client who is consistently late paying despite being invoiced monthly and whom then complains when you suggest that a late payment interest charge will be levied after the 6th late payment? I have 7 day payment terms clearly stated on my invoices and this client can take up to six weeks after invoice date to pay. Is that a reasonable length of time to wait for payment? am I being unreasonable asking for 7 days?

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