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Practice Tips - who should bill

15th Jul 2005
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"I have probably been responsible for well in excess of 5,000 fee notes to clients over the last 20 years or so. And I know from observation of others and anecdotes received that the art of billing is not nearly as straightforward as it seems. The result is:
1.    people don’t bill on time;
2.    people don’t bill enough;
3.    they don’t send a fee note that protects them and their firm from a claim;
4.    disputes arise and so cash is not collected on time.

This article just looks at the first two issues.
If you write a fee note you:
a.    know the client;
b.    probably have a friendly relationship with the recipient;
c.    anticipate the comment, or sharp intake of breath, the client makes upon receiving it;
d.    know you might have to defend it;
e.    know the work that was done, and probably undervalue it as a result as you don’t really understand what was so special about it.

The consequence is, whether you like it or not, that you’ll round the value of the fee down from what it’s really worth. I have seen this time and time again.

The answer to this problem is simple. You have to get someone else to write your bills for you. In my experience the person who works for you and writes the fee note:
1.    knows that the client’s cash ultimately pays them;
2.    probably thinks you’re good at what you do, and sees the real value in it;
3.    has nothing like as good a relationship with the client as you do, probably because the client is not very interested in them;
4.    will, as a result, always tend to charge as much at least or more than is justified by the time spent on the job.

You might, of course, say this has little impact on fixed price work. But even then I would not agree. I always strongly advise that time records are kept even when fixed price work is done. That way you know how much time you really spent on the job and can price more realistically next year. But those time records will also show what “extras” have been done, and which were not included in the fixed price quote. You will tend to write those off. Someone else won’t. They’ll add them to the bill.

Who is best at being that “someone else”? I suggest it’s your secretary if you have one. If they’re any good they’ll be really defensive about you. That makes them really robust billers. If not, have someone who you think is tough do it. It’s best that it’s not a fee earner. They’ll just do what you do, and maybe more so.

And how much is this worth? Well, let’s suppose you raise 250 bills a year (and most fee earners in small firms will do that) and each one has time recorded of £500 on average. If you rounded each one down to £475 and your secretary bills the £500 that was on the ledger your bottom line would improve by £6,250, or about 5% of turnover. As that will, however, flow straight through to the bottom line we’re bound to be talking over 10% of profit in many cases. That’s how much it’s worth to you a year to have someone else bill for you. You cannot lose by trying.

Richard Murphy
AccountingWEB contributing editor Richard Murphy is a sole practitioner chartered accountant but was previously senior partner of a firm for 11 years. He has also been chairman, chief executive or finance director of 10 SMEs. A collection of previous articles by Richard on practice management themes is available in Practice Management Zone


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