All too often, when work gets manic during December and January, billing takes a back seat.
In some ways, this is perfectly logical, since getting the work done is of primary concern.
Having said that, while some might run practices for fun, the main reason that most of us are around is to turn a profit. This can only be done by sending out appropriate fees to clients and getting them paid as quickly as possible.
There are two main issues that become even more significant in this busy phase: the quantum of the fee and its timing.
To take the less important one first; if you do not send out a fee, it is highly unlikely that it will get paid. In addition, if you leave things too long then clients frequently forget how much they appreciated your wonderful efforts. Part of this exercise involves not only tax return work but also sending out fees for other projects rather than delaying those until February.
People's minds work in different ways but one option is to set aside a little bit of time each day or each week devoted entirely to billing. A second possibility is to stop whatever you are doing every now and then with the deliberate policy of getting some fees out of the door. A final alternative approach might be to designate a specific member of staff who is responsible for ensuring that as many fees as possible get out of the door.
In extreme circumstances, delaying a fee can actually lose the money forever. When the economic climate is rocky and clients are struggling to survive, failing to send out a fee note could leave you praying that an ex-client's liquidators will manage to come up with a couple of pence in the pound. Had this been done two months earlier the recovery would have been 100%.
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The more significant issue in the general order of things is the size of a fee. Even if your standard practice is to charge clients a fixed amount for preparing tax returns, you should still have special rates for special work.
The easiest way of doing this is to base the charge on the time when the work can be done. If clients submit all of their information by let's say the end of October, they should pay the standard charge or even get a discount. If the data comes in November/December, the fee should be charged at a modest premium. Anything that is delivered in January should only be done if the client is willing to pay perhaps 150% or 200% of the standard amount.
There are two reasons for this. First, by that stage they will struggle to get anyone else to do the work and have made your life more difficult, probably increasing your costs as staff have to work overtime in order to complete the return.
Secondly, as stated in last week’s guide to self assessment risk, returns completed in a mad rush as the deadline approaches are much more prone to contain mistakes, leaving your firm with headaches and potentially financial exposure. If clients want to delay things until the last minute, they should pay what might be regarded as an insurance premium to help soften the blow if anything does go wrong.
The obvious response might be to suggest that such clients may not return next year. Frankly, the people who leave you in the lurch at the last minute every time are hardly the ones you want coming back anyway.