The days of billing clients based on how much time you’ve spent on their financial affairs is rapidly becoming a thing of the past. Not just that, you also no longer have to wait to invoice after you’ve finished the work. With monthly billing via Direct Debit driving modern businesses, you too can be on your way to creating a steady workload and healthy cash flow. This article, based on an extract from The Accountants Millionaires’ Club book, looks at why billing monthly is better and how to get your clients on board.
Take back control of your cash flow!
The problem with the traditional method of billing work at the end is that this way of working normally leads to high WIP and lockup, resulting in you being at your client’s mercy. As you can’t start (or finish) their work until they have brought in their records for you, it also has undesirable repercussions from reduced productivity and morale to an inconsistent cash flow.
So, what should you do?
Take back control of your practice!
Get your existing clients to move to monthly billing via Direct Debit, and start new clients on this new payment method from the beginning. This means you can begin to control your cash flow and ensure that it’s consistent.
Your clients will also be able to preserve their cash flow because now they will know what they are paying for their compliance work each month so they can spread out their payments over the year.
The benefits of billing monthly via direct debit
Billing your clients monthly:
- Ensures you get paid regularly regardless of when the clients bring in their records
- Can reduce your WIP and lockup to virtually zero
- Allows you to maintain a steady cash flow rather than receiving a lump sum
- Allows the client to preserve their cash flow
- Creates an organised client relationship where both parties benefit
How to easily move your clients to this payment method
Now you know that billing monthly via Direct Debit is better for your accountancy practice, here are 6 tips to get your clients on board smoothly:
1. Give an incentive to move to monthly billing via Direct Debit.
Introduce monthly billing along with a fee increase and offer your clients two different fee levels. The lower fee level is available if they move to payments via Direct Debit and monthly billing.
2. Aim to move your clients to monthly billing at the start of their new financial year.
This makes good business sense and makes it easier for you, otherwise it can get really complicated accounting for what they have paid for and what they need going forward.
3. Got new clients in the middle of the financial year? Bill them on an ad hoc basis first.
By billing new clients on an ad hoc basis for outstanding work in the current financial year, you can keep track of what has been paid for before starting monthly billing from the start of their new financial year.
4. Heavily penalise clients with higher fees if they refuse to move to monthly billing.
This gives clients more of an incentive to move to monthly billing. If they still refuse, it may be better for the practice if you disengage from the client.
5. Give new clients a provisional monthly fee for the first 3 months.
At the end of the 3-month period, you can then review their fee level and adjust it up or down as necessary.
6. Use automated systems to help make this payment process effortless.
Billing monthly will involve a lot of invoices, so use a software solution such as GoCardless with Directli. This system will automate the collection of your invoices on the day they are due and will even automatically mark your invoices as paid and reconcile them for you.
For extra work that isn’t included in the monthly fee, use a tool such as Practice Ignition. This allows you to quickly send the client a proposal and when the client signs the online engagement letter, it will automatically send an invoice and take payment. Just make sure that your staff know what is included in the client’s monthly fees, so they know when to charge for anything on top of this.