{"id":73548,"date":"2020-04-26t13:00:36","date_gmt":"2020-04-26t17:00:36","guid":{"rendered":"https:\/\/48e130086c.nxcli.net\/?p=73548"},"modified":"2024-08-14t09:30:19","modified_gmt":"2024-08-14t13:30:19","slug":"4-ways-to-bill-clients-2","status":"publish","type":"post","link":"\/\/www.g005e.com\/2020\/04\/26\/4-ways-to-bill-clients-2\/","title":{"rendered":"4 ways to bill clients"},"content":{"rendered":"

\"two<\/a>of course we have a preference.
\n<\/strong><\/p>\n

by jody grunden<\/i><\/p>\n

when i attend cpa conferences across the united states, i often hear from cpas: \u201ci don\u2019t want to bill for my time.\u201d<\/p>\n

so, how do you bill your clients?<\/p>\n

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client billing can include hourly billing, but it can also include flat-fee, retainer-based and\/or value-based billing. most people use one of these four methods. some use all of them or even a hybrid.
\n
\nlet\u2019s take a closer look at each of them:<\/p>\n

hourly billing<\/strong><\/p>\n

the hourly billing method is just what it sounds like \u2013 billing the client a standard hourly rate based on the amount of time it takes to do the work or complete a project. with this method, the client has little control and assumes most of the risk. you could almost say it pits the accounting firm against the client.<\/p>\n

why? if the firm underestimates the time it will take them to complete a project, they just bill for the actual hours worked, even if they\u2019re over by a little or a lot. using this method, the firm is guaranteed to be paid for every hour they worked.<\/p>\n

if the hours are way over the original estimate, the client is not going to be happy \u2013 and may even push back. this is not a good way to start a client relationship. the client will start scrutinizing every detail, and you\u2019ll continually be under a microscope. on the other hand, if you\u2019re really efficient and complete the project in less time than you originally estimated, you\u2019ll get paid less than you expected. the problem with hourly billing is that the better and more efficient you get, the less you make, which doesn\u2019t incentivize you to get better or more efficient. there\u2019s no reward for being good at what you do.<\/p>\n

hourly billing is not an ideal way of doing business, as it can cause friction between you and the client. it is rarely a win for anyone involved.<\/p>\n

flat-fee billing<\/strong><\/p>\n

flat-fee billing involves the accounting firm estimating the number of hours a project will take to complete and multiplying that by the hourly rate. both parties agree on the project cost up front, and the fee is fixed. in this scenario, the firm takes on the risk.<\/p>\n

it\u2019s imperative with flat-fee billing that you estimate and manage projects well. a low estimate will result in lower pay for your time investment. you have to be able to get the job done in the time you have allotted. in contrast to hourly billing, however, there is a reward for flat-fee billing if you can get the work done faster. the more efficient you become, the more you make per hour, and you can get more jobs done within the same amount of time.<\/p>\n

one of the other positives with flat-fee billing is that it\u2019s predictable. you know how much revenue you can expect, and your client knows how much the project will cost. the more efficient you become, the more profitable you will become as well.<\/p>\n

retainer-based billing<\/strong><\/p>\n

retainer-based billing is likely different from what you are used to. traditional retainer-based billing involves getting a deposit up front that you bill against. then, when you have billed through the deposit, you request another retainer from the client. here i\u2019m referring to the method of retainer-based billing that is used among digital agencies.<\/p>\n

retainer-based billing is based on hours, but it is different than hourly billing. with this type of billing, you and the client agree on both the number of hours per week you will allot for their project and the hourly rate. the client has access to you or your team for the number of hours you agreed upon. if they don\u2019t use the time, they lose it. if they use more than the agreed-upon number of hours, they\u2019re billed for the additional time. in this scenario, the client takes on the risk.<\/p>\n

as with flat-fee billing, retainer-based billing is predictable for both you and the client. you can make yourself or a team member available to do the work and know that your costs will be covered whether or not the client uses up the time they paid for. and, if the client uses more than what they paid for, you know you will be compensated for that additional time. for the client, however, retainer-based billing may not be worth the risk if they\u2019re not sure that the amount of work they need done will be consistent.<\/p>\n

value-based billing<\/strong><\/p>\n

you\u2019ve probably heard of ron baker. he\u2019s a speaker, best-selling author and a thought leader who has become very well-known in the accounting industry. he wrote \u201cprofessional\u2019s guide to value pricing,\u201d \u201cimplementing value pricing\u201d and a number of other great books.<\/p>\n

in his podcast called ditching hourly, pricing consultant jonathan stark interviewed baker, resulting in some really great quotes:<\/p>\n