Perspectives

January 2004

Tips for Painless Billing

By Rich Walker

Cash is the lifeblood of any business. Billing for it and collecting it are the heartbeat that keeps an organization alive and growing. Despite their essential nature, invoicing and collecting are among many people’s least favorite monthly chores. And the discomfort level can rise precipitously when an invoice requires explanation. At best, an otherwise productive hour might be spent going over old business, with cash flow temporarily pinched. In a worst-case scenario, business could be lost if the matter in question proves too difficult to resolve.

The following are some practical tips from Intuit Professional Accounting Solutions and member professional advisors on how to make billing as painless as possible for all concerned.

• The old saw about an ounce of prevention being worth a pound of cure is true, and worth applying. Explaining billing policies and procedures clearly and effectively up front is the single most important step to take to set reasonable expectations and save headaches down the road.
• Provide a written estimate of how much services will cost. For example, before preparing quarterly tax statements, send a one-page memo explaining that the job is likely to require eight hours of time, at $100 per hour, plus expenses. Map out the job’s deadlines, tasks, and procedures. Describe how work beyond the original project scope will be billed. Include a copy of the estimate with the invoice presented at the work’s completion.
• Set payment rules and stick to them. If company policy is payment at pickup time, collect the fee before handing over completed work. More than one professional advisor contributing to online discussion (at www.accountant.intuit.com) has shared tales of those who have attempted to get around this rule in one way or another.

Sound Advice

Sandi Smith, a Dallas-based CPA and contributor to Intuit’s “ProConnection” newsletter, suggests offering incentives to pay bills in advance. “One thing I do to speed up cash flow is to offer an early pay discount to customers,” says Smith, the author of three books and dozens of articles. “If they pay their bill in advance, I give them 5% off normal fees.”

Smith also recommends charging for travel time. Greater value is realized for onsite work, so there should be no objections to paying a small premium for house calls. How travel time is billed will depend on company procedures. Whatever the chosen policy, make sure it is fully and clearly explained before making house calls.

When dealing with new business, many recommend collecting a retainer fee up front. Polite demands for earnest money can help turn slow payers away at the door. Running a credit check with a credit reporting service can also be a wise investment.

Once work is begun, a quick read of the accounts payable record can warn of possible untimely payments or invoice disputes. When such patterns are detected, invoicing can become more frequent. For ongoing work, those with outstanding charges might be notified that work won’t continue until at least partial payment is received. Diplomacy and tact, balanced by a firm sense of resolve, are called for.

To avoid getting frequent calls to explain invoices, examine billing practices from every possible angle. Adhering to the following practices will simplify the process on both ends:

• Send out invoices in a timely manner.
• Describe in sufficient detail the work performed.
• Track estimates versus invoices and how closely they match.
• Prepare clean, professional, and reader-friendly invoices.

Both payer and payee are probably hard-working business people tending to the myriad daily details needed to keep their company up and running. By making billing procedures as plain and simple as possible, both parties can achieve greater success with fewer headaches.

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