Practice management - Billing and cooing

Anyone can give advice. The trick is to get paid for it. And you haven’t earned the money until it’s in the bank. Over the next two months we shall explore how to keep clients happy about paying your fees.

Managing the process of converting your work into cash gives rise to the highest rate of return on your time. Half an hour spent making sure that a #5,000 item on a bill will be paid is an earning rate of #10,000 an hour.

Not many do better than that. So it makes sense to develop a degree of proficiency in the art of billing. Unfortunately, most of us aren’t sensible when it comes to bills – for every reason from hating the administrative burden of them to recognising that this is one moment when the client has more say than we do.

And in the dark recesses of most of our minds lurks a fear that whenever control passes out of our hands, rejection is in the air.

Hence this article. It’s an attempt to unpack some of what gets in the way of us acting professionally, rationally and profitably about bills.

And it contains some practical tips culled and distilled from years of experience, exploration and experiment.

First the downside … how not to do it; most problems with getting clients to pay professional bills are susceptible to the Irishman’s advice: “If I was you, Sir, I wouldn’t have started from here.” The specific problem you have at any given moment probably began, unnoticed, much earlier in the job.

More generally, the wellsprings of trouble lie in pressures which are familiar to all professionals – the need to look busy, for instance, and the need to have big revenue figures alongside our names at the end of the year. So how does it all go wrong?

Consider the following story. The director of an organisation new to your firm, asks you to do some work for them. You agree, despite the fact that you:

are up to your eyeballs (but, as your inner voice reminds you, you never know when the work will dry up).

haven’t done this kind of work before (but, you persuade yourself, it sounds interesting).

should pass it on to the firm’s expert in this area (but you tell yourself you don’t need to because he never reciprocates).

You take a swift briefing from the director. But pressure of work keeps you from making a start until a phone call from him about progress panics you into …

– either doing it all yourself because there isn’t time to brief an assistant.

– or briefing an assistant badly because there isn’t time to do it well – and then having to re-do a lot of the assistant’s work.

Either way, you now have more time on the tab than you are comfortable with. Meanwhile, you discover some things about the job that …

– either you should have asked about before (but, because it will look stupid to ask now, you have to fumble along, re-doing bits as the client points out the shortfalls).

– or mean that you finally have to involve the firm’s expert to bail you out (and you’re in no position to complain when he dumps more time on your tab).

Either way, you now have more time on the tab than you dreamt was possible.

You are beginning to think twice before you book your own time to the job.

At this point, you start to wonder what the client is prepared to pay.

In the excitement of getting the job, you didn’t ask.

You are also beginning to doubt that the job makes any commercial sense for the client. You didn’t enquire about that either. And you hope that his organisation pays its bills. You didn’t ask for a credit check, because that would have been unnecessarily pessimistic.

In this increasingly anxious frame of mind, you sort of finish the job.

But there are one or two loose ends that allow you to postpone the evil hour of sending in a bill. It also makes a lot of sense to wait till the client uses your work in a way that pays off for him, so he’ll be more inclined to pay you.

Time passes. If you are going to meet your revenue targets/clean your tab, you now have to send in that bill. You have three main choices, none of them attractive:

Send the bill in as it stands and hope the client just pays.

Write off enough time to make the bill palatable – and face the managing partner’s questions.

Call the client and get his agreement to the bill before sending it.

You decide on the first option, safe in the knowledge that it’s the credit controller’s job to chase late payers. Should the bill not get paid, enough time will have passed to enable you to defend your position without challenge. And you can join everyone else in bemoaning the unpredictable behaviour of clients.

But deep down you know you haven’t been too smart, so you’d better get some more work in to cover the position.

The phone rings and it’s the director of an organisation new to your firm, asking you to do some work for them. You agree, despite the fact that you …

Doubtless, nobody you know has ever done all these things. But it’s a rare professional who’s never done any of them. The good news is that there are several fairly straightforward principles you can apply to your own billing. Then, with a little care and attention, you can avoid problems like these and, instead, have your clients pay up quickly, happily and in full.

How to do it better … best practice on billing – arrived at after exhaustive research, which includes making mistakes ourselves and facing their consequences – comes down to 12 main principles:

1. Don’t scare the client off

At some point you need to check that any potential client has a clear understanding of the size of your fee rates and an appropriate budget for the kind of thing he or she wants to do.

It might seem sensible to check these things right at the beginning, so that neither party wastes time. Not necessarily so. Any first contact with an individual offering work needs to be greeted with open arms.

Now is not the time to challenge the seriousness of intent or ability to pay by frightening them with talk of fees.

Now is, however, the time to start managing expectations, albeit gently.

It’s often the case that clients don’t know quite what they are asking for to start with. But after an exploratory discussion, they may increase their mental budget, and – if you’ve handled the meeting skilfully – they will be more ready to accept your fee rate.

Finally, even supposing you have to turn the work away, the thoughtful treatment you’ve invested will in time pay dividends.

2. Beware the knee-jerk budget

All the worst pressures on a professional come to the surface when the client asks: “How much will this cost me?” We tend instinctively to quote a low figure, either so that we don’t scare the client off, or because we haven’t thought it through ourselves, or for a variety of other knee-jerk reasons.

But clients – like ourselves when we’re clients – are very Mr Micawberish about money. Over-run the original budget estimate and the result is misery: you feel bad and the client feels bad. Go through the pain of estimating high at the beginning and the result is happiness: everyone can feel good when you come in on or below target.

There are a couple of other ways of limiting the pain:

When the client asks you “How much?”, ask him how much he’s budgeted.

He may want an indicative figure or range from you before he gives you this information, but that’s part of the process of checking each other out and is well worth spending time on.

Collaborate with the client over his budget if your figure doesn’t fit.

Try asking: “Is there any other department which might have budget, that would benefit from this work?” Or: “Would it help if we billed the job across two financial years?”

3. Low-ball and build

When you are first discussing a job with a client, it may be that you really don’t know – and can’t know-how long it’s going to take. But if, in order to protect your position, you quote a high figure for the total job, the client may get scared and back off. Under these conditions, a couple of tactics can help:

Both of you agree that matters are exploratory and thus what you should be agreeing is a fee only for the job’s first phase.

Particularly if the client is new and has no reason to trust you as yet, be explicit about limiting your fee until he understands that you produce value for money – at which time the fee will go up. Notice that by doing this, you are not reducing your rate (which is a difficult situation to recover from). You’re merely giving him, in effect, an introductory offer. Just because supermarkets use such offers is no reason to neglect the thinking behind them.

Brian Chandler and Tony Scott will conclude their study of how to get paid while preserving client relationships next month.