Billing and cooing

Author: Tony Scott

Billing and cooing

Tony Scott explores how to keep clients happy about paying your fees, and suggests 12 principles for success.

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.

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 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...

... 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:

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

b) Write off enough time to make the bill palatable – and face the Managing Partner\'s questions

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

You decide on (a), 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. These are they (and notice that most are not just the reverse of the obvious errors):

1 Don\'t scare the client off. At some point you need to check that any potential client has two things:

• A clear understanding of the size of your fee rates.

• 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 (see also Leave something in the pot, below).

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.

4 Show them what you\'ve done. In most assignments, there will be several standard stages: a period of familiarisation with the client; some research into the topic you are handling; some checking of your views with professional colleagues; and finally writing up your findings in some sort of document (usually the most time-consuming step in the process).

We\'re so familiar with each of these stages and their complexities that we instinctively gloss over them with clients – face to face or on paper.

In fact, though, since most clients aren\'t at all familiar with what you do, it is worth spelling out all the stages in your fee note, particularly highlighting any special treatment the client requested.  Short, swift wording may make for easier billing. But it will probably cause slower paying.

Describing the work you have been doing in detail also allows you to break one large bill into a series of smaller ones.  This may suit the client (and speed up your payment) – particularly if he or she has only limited authority to sign off spending and has to seek approval for large sums.

In some businesses, these authorisation limits can be quite low, so they are worth checking. I recall working for several years with – and submitting numerous £900 bills to – a public-sector organisation where the chief executive had to get special approval for amounts of more than £1000.

5 Catch the wave of gratitude. Investment bankers sit at the top of the pecking order for fee rates. This is not because they are better or brighter than other professionals, but because, when their bill goes in, it is connected in their clients\' minds with the £50m deal they\'ve just done – and looks very reasonable by comparison.

If the bankers waited twelve months before submitting their bills, their fees would probably look as outrageous as they really are.

The point is that a client\'s perception of the size of your bill is always in relation to something.  The bill never stands in a vacuum.  So it makes sense to bill close to the point where you\'ve delivered something the client can see, recognise and value – even if it means breaking your firm\'s normal billing cycle.

In law firms, corporate lawyers benefit the most from the investment-banker effect and commercial lawyers the least. In accounting firms, corporate finance people do best, auditors worst. But all professionals would benefit from paying more attention to timing: issuing bills at or near the moment when clients feel maximum gratitude.

6 Bill often, at least once a month. The days of saving everything up until the job is finished are gone, particularly if it\'s a long-running job. Clients do not usually react negatively to monthly billing.  Most suppliers now do it as a matter of course, and it helps clients to smooth out their internal budgeting and cash-flow control.

And at a lower level, monthly billing avoids the nightmare of trying to explain six months\' worth of expenses.

If you get a sense that a client will be unhappy to pay before he sees results, then collaborate on a deal: offer to hold back the last month\'s bill, or bill only a proportion of the work done each month.

7 Catch the computer. It\'s well worth checking with a big client how his or her organisation\'s internal payment cycle works.  If, for instance, your monthly bill arrives just after the monthly computer run, you could be stuck waiting for your money until the next month\'s run. That won\'t help your cash flow.

If, however, you take the trouble to ask, you may find that a bill submitted on the 27th of the month rather than the 30th just slips into the schedule.

8 Get the wording right the way your sponsor wants it. It\'s tempting to slip into routine formulaic phrases when you\'re dictating fee notes. But the words deserve more thought than that.

What may seem a standard and unimportant phrase to you may matter a great deal to a client who has to get your bill past an internal approval process or hand it over to a rival department. A form of words like 'To professional fees for services rendered' can appear cold and unhelpful, and may provoke challenge on the grounds of vagueness. On the other hand 'For hand-holding during your recent crisis' may be chattily accurate but acutely embarrassing.

Your sponsor at the client organisation will know what form of words will most easily get approval and/ or avoid exciting comment. A brief phone call with him or her will not only head off potential problems. It will also show that you are thinking of him and his position with his colleagues.

By the same token, it\'s sometimes worth exploring with your sponsor the idea of setting up a retainer arrangement in place of one-off payments triggered by fee notes. In that way, rather than having to push a series of bills through the payment pipeline – risking challenge on each – your sponsor may need to expose his or her decision to scrutiny only once.

9 Take care of the little things. Because a lay client has no means of assessing how well you\'re taking care of him on the core professional and technical matters you\'re handling, it\'s particularly important to demonstrate your thoughtfulness in ways he or she can assess.

That usually means taking special care of details that to you may seem peripheral, but to the client will seem powerfully comforting. You can do this in at least three ways:

• Be visible early on. Make a point of calling or visiting often during the first stages of a job – even if there isn\'t much to do in any formal sense – so that the client has the reassurance of knowing that you\'re on the case.

• If you\'ve decided not to charge for some time you\'ve put in, then make it plain on your fee note. You could, for instance, use words like: 'To briefing new assistant to join the project team – 3 hours (this will not be charged).'

• Or, if you\'re on a long-running project where you have an office at the client\'s premises, you could mention in the bill something along the lines of: 'We\'ve deducted from this month\'s expenses the sum of £200, which is our estimate of our phone use not on your business.'

You might take the view that these ideas and amounts are trivial in the larger scheme of things. So they are. But that\'s precisely their point and their value. If you show in such ways that you are looking after the client\'s pennies, he will be much readier to believe that you are looking after his pounds.

10 Leave something in the pot. Clients regularly criticise their professional advisers for not talking to them between projects. So consider either over- or under-billing on the last bill of a project, with accompanying words such as:

'We have billed you the fixed fee as agreed. However, there are a couple of days left in the budget which you are free to use on anything else we might help you with.'

or:

'We have spent a couple of days more on this project than the estimate we gave you.  These extra days have not been charged.'

Now there is an excuse for the client to come back to you – either because you owe him, or because he owes you.

11 Be willing to stop the clock. Generally speaking, clients like to feel they have some access to free advice. So if they discover that informal discussions are turning up on the bill, two things will happen that you don\'t want to happen.

First, they are likely to feel conned to some degree, because the charges were unexpected and unexplained. That could lead to lingering resentment, which may surface later in the form of complaints about your service or your bill.

Second, they will stop calling you whenever they feel like it. That shuts down one of your most useful conduits, because it\'s during those more relaxed conversations that you tend to get the most useful snippets about the business and its players: snippets which can guide you to your next piece of work.

12 Don\'t be frightened to bill for management. Most professionals are used to charging for three sorts of time on a job:

• The time you spend doing technical work.

• The time you spend managing other people\'s technical work.

•  The time you spend at client meetings.

But even an experienced professional may overlook several other areas. For example, on a job that has taken a long time to set up, there is an argument for billing some of the set-up or briefing time. And on a complicated job, there may be an argument for billing the time you spend on billing itself.

Some of these non-technical inputs will be covered in the way that your charge-out rates have been calculated. But don\'t take this for granted.

If in doubt, the principle is the same as for everything else: talk to the client about it.

Article Source: http://www.articlesbase.com/sales-articles/billing-and-cooing-4519758.html

About the Author

Tony Scott is a management consultant, trainer and coach, and the director of a London-based international consultancy (http://www.oliverscottconsulting.com). He specialises in helping businesses and people to communicate better – face to face or on paper.