As a partner in a tax and accounting business, I have been asking myself the following 3 questions at the end of each month for the last ten years:
- Have we billed all time spent working with clients?
- Have we applied the expected billing rates?
- Have we met the clients’ quality and billing-rated expectations?
That is to say, these questions have come out of three main worries: missed time missed money, or missed client expectations.
With the development of the practice to 20 consultants and accountants and over 180 ongoing clients, the answers to these questions became more and more demanding.
Still, after over 5000 invoices in the last few years, we have learned many lessons.
So, here is a Step-by-Step Guide on how to improve time billing, coming from our own experience:
1. A Good Initial Arrangement with the Client
To avoid misunderstandings when the client gets the invoice, you need to ensure upfront that the client understands what you do for them and how much that costs.
Here are the key elements you should arrange:
- Define the types of your fees (retainer, billable, or both)
- What is considered billable work, and what isn’t
- The height of the billing rate
- Are you invoicing based on a blended billing rate, or does each member of your team has their own billing rate
- How to charge for commute and other client-related expenses
2. Time Tracking by Accountants Is a Must
Tracking the time you spend on a specific client is the only way to invoice for the time of your accountants fairly and accurately.
You will need Excel or a simple time tracking tool.
If you have multiple accountants in your team, automatized tools have an advantage over Excel.
Here are the key elements of a good time tracking tool:
- Tracking time for each client per specific task
- The possibility to mark the tasks as billable or non-billable
- Time reports, so the managers can conduct a review
It is important to define billable and non-billable tasks upfront, so that when your team logs time, the system creates a task list automatically and lists them as either billable or non-billable.
However, you need to make sure using the time tracking tool isn’t counterproductive. This can happen if:
- The implemented tool is complicated
- The employees don’t accept the tool, as they see it as a type of control over them, rather than making sure you’re billing the clients fairly
3. Prevent Time Loss
Some activities require a lot of time, but can’t be charged to the client. Thus, it’s important to track time to identify the activities that waste too much time and can’t be charged for.
It is especially important to identify certain activities that can be both billable and non-billable, such as:
- Internal meetings for the client
- Unexpected phone calls from the client
- Creating the contract with the client
- Invoicing
- Checking the bank statements
- Commuting to the client
- Checking a post for client or courier support
- Waiting for the client
- Visiting banks or administrative institutions
In an ideal scenario, in the case of these activities taking a lot of time, they should be billed to the client.
However, the client can be sensitive to seeing some of these items in the invoice. Thus, it’s good to track the time these activities take separately, and group all of them when creating the invoice so they’re within the main service.
Another option is to simply increase the billing rates to the clients who take a lot of time due to these activities, so the additional income can cover your expenses.
4. Review Billable Work for the Client
After providing the service or the period after which you bill, export a list of all tasks you’ve done for the client.
Review the task list.
Confirm all billable items.
Make corrections if there are tasks that should be billed, but have been marked as non-billable by the team.
That is to say, this step is dedicated to ensuring you have a good basis for billing.
5. Make an Accurate Invoice
Mistakes in invoicing are very common, especially in the corporate service industry.
This is why it is extremely important to automatize time tracking and export the invoices based on logged and reviewed time for each of the clients.
Once things are automatized, transparent, and reviewed, the possibility of error is minimal.
If you have a time billing system you can take these steps very easily and simply export an accurate invoice for each client.
6. Make Sure that the Client is Satisfied with Your Time Billing
As important as it is for the client to initially understand what you do for them, it is also important for them not to be surprised by the invoice.
It often happens that the client isn’t satisfied with the number of hours you’ve spent when you invoice the billing rates.
To avoid this scenario, and keep the clients happy, you should have a transparent record of completed tasks for each invoice.
In an ideal scenario, each invoice should contain an appendix that specifies working hours per team member and work tasks.
Start managing your time
FREE 14-day trial – no credit card required
