How to Accurately Bill for Time: A Step-by-Step Guide for CPAs

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.