Are you a service provider and aren’t charging enough for what you do? Are you afraid to raise fees thinking you’ll reduce your client base?
You provide invaluable services to clients and it is time to ensure that you are not underselling yourself and falling into bad billing habits. We all know the saying “old habits die hard” but it is time to make some changes that help you run your business more efficiently and show how valuable you are. According to Journal of Accountancy, there are many billing myths that you should be mindful of:
Myth 1: ‘I’m just doing basic work, and it’s not worth that much.’
Unfortunately, many entrepreneurs place too low of a value on the services they provide. You are a professional that is providing a critical service. It is time to instill more self-confidence and self-worth in yourself because if you personally believe in this myth, then your clients will as well.
Myth 2: ‘Clients are fee-sensitive, so we can’t charge too much or raise fees.’
Raising fees can be an unnerving task as many fear they will risk losing their clients.
However, if you are underbilling your services, then this will set the tone for your clients, and it may be very difficult to increase fees later down the line.
Myth 3: ‘I’ll underbill with the hopes of getting bonus work from the client.’
By providing discounted work to your clients, you are setting the expectation that your fees will always remain cheap. It is important that you explain your value appropriately to your client so you don’t have to markdown your services.
Myth 4: ‘If I lower my fees, I’ll retain clients.’
If you discount your rates, your clients may always return expecting a lower fee for your services. It can be completely understandable to want to lower fees for a client who may be financially struggling. However, if you know a client might have difficulty paying, instead of decreasing your worth it may be beneficial to put them on a payment plan to ease the financial burden.
Myth 5: ‘The engagement letter doesn’t matter.’
If you are in a business where what will be done could and should be spelled out, an engagement letter is very important so that your client understands the services you will be providing, your fees, and the details about potential penalties for late payments.
Myth 6: ‘It’s OK to send bills months after the work is completed.’
If you delay sending an invoice, it can be difficult to get your client to understand the value of the work and the fee charged.
They may also feel it isn’t important for you to receive money quickly since you didn’t invoice right away.
Myth 7: ‘I should send detailed bills to clients.’
The more details you put on a bill, the greater an opportunity you give your clients to question you. If you are concerned that your clients may not understand your value, ask them if they are satisfied with your work and if you are meeting their expectations. The details of work to be accomplished are spelled out in the engagement letter.
Myth 8: ‘If I pester clients with collection calls, I’ll anger them.’
As a business owner, it is your responsibility to ensure that your clients pay promptly. If you set the expectation that they can make late payments, then they may always pay their bills late.
Myth 9: ‘The owners should do the billing.’
This is not true as managers should be preparing the bill since they are intimately involved with the clients and work. If billing by the hour, managers should capture the time to create the bills, and if charged by a project fee, create the invoice for the agreed upon rate. Once the billing is complete, have the owner review it.
Don’t allow these myths to hurt your firm. It is time to focus on reminding yourself and clients how valuable your services are. If you have any questions on how you can avoid these common billing mistakes, please contact me at 310-534-5577 or [email protected].
