Accurately billing clients is fundamental in every single organization. When it comes to maintaining a business, a few things are as important as understanding how to bill your clients properly.
Although building sales, acquiring new customers and leads, and promoting your goods and services are crucial for any business, they won’t generate the expected revenue if you lack the knowledge of how to bill your clients effectively.
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So, if you want to be the master of client billing and get paid better and faster, here is our step-by-step process to run your business much more smoothly.
Client billing is the process of billing someone for goods or services you have provided them with. You give or send them a bill stating how much money they owe you for these goods or services.
Billing is an extremely important task for any business to maintain the cash flow and to keep the business financially flowing. Maintaining a positive cash flow throughout the year is a necessity for any business.
The client billing process usually includes steps such as creating an invoice that lists the goods or services provided, the price per unit, the quantity, and the total amount due.
The invoice may also include other factors like applicable taxes, fees, or discounts. Once the invoice is sent to the client, they must pay the amount owed within the agreed-upon timeframe.
TIP: Read our article about project billing if you think it’s the same as client billing.
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However, the exact steps that involve the billing process may vary depending on many factors, such as the type of business, the payment methods accepted, and others. Nevertheless, some common steps in the client billing process include:
- Create an invoice: this is the first step in the billing process. The invoice is where you list the products or services you or your company have provided to the client and the price for each item. It’s super important that the invoice is accurate and includes all the right information your clients need to pay for the listed items correctly. It’s also key that the invoice is created in a way that is easy for the client to understand. If necessary, provide explanations of any charges, list payment terms, and include extra information, such as your contact for any additional information.
- Send the invoice: once you generate that invoice, it’s time to send it to your client. You can either send it by email, mail, fax, or even through an online billing portal if you have one.
- Track the payment: the final step in the billing process is to collect the money from your client. After sending the invoice, you’re expecting to receive your money, so you need to track it. You can do your payment tracking by using billing software or just send reminders or follow-ups in case of payment is overdue.
- Process the payment: after receiving the payment, you proceed to process it, which can involve depositing checks, carrying out credit card transactions, or utilizing other accepted payment methods.
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Depending on your business and your own personal preferences, there can be many ways you can bill your clients: hourly billing, value-based, flat-rate, retainer, and subscription billing.
- Hourly billing: it involves billing clients based on the number of hours you spend working for them. The hourly rate is something that is agreed upon in advance and is usually based on the level of expertise required and the amount of time required to complete the job.
- Value-based billing: it involves charging clients based on the value provided by your services, instead of the time or effort involved. This billing method can be based on the impact that the services have on your client’s business, such as the extent of revenue increase or cost reduction achieved, among others.
- Flat-rate billing: with this billing process, you charge a fixed amount for a specific project or service, regardless of the time you spend on it. This can be beneficial for clients who want a predictable cost for the work upfront, for instance.
- Retainer billing: it involves charging a fixed fee to a client for a set amount of work over a specific period, usually a month, for ongoing services, such as consulting or legal services. The retainer fee is typically paid in advance and provides the client with access to a set number of hours or services each month.
- Subscription billing: mostly common for industries such as software services, streaming services, magazines, and gym memberships. This method involves charging clients a recurring fee for access to a product or service over a certain period, such as monthly or annually. This can be beneficial for clients who want ongoing access to a service or product.
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Even though there is no right answer, the amount of time that you can give your clients to pay an invoice can vary depending on many factors, such as the industry, the relationship with the client, and the payment terms agreed upon in advance.
A common payment term is to give clients 30 days to pay an invoice. However, this can be negotiated if you want to. You can discuss this with your client and either make it shorter or longer than 30 days.
Some may choose to offer shorter payment terms, such as 15 or 20 days, while others may prefer longer payment terms, such as 45 or 60 days. Either way, regardless of what you agree upon, the payment terms and the due date should be clearly stated on the invoice.
Let’s assume you and your client agree with the 30 days; it means that your client has 30 days from the date the invoice was issued to make the payment.
Having clear payment terms as a business or service provider is crucial to avoid confusion or delays in payment, and it’s important to communicate these terms to clients in advance. If payment is not received within the agreed-upon timeframe, sending a reminder or follow-up to the client may be necessary to make sure that it is not forgotten.
Time tracking is the process of monitoring and recording the time spent on activities, tasks, and projects. It involves keeping a detailed record of when you start and stop working on specific tasks and tracking the duration of breaks, meetings, and other activities throughout the day.
Time tracking can be done manually using tools such as timesheets, spreadsheets, or dedicated time tracking software. Alternatively, it can be automated through amazing apps like Timeular.
Implementing time tracking and using the right time tracking software can be super useful in client billing because it allows you to accurately track the amount of time spent on a project or task for your client.
By tracking your time spent, you can use this information to bill all your clients accurately based on the actual time spent on the work.
Here are a few ways in which time tracking can help you with client billing:
- Accurate billing: by tracking the time spent on a project or task, you can more easily bill your clients accurately for the actual amount of time you worked for them. This can help to avoid overbilling or underbilling clients, which can lead to disputes or loss of overall revenue.
- Transparency: time tracking is key to providing transparency to clients by showing them how the billed hours were spent. For instance, if you use a time-tracking app such as Timeular, you can create reports from all your time records, customize them or export your data. This can help to build trust with clients and demonstrate the value of your services.
- Better project management: time tracking can provide valuable information for project management and help you optimize your working process. It allows you to identify where additional resources may be needed, track progress, and ensure that your projects are completed on time and within budget.
- Improved efficiency: tracking time can help you identify inefficiencies or areas where your time is being misused. By tracking your time and getting this valuable data, it can aid in refining processes and enhancing productivity, which can ultimately benefit you and your clients and lead to a boost in profitability.
The first thing you can do is review the contract or agreement you have with that client and confirm that it is in line with the desired parameters. If not, you must be clear and specific when requesting more money from your client to ensure they understand why you wish to ask for more. Remember to be flexible and open to negotiation so everyone stays happy, and always maintain a professional tone.
You can either send a friendly reminder email or a message to the client reminding them that payment is due. Don’t forget to be clear and specific about the amount owed, the due date, and the payment methods accepted. If the client has any questions or concerns about the payment process, offer help and provide a deadline for payment to encourage the client to act asap.
There you go; we hope you found this article helpful!
Remember that accurate client billing is essential for the financial health and success of your business, whether you work in a company or solo as a freelancer.
By understanding the different billing methods available, establishing clear payment terms, and tracking time accurately, you can ensure that you are billing your clients fairly and appropriately.
Even though it can be a sensitive matter, it’s important to approach billing with transparency and professionalism. Keep this in mind, with transparent client billing you can build strong relationships with your clients and ensure that your business is operating as effectively and efficiently as possible.
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