Compare milestone billing vs. project billing to get paid faster, improve cash flow, build client relationships, and finish projects on time.
Time and Billing: Your Two Biggest Friends or Foes?
Time and billing can be a nightmare for small businesses. While it’s a time-consuming process, it’s also essential.
Time and billing can be a nightmare for small businesses. Even after the tedious process of sending out invoices, there’s no guarantee you’ll get paid. While time and billing is a time-consuming process (no pun intended), it’s also an essential part of business.
So how do you manage the endless moving parts and multiple client demands, all while dealing with redundant administrative tasks like managing billable hours, sending and receiving invoices and tracking down late payments?
Well, you’re not the first to ask and you certainly won’t be the last. But the good news is, there are plenty of resources available to help you smooth out your time and billing processes, and get to the green all that much faster.
Why time and billing is so hard
How much time do you spend at work on email?
According to a recent survey of 500 workers in the professional services firm, each employee lost an average of $50,000 per year in revenue due to insufficient tracking of emails with clients and others. That’s because almost 40% of respondents reported never tracking time spent reading and answering emails.
Many professional services firms directly use timesheets to bill clients hourly or determine retainer amounts. Yet they lack a simple, intuitive system for time and billing. And as a result, time spent on things like email fall through the cracks.
When you take into account the size of the professional services sector and the figures from this survey, the U.S. economy is losing 50 million hours, or $7.4 billion a day, in productivity.
The changing nature of work
Sometimes it’s easy to identify early on which projects are big winners and which are major disasters. But it’s those projects in the middle that have no visibility as to what’s going on. Part of this difficulty comes from the changing nature of work.
Tracking exactly how much time you spend on projects is far trickier than it once was. Prior to email, correspondence typically came in the form of mail or fax. So, you’d spend X amount of time reading the letter and deciding what to do. Then you’d draft a reply. Say this process takes about an hour, and about two minutes to track, you’re dealing with about a 3% overhead time to track the work you completed.
But with email, people are dealing with hundreds of correspondences a day, and most interactions take 20 to 30 seconds. So if it takes you three minutes to record that time in your timesheet program, that’s a 60% spending in administrative overhead. And it’s pretty impractical to assume anyone is going to log every activity, bit by bit, as they answer an email.
Time and billing have become disconnected afterthoughts of getting work done.
Improve your billing processes
Billable time is the essence of a professional services firm’s operations.
Tracking time and generating invoices and reports provide a foundation for operations. Considering how mission-critical time and billing are for those in the professional services industry, it’s amazing how few properly capture all of their billable hours.
Every minute counts when it’s time to bill your clients. But time and billing is often an inconsistent, manual and painstaking task. And the past two decades have witnessed the rise of alternative fee arrangements, which has only made the process more difficult.
While billing by the hour remains a popular structure, many firms also offer fee structures such as:
- Contingency - A lawyer agrees to accept a fixed percentage of the recovery.
- Retainer - Upfront cost incurred by an individual to pay for services.
- Flat-fee - A single fixed fee for a service, regardless of usage.
- Task-based - Categorization of fees based on the work performed.
- Value billing - Amount billed is based on value of service or information.
Choosing the right time and billing software
Regardless of which billing type your firm uses, billing overall has become a much more complicated process than it once was. Now more than ever, it's important for those in the professional services industry to have up-to-date technology with mobility options in place to properly record expenses, generate invoices, track outstanding receivables and report on profitability.
In order to identify the best technology to fit your firm’s needs, take a step back and ask yourself these 4 questions:
1. Are you spending too much time tracking time?
Tracking time should be easy and intuitive. Firms often rely on manual processes to collect time, report time, and bill for it. Many professionals use an excel spreadsheet or jot time on spare pieces of paper and then handing that information off to the billing staff to deal with. This process can lead to excessive time spent entering data and clarifying questions with timekeepers. And it creates the potential for errors on bills.
Even if your firm has a solution for tracking time, it may have other challenges. Are your employees using the software throughout the day as they work? Is it easy to use? Can they access the time tracking features from anywhere and on the go? If the answer to any of these questions is no, then there are inefficiencies in your billing process.
2. Are you invoicing accurately?
How much non-billable time is wasted addressing client complaints and adjusting bills based on those complaints? You’ll never completely eliminate client questions and complaints. But repeated complaints about the same issues may signal accuracy issues.
3. How much time does it take to create and send bills?
Converting timekeeper information into a client-ready bill can be a highly manual process. Compiling spreadsheets, checking hourly rates, revising entries, and ensuring formats are correct takes time. Manually printing invoices and envelopes, stuffing those envelopes, adding postage and mailing them can also be a time suck.
Automating the electronic delivery of invoices with online links for online payment is essential for an efficient billing process.
4. Do you have the ability to gather important insights from billing and reporting?
Reporting is critical in order to have an accurate view of your finances and operations.
But in order to get that oversight, you must collect data from multiple resources, standardize it and analyze the results on a weekly basis.
Your billing processes and existing software should be able to produce regular reports for you without any leg work.
Don’t rely on an outdated system
The good news is, it’s easier than ever to rectify billing inefficiencies with time and billing software. Streamline and automate repetitive tasks such as:
- Accounts receivable
The more data you track, the more business insights your software can provide. Plus, many software options also include apps for your smartphone, so you can stay connected anywhere and on the go.
Technology is an essential tool for today’s successful professional services firms, especially when it comes to time and billing. However, a reliance on outdated systems or manual processes can hinder your law firm’s profitability and result in diminished service to clients and inefficient processes.
Don’t let outdated billing practices hurt your firm. Click the link below for an in-depth eBook on 5 billing practices you should always avoid.