ow to Sell Your Services at a (High) Price Clients Are Willing to Pay - BQE Software
6 Tips to Improve Receivables and Get Paid Faster
Pay day is the happiest day for employees. For business owners, the equivalent is when they get paid by clients. For retail, food service and most other industries, the customer pays when they get the product or service.
Payday is the happiest day for employees. For business owners, the equivalent is when they get paid by clients. For retail, foodservice and most other industries, the customer pays when they get the product or service. But for wholesalers, business-to-business providers, and professional services firms like accountants, engineers, architects and others, the long-standing practice is to provide the service or product and then invoice the client for payment later.
When AR is working well, it can be virtually hands-free, with clients paying their invoices on time. But that is rare. It is far more common for firms to have at least a few clients that need reminding about their late payments, and some need additional reminders, which leads to aging AR reports in the 30-60-90 range. After two months, however, it is increasingly likely that the debt will be sent to collections, and the client may be removed from active status.
As more and more firms move to value-based pricing, many are finding it a good time to also revisit how they bill their clients. For some, this means tightening down on standard AR billing best practices, but others are moving to a subscription-based pricing model that charges the client a steady rate across all months of the year.
Here are several ways that firms can reduce their AR challenges.
If your firm was in the retail industry, you’d be getting paid for your product before customers walked out the door or finished their online checkout. Some firms are deciding to implement a version of this model. In short, clients agree to make the first payment in advance of your firm providing their service. This works best when the price is a flat fee and known in advance of doing the work, such as with value pricing systems (https://www.aicpa.org/interestareas/privatecompaniespracticesection/newsandpublications/small-firm-solutions/the-benefits-of-value-pricing-and-how-to-do-it.html), not for hourly-based billing.
Read how one accountant eliminated AR using a retainer-based system and no longer has to spend time on aging and reminder invoices: https://blog.bqe.com/2017/06/05/how-to-eliminate-your-accounts-receivable
Subscription-Based Pricing with ACH
Another way to accomplish the same elimination of accounts receivable is to implement subscription-based pricing, for all of a client’s services. This averages their payments to a steady and consistent monthly cost, which can be attractive, especially to seasonally affected clients. At the same time, since the price is a consistent sum each month, have clients agree that the payments will be due and automatically debited from their account or charged to a business card on the same day of each month.
The customers can be sent an automated reminder a couple of days before that a charge will soon be drafted to their account, and clients can still receive a report of the client services they were provided during this time, but with a zero-sum due invoice. Could some prospective or current clients balk at this new payment model? Yes. But consider if you want clients who are adaptive to technology and automation or clients who cling to antiquated models.
Users of BQE Software now can use firm-specific ACH payment solutions from LawPay, DesignPay and CPACharge, which are now integrated into the BQE platform. These systems can help firms improve cash flow and efficiency.
Whether eliminating AR or reemphasizing best practices for traditional invoicing models, it’s critical to automate every step of the process to avoid tedious manual work that is much more prone to error. With AI-powered smart practice management systems like BQE CORE, firms benefit from the automated time and expense entries, automatic production of all reports, and invoices that are automatically generated electronically with approvals processes, before the system sends them to clients, also electronically. The system can also be set up to automatically send client reminder notices, as well as keeping firm staff alerted to aging and client histories. Do not accommodate clients who want paper-based billing, as it is a drag on productivity and less trackable.
Move Away from Email
Although client invoices would not likely include sensitive or identifying information, emails are still can pose a danger to businesses, especially if they contain attachments or links. Instead, consider offering clients a portal on your website they can log into to view and download (if desired) their invoice, as well as other documents, financials, reports and forms you may want to give them. An option is to send clients an email with a link to the portal, or just to remind them to visit your firm’s website and log in to their portal.
Polish Your Invoices
If still sending a traditional email or even print invoices, make sure they are clear and to the point, with details on the work provided and the amounts due, whether there was a PO number involved, that it includes proper contact information for the client and your firm, and that the payment due and due dates are very clear. Also, if you offer payment discounts or late fees, make sure these are clear and not easily missed. You should include a link to online payment options and may even consider offering a one-time payment discount to clients who opt-in to subscription billing or ACH payments.
On initial invoices and on subsequent reminders and late notices, try to remain positive. If you wish to retain the client, with the belief that the payment is just slipping their notice, then it is better to avoid negatively charged or confrontational messaging. If the payments get beyond the 90-day late stage, it may be time to send the account to collections, where they can play the tough role. One study showed that businesses with invoices with polite language get paid an average of 5 percent faster. https://www.forbes.com/sites/ilyapozin/2014/02/26/want-your-clients-to-pay-faster-7-surprising-tips-from-freshbooks/?sh=6b0954432475