In the complex world of running a growing architecture or engineering firm, maintaining a profitable business requires more than delivering beautiful designs or technical solutions. To keep your team focused on the high value work and service your clients your business needs effective billing and invoicing processes. These are vital to ensuring that your firm is financially healthy, has adequate cash flow, and that you as the firm owner can focus on the right things.
By appropriately balancing administrative tasks with project work, and delegating when possible, you can calm the chaos of running a business. Through the implementation of invoicing best practices with repeatable and predictable processes, embracing software tools to help track resources and run batch invoicing, and adopting digital payment methods, you can save administrative time, create a more predictable revenue stream, and reduce the risk of leaving profit unrealized.
This article outlines the best practices that will help you and your firm streamline its billing processes, improve cash flow, and ultimately focus on what you do best—delivering outstanding projects to your clients.
But First a word about variations in billing requirements:
Before we dive into some tips to improve your invoicing best practices, it is important to acknowledge that billing strategies vary greatly by firm size, client type, industry, and by the people filling certain roles at the firm. Frequently there are billing requirements the lie outside of your control. Large clients, like corporations, government agencies, or educational institutions, often dictate the invoicing process for their projects. To take on these projects, firms must agree to the invoicing requirements and can’t dictate their terms.
On the other end of the spectrum, small jobs like retail and residential often provide more flexibility. Your firm can most likely set the invoicing policy for this type of work.
Large A&E firms with dedicated billing departments will have different best practices than small firms where the owner is handling the invoicing. There will also be a difference if you are the prime owner of the contract or you are acting as a consultant to another business - like a structural engineer working under an Architectural firm that owns the contract with the client. Each will have different challenges and opportunities.
Many recommendations here may not be applicable to some firms or projects. And if you have a range of project types at your firm, you may find that you need different billing strategies for different clients.
The key takeaway I hope you get from this article and that is applicable for all firms is to design a process that works for you and your situation. Your billing process is a design problem to be solved. Make sure that process is straightforward, repeatable, documented, and adhered to.
With that out of the way, let's dive into some of the challenges firm principals face when managing their billing processes.
Billing Workload Challenges
Firm owners have many things on their plate. Most started their practices to do the type of work they love and thus want to focus their time on the architecture or engineering work rather than being pulled away into firm administration tasks like invoicing. This makes sense and there are some common challenges and risks we see at many architecture and engineering firms.
Invoicing Delays
When you have too much work on your plate, and too many fires to put out, important tasks like invoicing get pushed to the back burner and delayed as the design work takes precedence. I've worked as an advisor to an architecture firm that forgot to invoice one of their bigger clients for over 6 months. Obviously that had a detrimental impact on their firm's cashflow. This may be an extreme example, yet this is too common across many A&E firms and a dangerous situation for any business. When the timeline for invoicing isn’t predictable, neither is your cashflow, putting your business at risk.
Irregular Invoicing Cadences
An irregular invoicing rhythm is another common billing habit at A&E firms that negatively affects when invoices get sent and the predictability of cashflow.
Billing at project milestones is a common example of this risk. Although it may feel right to invoice at the end of a phase or after a set milestone, these are inherantly unpredictable and don't align with your financial commitments which tend to happen on a monthly bases - like rent, salaries, and software subscriptions, to name a few.
Phase or milestone billing means you are stuck creating invoices randomly throughout the month rather than allowing you to clump your invoicing work into a single block of time. This practice will disrupt other workflows and continuously distract you from being able to focus on the billable work that you prefer to spend your time on.
It means you will have to work on invoicing continuously as project teams meet milestones. It also means invoices can be delayed, sometimes by weeks or months, if a project gets off schedule or a client delays a phase from being complete. The resulting cashflow from those sporadic invoices will be hard to predict, making it difficult to balance expenses with revenue which can lead to debt or negatively impact your business reputation.
No Set Invoicing Process
Not having a systematized process is not only distracting for you as the firm owner but it also prevents you from being able to delegate these tasks to someone else. It is difficult to hand off work and have it done to a high quality when there isn’t a defined process someone can follow.
When a process is based on a personal habit or memory, or tied to a variable milestone, it is almost impossible for you to hand off this work and have your expectations met. There is also wasted time and effort because the work is done slightly differently every time. This is a common frustration for firm owners as they try to delegate work best handled by others. Too often they start by delegating and when the task isn't done to their expectations they either micro-manage the person filling the role, or take over the task themselves. This leads to frustration, overwork, and burnout.
Poor Data Management
Missing up-to-date data means more work to ensure invoices are correct. Manually updating spreadsheets takes too much time and can lead to human error. Having to talk to each project manager to get an accurate picture of what work has been completed and what can be invoiced interrupts your whole team. Trying to track milestones across every active project to know when to bill is time consuming. Meanwhile, manually tracking time and calculating invoice amounts just adds to the frustration of being overburdened with administrative tasks. Together, these common challenges can delay invoices being created and sent and make revenue highly variable from month to month.
Billing Workload Solutions
The goal is to cut down on the work you are currently doing that could be delegated to others. This opens your time to focus on the work that you love, and the reason you started your business to begin with. These recommendations can be effective in reducing the chaos of running a growing architecture or engineering business and ideally make your role as the firm leader more rewarding.
Systematize Your Billing Process
Your billing process needs to be simple, clear, and repeatable. There should be a documented system that outlines how you will bill. This process should be developed in a way that anyone can step into the role and successfully invoice the correct amounts for each of your projects. As a firm owner, you should help define or design the billing system but once it is standardized the goal is to delegate it to others while you focus on higher value work.
It is important to note that when we suggest documenting this process, we literally mean to write it down. Whether you have a physical binder with your business's standard operating procedures or use a tech solution like Notion or an intranet (or even a custom GPT), it is important to document how each process in your business is to be done. The documented process should be easily findable or searchable so anyone at the firm could take over that role for a day and get invoices out the door accurately.
Regular Invoicing Rhythm
Invoicing should be done at the same time every month. It should be like a heartbeat, pumping the lifeblood of your business. A consistent predictable invoicing rhythm will even out your cashflow, take the stress out of firm financial management, and allow yourself and your team to focus on other work.
We recommend invoicing monthly - on the last business day of each month - and holding firm to this schedule. Block off the needed time through a regular calendar event, so you don’t get pulled away into other tasks. Invoicing should be a non-negotiable task that takes precedence over anything else on your monthly billing day. Make sure any others on the leadership team that need to be involved are also available at the same time each month.
At the risk of being redundant, this is a non-negotiable event that never gets rescheduled for other tasks or requests. This time is set aside either for you to create the invoices for all active projects, or ideally, to review the invoices your administrative team has put together and approve them to be sent.
Some firms may prefer to increase this rhythm to twice a month. This is fine, if that is what works best for your business. When I was running a firm, I personally appreciated being able to put aside thinking about billing for a full month at a time so I could focus on other work. However, I understand that this may not work for everyone. Regardless of the cadence, it is important to find what works for you and your team and make this a regular part of your monthly schedule.
Hire Administrative Support
Firm owners should not be doing most of the administrative tasks. Even when it comes to something as important as invoicing, you should be training people to take these tasks off your plate. It is your job to design the desired process that works for your business, and then delegate that work to someone else. You oversee and review reports and invoices, and approve them to go out, but most of the work can be successfully completed by others in the firm, opening your time for higher value tasks.
This means you probably should be looking to hire an administrator or office manager who can handle many of the financial aspects of running the business. Even small firms could benefit from this sort of support. I would recommend bringing on an administrative support person when a firm grows beyond 7 people.
For smaller firms, look to outsource most of this work. Remote bookkeepers can both balance your monthly books as well as handle tasks like developing and sending invoices, paying bills, and generating the reports firm owners like you need to review on a regular basis. Again, it starts with you designing the process you want them to follow, but onse the system is set up and documented, you should be able to successfully delegate or outsource much of this work.
Add Beneficial Billing Terms In Your Contracts
When setting up agreements with your clients, develop terms that are to your benefit and assist you in simplifying your billing practices and cuts down on the effort needed to invoice.
When you submit a proposal there is more to it than just the scope of work and the price for your services. There are many additional terms that could accompany your agreements that can help your firm be more successful and help with your billing and cashflow.
For instance, ask for larger down payments. How does this help? It mitigates the risk of not getting paid, it can reduce the number of invoices that ultimately need to be sent, and it helps you manage your business expenses because you have more cashflow up front.
I have even offered small discounts to clients if they paid 100% upfront. Think about the amount of time you would save if you only had to invoice a client once? A small discount could save lots of time, reduce your risk, help manage expenses, and maybe even save money if you don't need to take out loans or tap into lines of credit. Plus if you could put that money in a high interest savings account or invest it, the small discount could be more than offset by that money working for you.
Of course not every client will go for this, but if just a few agreed to these terms it would save your team a lot of time and effort tracking project revenue and crafting invoices. By putting terms like this into your contracts, you also give yourself and your clients things you can negotiate on other than the price for your services.
Other terms to consider that can help with billing:
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Late payment penalties
I charged $300 or 3% of the invoice amount whichever was greater, if an invoice was paid more than 30 days after it was due. Check with your local laws to see what you are allowed to charge. You should definitely have a late payment penalty in your terms.
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Electronic payments
Add a term in your agreement that all invoices will be sent electronically and payments will be paid electronically. This cuts down on paperwork, mail delays, processing checks, and typically leads to invoices being paid 30% faster on average.
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Defined Payment Schedules
Use contract terms to outline the specific days invoices will be sent and payments will be due. Making this transparent and in writing will help ensure you get paid on time. Having this conversation with the client at the beginning of a project will also give them a chance to inform you of their internal processes so you can predict when payments will be processed. I even took our proposed pricing and divided into even monthly payments to be more predictable for us and our clients.
Automate
Incorporating automation into your billing and invoicing processes offers significant benefits that can transform the way your firm operates and save lots of time, both for you and your staff. Automated invoicing systems can reduce errors, ensure invoices are sent on time, and provide real-time tracking of payments.
By automating repetitive tasks, such as generating invoices, generating reports, and sending payment reminders, you can free up valuable time for yourself and your team. This reduces the administrative burden and enhances the accuracy and consistency of your invoicing.
Automation tools can also integrate with your project management and accounting software, providing seamless data flow and up-to-date financial insights, which are crucial for making informed business decisions. Ultimately, automation empowers your firm to maintain a steady cash flow with minimal effort, allowing you to focus on delivering high-quality projects to your clients.
Batch Invoicing for Professional Service Firms
With firm management software that integrates project management, time tracking, expense tracking, and financial tools like invoicing you have the power to significantly reduce the amount of time spend on invoicing processes each month. Automation, as discussed above is a great tactic to cut down on time spent, while batch invoicing is another feature you should look for in your firm management software.
Instead of creating each invoice, one at a time, for each project and client, it can be possible to have the software batch generate invoices for all active projects at once. Then your invoicing team simply has to review and make specific adjustments to the invoices before they are sent. This can have a huge impact on the efficiency of your billing process and make it a lot less painful for your team to execute this each month.
Invest in Software That Can Save Time
Investing in software like BQE CORE can be a game-changer for architecture and engineering firms looking to save time. BQE CORE is specifically designed to meet the unique needs of A&E firms, offering comprehensive solutions for time tracking, billing, project management, and accounting. By centralizing these functions into one platform, BQE CORE eliminates the need for multiple software tools, reducing the risk of errors and the time spent on manual data entry.
The software's automation capabilities streamline the invoicing process, ensuring that invoices are accurate and sent out promptly, which helps maintain a consistent cash flow.
Additionally, BQE CORE provides real-time insights into project financials, enabling better decision-making and more effective resource allocation. This investment not only enhances operational efficiency but also allows firm owners to focus more on high-value tasks, ultimately driving profitability and growth.
To see how BQE CORE can benefit your business and make the billing and invoicing process streamlined schedule a customized demo today.
Conclusion
Mastering the billing and invoicing process is crucial for the success of any architecture or engineering firm but it shouldn’t rely on manual tasks carried out by firm owners or partners. Managing your workload so you can focus on the things that only you can do is vital to the long term success of your business and also your enjoyment of your job.
By systematizing your processes, establishing a regular invoicing rhythm, and leveraging software for tools like batch invoicing and automations, you can significantly reduce the workload associated with billing while ensuring a steady cash flow.
Additionally, setting favorable billing terms in your contracts can streamline invoicing and improve your firm's financial health. Remember, the key to managing these tasks effectively lies in designing a process that works for your unique business needs, documenting it thoroughly, and delegating wherever possible. By doing so, you can focus more on what you love—creating exceptional projects—while maintaining a profitable and efficiently run firm.
