3 Billing Challenges Consultants Face and How to Overcome Them
As an independent professional, billing clients is an essential part of your business. The financial side of your business can rapidly become messy and stressful if you don't have a solid system in place to track your hours and bill your clients.
If you're just starting out, you'll want to make sure you're charging the correct amount for your services and that tracking your expenses and billing clients is as straightforward as possible.
If you're a seasoned individual, re-evaluating your bill rate and considering new financial tools and methods are always worthwhile tasks.
Billing clients is an important part of your job as an independent professional. Without a good system in place to track your hours and bill your clients, the financial side of your business can quickly get messy and stressful. If you’re just starting out, you’ll want to ensure you are charging the right amount for your services and make it as simple as possible to track your expenses and bill clients. If you’re a seasoned independent, it’s never a bad idea to re-evaluate your bill rate and consider new financial tools and methods.
1. Deciding How Much to Charge
When deciding how much you should charge for your services, there are many things to keep in mind. You’ll want to find a balance between not charging too little and not charging too much for your services. You want to remain competitive, but not undersell yourself. Here are a few tips when considering your bill rate.
Factor in your costs
There are two main types of costs: fixed costs and variable costs. Fixed costs are things like insurance, utilities, or rented office space that remain the same from month to month. Variable costs are things like advertising costs, business software, or project materials that may change based on your particular client or type of project. Be sure to keep in mind other costs such as health insurance or retirement contributions and potential tax-deductible expenses.
Calculate your billable time
There are a few different methods you can use to determine your billable rate. Cost-based rates consider what you need to make to cover your target income, market-based rates consider what you provide versus similar services available in the market, and value-based rates consider the value you bring to your particular client. Check out our bill rate calculator for help determining the best rate for you.
2. Tracking Hours Worked
Tracking the hours your work is a valuable practice whether you charge your clients by the hour or by the project. When you know where and how you spend your time, you can adjust your habits to be more productive and profitable.
Billable vs. non-billable hours
Billable hours are the time you spend working specifically on a project or with a client. Non-billable hours are the time you spend on tasks like business administration or marketing.
Time tracking tools
There are many tools and resources available for time tracking, account management, and billing. Do-it-yourself software platforms can provide a range of accounting options at a monthly cost. Mobile time tracking apps like HoursTracker or Toggl come at a much lower cost and can be a simple way to track billable hours on-the-go. Or, if you’re looking for additional assistance such as contract review, automated invoicing, and expense compliance review, check out services like MBO that provide hands on support where and when you need it most.
3. How to Invoice a Client
When it comes time to invoice a client, you’ll want to present yourself in a professional manner. Before you even start a project, talk to your client about your billing policies and procedures. Make sure you are on the same page regarding rates, billing method, timing of invoicing, time to pay, preferred payment method, and late fees. This will help you avoid difficult situations and conversations down the road.
Keep invoices simple and clean
A client invoice should be clean and easy to understand. Avoid using industry jargon that your client may not be familiar with—anyone who reviews your invoice should be able to understand what’s going on. Important items to include are: your name and contact information, date of the invoice, a breakdown of services rendered, client name and address, and total amount due.
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