Myths That Stymie Efficient Billing

A seldom taught and underrated skill, effective billing is a vital cog in the cash-flow machinery of firm success. Partners’ billing styles may vary widely, but resolving outdated notions and standardizing your firm’s approach can yield advantages. These include reducing professional liability exposure, achieving consistent and equitable prices, maintaining adequate working capital, reducing errors and write-downs, and improving client relations. To tune up, your firm may need to topple some long-standing CPA myths first. Check the list below against current attitudes at your firm:

      Accountants should do the job first and worry about money later. Reality: The “products” CPAs have are time and information. Give these away and you send the wrong message to clients and hurt your business.

Inexperienced or inefficient staff cause write-downs. Reality: Maybe it’s not the staff. If a job has run over budget three years in a row, it’s time to rethink pricing.

If we raise prices, clients will leave. Reality: Some clients are price-conscious, and you might lose a few. Nevertheless, fees have to be cost-effective.

If you do good work, clients will appreciate it and pay without prompting. Reality: Clients take technical quality for granted. You have to decide what services are worth in your area and bill appropriately.

If you don’t charge for all the work, clients will be more likely to pay the bill. Reality: Most of the work a CPA does is invisible, so it’s not a factor.

Last year’s billing is a good basis for this year’s price. Reality: Not true. The client is unaware of how your overhead changes, but you need to adjust for it.

If you charge lower prices than the competition, you’ll get more clients. Reality: Most clients don’t know what your competitor charges. Nor do they care.

Asking slower-paying clients to pay is unprofessional. Reality: Clients will respect you more as a business adviser if you run your firm in a businesslike way.

If you do ask clients to pay, they will take their business elsewhere. Reality: If they’re not paying, they’re not clients.

Clients appreciate it when you delay sending them their bills. Reality: Clients prefer to know what they owe, even if they can’t pay right away.

The amount on your time-and-billing system indicates the fair price. Reality: Timekeeping is one aspect of your costs, but it may have no relationship to your service’s value to the client.

What you do can’t be very valuable because it is easy for you. Reality: Not at all. That aptitude may be the core of your service’s value to clients.

Source: Adapted from the Management of an Accounting Practice Handbook (New York: AICPA, 2000), chapter 203, section 203.02, “Billing Myths” by David Cottle, CPA (from Bill What You’re Worth…and Collect What You Bill ). Used with permission.