If you're in a service business, billing accuracy is one of those things that you need to get right - to save time, predict revenue, and make customers happy.
When you're operating a service business, time is money — and the time it takes to generate invoices and track hours worked can get in the way of your bottom line. It's important to monitor both billable and non-billable time so that you can get the most accurate picture of how your team is spending their time, which will enable you to make better decisions about staffing and billing rates.
If you're not careful, billing can become a huge issue. You'll find yourself spending way more time than you'd like trying to gather and organize billable hours on your invoice. This can put a strain on how much work you get done each day and also lead to serious errors in your billings at the end of the month. Not to mention all the secrecy that's going to be hanging above the expected revenue.
Here's how invoice accuracy and automated processes can help out.
Billing is the lifeblood of a professional services business.
If it's not accurate and thorough, it can be a headache for everyone involved, generating extra expenses and time spent on follow-ups to get things squared away.
Invoice accuracy is also important because it provides a solid foundation for your relationship with the client. If you send out invoices containing errors or omissions, or if you miss deadlines routinely, you're telling your client that you're unreliable and that they can't necessarily count on you to get the job done in a timely way. And that's a big problem for any business relationship.
Billings should be easy to follow; they're like receipts — they should be as clear as possible so that when you give them to your clients, there isn't any question about what's been included in them.
When there are items that seem unclear or confusing, it's natural for a client to question whether they were charged correctly — or whether they were even charged at all. That could lead to late payments or worse — the client might pass on the payment if they have doubts about how their bill was calculated or what was included in it.
And there are many more items that support the value of invoice accuracy. So let's break some of them down.
First things first, accurate invoicing starts before you start running a project, not when you are wrapping it up and trying to pull all the numbers together. To achieve invoice accuracy, your teams need to register the time they spend on projects. And even though this might seem like extra work, tracking time to ensure a healthy billing cycle comes with its own rewards.
With all the team members being on the same page as to what needs to be done and how much time each project stage is going to take, you will always be able to build realistic project plans later on. Better yet, you'll be able to give clients accurate indications of the time and the resources their desired project is going to take, adding transparency into the process, improving customer experience, and getting loyal customers.
If you don't already have a system for tracking time, there are plenty of options available. A simple spreadsheet might be all that you need, but there are a number of more sophisticated apps out there that can help keep everything organized and give you detailed reports with minimal effort. Whatever system you choose, make sure that it's convenient for everyone on your team, and that they know how it works so they can use it consistently throughout each project.
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Accurate billing asks for a clear distinction between billable and non-billable work. There are many tasks that don't carry a monetary value, such as answering emails, preparing proposal drafts, or having internal meetings.
Managers need to understand where the line is drawn between billable and non-billable work so they can monitor utilization effectively. It's also especially helpful for employees to know what's billable and what isn't because it gives them insight into their own productivity — if they're spending too much time on non-billable work, they'll have to adjust their habits or try to negotiate a higher pay.
Accurate billing is an important part of professional service businesses. Services businesses, especially those that bill by the hour and rely on accurate invoices, need to be able to correctly identify which tasks are billable versus non-billable and measure the billable utilization of their team members.
It's critical to identify both types if you want to ensure proper billing and prevent overpayment or underpayment by either your customers or your team members.
Billable utilization is the amount of time that you spend on a project that is directly attributable to billable work — in other words, the amount of time that you spend working for which money will eventually come in. It's a key metric for any professional services business, as it allows you to track how much time your team is spending on work that turns into revenue.
Because each member of your team is responsible for billing out a specific amount of time every month, accurate billing lets you quickly assess how well your team is able to meet their targets. If a certain resource isn't meeting their billable utilization goal, there's no need to guess why or what might be interfering with their success — you can see exactly how much time they're recording, and determine if there are areas where they need help with the process or even additional education about how to keep track of their time or improve their skills at staying productive.
It's important to have a billable utilization rate of around 80% because it tells clients that you're dedicated to them and the quality of your work, but it's also important not to get too carried away: if your billable utilization gets too high, it can place an unfair burden on your staff and make it difficult to get to everything you need to do.
Most service businesses rely on some form of fixed-price project work. In these situations, an accurate budget and schedule are extremely important — not just for the client's sake, but to help you control project costs for your own benefit.
When you know exactly how much every task on every project costs, it becomes easier to plan for the future as well as accurately quote future projects. You can use your historical data to predict how many people you'll need for what kinds of tasks, how many hours they'll take, and how much it will cost. This data can then be used to figure out how much revenue you can expect from each new client — giving you a clearer picture of your projected profit and loss for each month.
Making it easy for your clients to see what they're paying for leads to increased customer satisfaction.
When you're billing for your professional services, it's important to make sure you're billing accurately and completely. Accuracy is a matter of trust — your clients need to trust that they can rely on you to provide an accurate bill every month.
The more accurate the items are, the easier it will be for your client to understand how much they're paying for what. Inaccuracies can also cause confusion about what has been billed and what hasn't, which can lead to questions about why charges for certain things were included and others weren't.
This can be confusing and frustrating, and it can also lead to disagreements down the line.
Accurate billing is a necessity for service businesses. It enables project management teams to better manage their projects and areas of responsibility and increases overall productivity within the company. It also helps ensure that the company has enough capital to sustain itself financially and can continue to provide services to its customers.
Being proficient in project accounting can make or break a professional services business. When the right amount of time is spent on an assignment, that extra effort translates into more revenue for the business.
