For some A/R collection advice, here is something that can be used to reduce the incidence of client confusion, monthly negotiation, and payment delay for those who bill hourly.
I commonly criticize hourly billing, and on top of everything else it is incredibly time-consuming for outside counsel to prepare, validate and submit invoices, as well as for inside counsel to review, understand, and approve.
As we commonly do on RainmakerVT, let’s see it from the clients perspective. Yes, billing software is sophisticated nowadays. But still, having to reconcile multi-page bills from dozens of different law firms is a pain if you’re responsible for the billing department of a sizeable company. This almost guarantees slower payments.
And your client does have to validate that the amount they’re paying you is reasonable relative to what was accomplished before authorizing payment.
So, what could we do to help this process along? The title kind of gives it away:
Add an executive summary to your invoice!
The summary invoices should contain is supposed to give your clients a way to easily visualize that things seem to be more or less right.
Make a list of open matters and give a short description for each item. Include the progress achieved since the end of the previous billing cycle, explain any discrepancies between budget and duration that might have occured, and give a statement on what progress you expect during the next billing cycle.
For visualization purposes it also helps if you add a percentage overview of (a) how much of the projected budget was already used and (b) how much of the projected duration for the project has already passed. That makes it easier to see how much of a discrepancy there is between the two.
This might seem counter-intuitive. Why would I brightly highlight discrepancies for my client? I’d be glad if they didn’t notice! Right?
No. Clients will commonly spot-check the detailed time records and if they start noticing things that they have to investigate, they’ll feel less confident about everything else that’s in your bills. So now they loose trust and need to check everything even more thoroughly.
Instead if you use this kind of executive summary for invoices, you communicate to your client openness and trustworthiness, increasing the chance of a timely payment authorization.