Academic journal article Journal of Accountancy

The Quicker You Bill, the Quicker You're Paid

Academic journal article Journal of Accountancy

The Quicker You Bill, the Quicker You're Paid

Article excerpt

Here's how we handle the billing and collection process at Mendlowitz Weitsen. We use fixed fees as much as possible for new clients, and our fixed-fee engagement letters state what we will do, what we don't include and what the payment schedule is. New clients pay us retainers--as do existing ones if we provide services apart from our regular work for them.

We try to time payments to the work flow, so for a job expected to take three months, we ask for a retainer of about 25%, followed by three equal monthly payments. We've found that billing frequently for smaller amounts gets us paid faster with less resistance. No tax return or financial statement leaves the office without a bill unless it is already paid for or covered by regular retainer billings.

Clients, especially new clients, that don't pay bills within 15 days get a telephone call from a partner asking them if they received the bill, if there is any problem and telling them that we expect timely payment. That reminder sets a tone to the arrangement--and it works.

For frequent late payers, we hold up completing their work--and sometimes don't schedule any of it--until they pay us. For people who are long past due, we "freeze" the arrears amounts, and they have to pay us in full, in advance, for new work. That way we don't lose the current work they would pay someone else for anyway and--it's hoped--we collect all of what they owe at some point. We also ask arrears clients for a series of postdated checks (for any amounts) for as much as a year in advance, so the past-due balances can be settled gradually.

Getting paid isn't just a business function, it's a marketing issue. How you present bills can make a difference to how and when you get paid and whether you retain the client. For example, if we perform an extra service when we do a tax return, it goes on the bill as a separate item instead of lumped with the tax preparation fee. This shows the extra work is special and the charge won't recur. …

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