Smart Billing Practices
If you’re a web designer, developer, graphic designer or any other practitioner within the creative-technical industry you know this scene all too well. A client comes to you – they want a website, logo, app or brand name. No, they want all of those, and they’d prefer it in a month or six weeks at the latest.
You have your initial meetings, the contract is signed, the deposit paid and you have cleared your schedule, ready to get to work, and then you get that call. “Sorry, but we don’t think we’ll have the necessary content you need for another month.” You bury your head in your hands and rue the day you were born.
Get hands-on with your finances
Maybe you’re a sole proprietor, maybe you run a small firm or you’re part of a large online advertising agency. The problems are always the same – how do you cater for fixed expenses when you’re not sure when clients are going to pay up for work done?
The most important aspect of your business is its cash flow. Without money, you’re looking at accruing fixed expenses and a plunge down the cliff of sure bankruptcy. The risks are real – you could lose your home if you depend on that payment for your rent or mortgage, and now you’ll be in a real pickle.
Popular ways to deal with cash-flow problems
Among the most common methods of addressing cash flow problems is beginning with a nice stash saved up in the bank, or a credit score good enough to take out a loan should need arise. For the first option, you can trust friend, family or angel investors. You can also have gigs which bring in passive revenue, even though you’re practicing your web design and development as a full-time job.
In order to preserve the cash flow, it is necessary to have different billing practices for different client situations. Instead of charging every job per project – with a fixed deposit and the rest to come at the end – consider charging hourly for projects that may qualify.
If you do pick hourly billing, it’s important to make as regular an estimate as possible so that you have enough hours to bill at a good enough rate to keep the office running. You want to avoid billing extra hours wherein no work was done because when clients find this out it won’t be taken too kindly. But again, you also don’t want to underestimate the time it will take and end up short-changed.
Base your assumptions on the fact that the job is going to take the maximum time limit, but work as efficiently as you can. Unfortunately, whether per hour or per-project billing, jobs tend to take up more time that was dedicated in the schedule.
Every delay is a money-drainer
You need to understand this and help your clients to understand the same – every delay is money down the drain. When a client promises to send something on Monday, but it comes in on Wednesday, Friday or God forbid the following Monday, it can leave you in a quagmire.
Now, nobody’s perfect and the delay could have been caused by any number of unavoidable circumstances. This is normally dealt with by extending the project schedule by the number of working days the delay covered. But what if the client delays by one month or even more? You cannot be indefinitely held hostage by a given client.
Unfortunately, most contracts of a work-for-hire nature do not include explicit clauses to protect one against the effects of client delays. These delays mean that you cannot get any work done, so there are no billable hours to charge.
Some firms have included delay penalties and restart fees to offset the risk of such occurrences, but these become a put-off for most clients. Of course, they cannot fathom how having to pay to stop work is acceptable, but there’s no reason to be unable to protect yourself as a designer from the risk of delays and still be upfront and fair to the client.
Negotiating more agreeable terms
Contract negotiation is in itself a real art and a very difficult one at that. For successful negotiations, there must be knowledge of each party’s desires and/or requirements and an accurate picture of all options available. Being familiar with ‘logrolling’ or trading assets during the negotiation processes to come up with acceptable value for each party helps too.
Your first discussions with the client will decide the tone of how you will carry out future discussions, all of which are likely to boil down to two aspects:
- How much the service the client wants will cost
- What the client can get with the money they have
Most clients have no idea how much it costs to get technical design work done, they know what they want roughly, but little else. So you’ll probably hear the client asking for a website, logo and app. When you offer price X, they’ll probably say, “How much for the app alone or the logo, or the site?” Basically, they’re trying to get a feel of how you charge for your services.
Alternatively, after you’ve told them it’s going to cost price X, they’ll tell you they only have Y budgeted for the whole shindig and ask what that amount can get them. Now, both assumptions inherently carry the presumptive and grossly mistaken idea that a creative job has a fixed cost, like the cost of milk in a grocery store.
In practice, no two creative jobs are similar, which means each would take a different amount of time, effort and resources to solve. To move from under this shadow, you both have to embrace this fact and work from there.
If you don’t like how the conversation’s going, change the conversation. You can do this by having a brief discussion with the client about something you can call ‘Terms of Service’ at the end of the very first consultation. This is where you shield yourself from the inevitable delays a project will cause, and it enables you to proceed under ‘full disclosure’.
Be reasonable and apply the terms consistently with every job. It also helps if you write out a plain English version for your clients who don’t have access to legal services to decipher the legal mumbo-jumbo for them – it’s also a show of good faith.
Choose a cycle where your billable hours are paid on a regular calendar schedule, once certain mutually agreed-upon milestones have been reached. Offer ranges rather than fixed figures, based on projects of similar magnitudes that you’ve handled in the past.