IN FIRM: Optimizing 2009 Billing Processes

From the Dec. 2008 Issue

With concerns about the economy and talk of recession, most firms and their clients are buckling down their operations any way they can. One area that is getting a lot of attention in our client base is that of improving billing and collection processes, as many firms still have not transitioned to daily billing that would allow an invoice to go out with the completion of every client engagement. The easiest place to begin this process is with the upcoming tax season billing, as most firms do a fair number of returns where the return can be billed on its own. We all know that the client’s greatest satisfaction with the firm’s service is the point at which they receive the return, so it is obvious that if we can deliver an invoice with the return, we have the best chance of optimizing collections. To transition the firm to a daily billing process requires that the owners think about the psychology of how the firm bills, evaluate the process to capture time and expenses, and use the tools within the firm’s disposal to make sure the invoice gets out timely.

PSYCHOLOGY OF BILLING
When firms step back to look at how they bill for returns, most will realize that the amount is highly subjective based on local market rates and what the biller feels the client will bear. In most cases, if the return is fairly similar to the previous year, the biller will invoice the return with a reasonable markup unless there is a significant change in the factors impacting the return (such as a sale of a property or a divorce). Production on a return can vary depending on the experience of the preparer and issues with technology or applications, which firms usually spread amongst other clients, rather than the specific return that may have been impacted by the problem. Please note that billers are more aware of these items at the time they are signing the return than a few weeks later when they may be doing group billing, so it is in their best interest to bill as closely to the preparation as possible, which would be at the time of signing the return. If the biller can be provided the previous year’s amount, the current year’s projected invoice, and an accurate listing of all time and expenses either on the tax lead sheet or within the system, they would have the best knowledge to accurately determine the invoice.

CAPTURING TIME & EXPENSES
The key to successfully capturing time and expenses is to do it in real time, which means daily timesheet entry, release and posting. Studies done in the past showed that firms transitioning from monthly or weekly time entry experienced a 5 percent to 7 percent increase in realization. Promoting daily time capture begins with the owners committing to the process and making sure there are processes to ensure accountability. This is often enforced with cash “dings” for each time an owner does not have his time in on schedule. For employees, firms cannot withhold pay, so a more positive approach is usually called for, which can include rewards or other firm perks. Today’s time and billing systems can help administrative staff identify those who don’t have their time in so they can be followed up on a daily basis until it becomes a habit (which firms should start doing immediately). Many firms post a listing on the intranet or bulletin board to promote compliance. Please note that it is critical for the firm to have a culture of entering expenses at the same time as they are incurred so that they can be charged for, as well (and not written off because they were entered long after the bill went out).