Do Professional Services Billings Typically Carry Payment Terms?

upfront billing

Should professional person services organizations ever charge up front for their services?

For many professional services organizations (PSOs), this question is a nonstarter. In their view, such an idea is a clear violation of some long-held "my word is my bond" tradition that can only cheapen the client-PSO relationship. Implementing this practice would make it announced as if they were interested in money first…and customer service somewhere after that. This would create an atmosphere of mistrust from the very offset of their client associations.

For an opposing view, nevertheless, look no further than the legal profession, where clients routinely pay retainer fees in advance to secure the services of their attorneys. As a farther example, also consider dwelling contractors, who almost always require a deposit and so they can buy the materials needed to build that dream house or revamp that kitchen. And don't forget organizations such as software support firms that typically nib their unabridged annual maintenance fees up front, earlier they field even their get-go service call.

The fact is, a lot of PSOs exercise upfront billing – and this trend is continuing to grow. Today, professional services organizations ranging from fitness coaches to photographers to web designers accuse some form of initial fee before providing services. Even the medical profession is getting into the deed, with many hospitals either billing patients for the cost of their deductibles – or at least working out a payment programme with them – prior to scheduling their elective surgeries.

upfront billing PSO A lot of professional services organizations from a variety of industries practice up-forepart billing.

What are the benefits of upfront billing?

Charging up front end for professional services can deliver meaning benefits for the PSO simply also for the customer. To be sure, it does provide the obvious: a guarantee that the PSO will receive payment for services. Simply upfront billing as well tells the customer that it is dealing with a true pro. In "Why You Should Always Require Money Upfront as a Freelancer," Janna Hogan states: "Professionals who implement and follow payment policies are viewed equally people who take their services and business seriously." Rather than making a customer leery or fostering ill will, then, a properly handled, consistently followed upfront billing process, can really build the client'southward confidence that it will receive what information technology has paid for.

Professionals who implement and follow payment policies are viewed every bit people who have their services and business seriously.

From the Common Benefits category, an upfront payment for an upfront beak signals to the customer and the PSO that both parties are committed to the project. "Without a deposit, yous customer may still exist on the fence near the project," continues Hogan. "This is a good way to solidify their commitment to working with you." In her view, this initial transaction lays the foundation for the two-way trust that is vital to every successful projection.

How much should y'all bill upwardly front?

Once the decision to bill upwardly front is made, the side by side item to accost is how much to charge. Consultant Michael Zipursky maintains, "Whether they pay you for your whole month in advance, 50%, 33% or 25%...information technology doesn't matter. What matters is that yous've received payment for the work you are going to provide."

For some, though, the event revolves effectually greenbacks period. Fifty percent, 33%, or 25% upwards front still leaves 50%, 67%, or 75% outstanding that could be used now to pay salaries, buy supplies, keep the lights on, etc. A number of PSOs that take traditionally billed postal service-projection are currently beginning to charge 100% of their project fees in accelerate – before completing even their first billable task.

One organization that sees the value of this seemingly radical notion is the video production company Vanilla Video. Co-ordinate to this house, 100% upfront payment creates a win for the PSO by –

Increasing cash flow.
Curbing inefficient utilize of administrative resources.
Preventing customer leverage abuses (e.g., withholding payments).
Alleviating credit risks.
Reducing overall operating costs.

vanilla Vanilla Video is one PSO that has embraced 100% upwardly-front end payment.

Merely, as Vanilla Video points out, the concept as well represents a win for the client:

Information technology causes the client to think through the project goals for a better projection result.
It offers convenience (one payment vs. multiple payments).
Information technology provides an incentive for the PSO to complete the client's projection faster.
It optimizes resource (more of the PSO's resource are devoted to the project, rather than to assistants).
Information technology promotes better service (merely put, the PSO wants to delight and retain the customer).

Switching to upfront billing

Whether information technology's 10% or 100%, switching to upfront billing tin be a bumpy transition. New clients may not feel comfy with the idea, and existing clients may not sympathize the change. For new clients, getting their purchase-in can be as simple as explaining your billing policy and and so reinforcing information technology with some of the customer benefits listed before.

Ultimately what is virtually of import is building and maintaining long and successful relationships with existing and new clients.

Existing clients – especially ones with whom yous have a long and successful relationship – may be a tougher sell. Michael Zipursky suggests approaching the subject this way: "To change an existing client over merely permit them know that your company is using a new billing system to keep more organized and that all you clients are now paying yous in advance or x percentage up front….if you lot're doing groovy piece of work you'll confront very petty resistance."

To bill or not to beak (at present)

Like many business operations, billing up front is not a one-size-fits-all solution. Some clients will be open to it; some, not. If a potential customer is adamantly opposed to the idea, peradventure this is a point that you should walk abroad from the bargain. For existing clients, nonetheless, Michael Zipursky says, "If it [upfront billing] looks like it's going to jeopardize your lucrative project with them…you're usually fine working with their rules."

Ultimately, the question "Should professional services organizations ever charge upwardly front for their services?" is something every PSO must answer for itself. Later on conscientious consideration, the response may exist "No. Stay with the familiar." The PSO that does decide this policy is the right way to go, however, may soon discover itself joining the ranks of professional person service organizations for whom upfront billing means improved project operation, increased client satisfaction, better cash menstruum – and greater profitability.

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For additional information on Beyond Software please contact:

Nicole Holliday
nholliday@beyondsoftware.com
866-510-7839

Topics: Professional Services, Project Bookkeeping