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The best billing best practices for better billing habits
Published:Feb 16, 2024

Billing best practices for better billing habits

Projects can easily derail without clear expectations and a streamlined billing model, causing strain on client relationships and affecting your bottom line. A solid billing process can help your business go a long way.

In this article, we’ll delve into the best practices for billing for your services. We’ll touch on aligning expectations, choosing the right billing software and model, cultivating a time-tracking culture, and leveraging the right apps.

1. Aligning expectations with clients

Aligning expectations helps prevent scope creep, miscommunication, and disputes that can derail your project and strain client relationships.

It puts everyone on the same page about what the project entails, its objectives, deliverables, and success criteria. Here’s how you can align expectations with your clients effectively:

  • Define the project’s objectives: Clearly outline the project’s aims and use them as the basis for all future discussions and decisions. 
  • Set realistic milestones and deadlines: Break down the project into manageable chunks — each with its own deliverable and deadline — so both parties are on the same page about the project deadline.
  • Establish regular feedback channels: Regular check-ins allow you to update the client on the project’s progress and promptly address any concerns.
  • Document your expectations: Use professional tools such as a project charter, a statement of work, or a project plan to outline your expectations. Having a clear roadmap not only provides alignment but also fosters trust and transparency.

Documenting your expectations with apps like a project charter, a statement of work, or a project plan is also helpful. These documents outline the project’s scope, objectives, deliverables, timeline, and other details, providing a reference point for you and the client.

2. Choose the right billing model

Your billing model can influence your project’s success and your bottom line. It’s not just about how much you charge, but how you charge. Different projects, clients, and situations call for different billing models.

Choosing the right billing model involves considering several factors:

  • Project size, complexity, and duration
  • Client’s budget and requirements
  • Your skills and experience

You must also evaluate and compare different models based on their risks and rewards, flexibility and control, transparency, and trust.

The best billing model can vary depending on the project:

  • Fixed price suits simple, well-defined projects with clear scope and deliverables.
  • Time and materials (T&M) work well for complex, uncertain projects where it’s hard to estimate the time and resources needed.
  • Value-based billing can be a good fit for high-impact, innovative projects delivering significant value.
  • Hybrid models work well for mixed, dynamic projects that involve different tasks and stages.
each type of model showing what it's best for

Each model has pros and cons, and choosing the one that fits your project best is essential.

For more insights and examples, check out our guide to software development billing.

3. Cultivate a time-tracking culture

Time tracking isn’t just about clocking in and out. It’s an integral component of managing software development projects effectively. Tracking time thoughtfully enhances billing accuracy, boosts efficiency, and elevates profitability by giving you clear insights into the effort each task requires.

Time tracking promotes productivity by keeping everyone accountable for their time. It also increases visibility into project progress, allowing you to identify bottlenecks and make the necessary adjustments.

Creating a culture of tracking time takes time, though. It requires clear communication, setting expectations, and providing the right apps for the job.

Here are some steps to get you started:

  1. Use reliable time-tracking software: Choose a user-friendly time-tracking software that integrates seamlessly with your project management and accounting systems, streamlining the process and minimizing disruptions in your workflow.
  2. Set clear policies and expectations: Make sure everyone understands the importance of time tracking and how to do it correctly. Consistency is key.
  3. Provide incentives and feedback: Encourage time tracking by recognizing those who do it well. Regularly review time tracking data and provide feedback to help your team improve.

4. Use invoicing software

The average small business spends around 120 working days per year on administrative tasks, including billing. That’s a lot of extra time you could be spending on your core business activities!

One advantage of invoicing software is its ability to send automated reminders and notifications. The software will keep track of due dates and send reminders to clients.

Many invoicing solutions integrate effortlessly with other apps and platforms you already use, including your project management tool, customer relationship management (CRM) system, or accounting software.

Such integration ensures a smooth workflow, allowing you to pull data from different sources without switching between multiple platforms.

Invoicing software doesn’t just help with billing — it also provides valuable insights into your business. Most invoicing software offers robust reporting and analytics features. You can track payment trends, identify your most profitable projects or clients, and even forecast future revenue.

5. Send invoices promptly

One of the most effective ways to improve your cash flow and maintain a healthy relationship with your clients is to send invoices promptly.

The quicker you send the invoice after the delivery of a service, the sooner you can get paid. Due ran an experiment where they sent a total of 250,000 invoices. 63% of those invoices were paid within 30 days, while 18% of all sent invoices were settled within 24 hours.

visual representation of a stack of invoices totally 250,000 showing 63% paid in 30 days and 18% of that total paid in 24 hours

Timely billing improves your cash flow and solidifies your reputation as a professional and reliable service provider. Remember: your client has a business to run and expenses to track, too. 

If your business has grown to the point where you’re juggling multiple projects, consider delegating invoicing responsibilities to a trusted team member. That way, invoicing doesn’t slip through the cracks amid other tasks.

6. Incentivize early payment with discounts

There are two popular discounts for early payments: volume discounts and time-based discounts. Volume discounts are all about quantity. The larger the payment, the lower the price.

On the other hand, time-based discounts are all about speed. The faster the payment, the lower the price. Both offer a win-win scenario, with clients saving money and you improving your cash flow.

For example, a 2% discount if payment is made within 10 days.

Dynamic discounting, however, is a bit more flexible. The earlier the payment is made, the larger the discount.

Here are some tips to help you implement discounts in your billing:

  1. Track your invoice and payment data: Record keeping will help you understand your client’s payment habits and tailor your discount strategy accordingly.
  2. Set an expiration date for the discount: Make it clear that the discount is only available for a limited time, creating a sense of urgency.
  3. Give your crew some leeway: Empower your team to offer discounts when they see fit, fostering closer client relationships.
  4. Offer different payment methods: Make it easy for clients to pay early by offering a variety of payment options.
  5. Categorize your clients: Not all clients are the same. Some may be more likely to take advantage of early-payment discounts than others. Make sure you’re targeting the right clients with your discounts.
  6. Inform your clients about the discount: Don’t assume your clients know about the discount. Highlight the benefits and savings clearly in your communications.

7. Keep communication lines open and consistent

Open and consistent communication can prevent misunderstandings that might lead to conflicts and disputes. For example, if a client is unaware of certain charges on their invoice due to insufficient information, it can result in disputes that delay payments and strain relationships.

Keeping clients informed about project progress gives them a sense of involvement and control, building trust and making them feel valued and appreciated. Maintaining communication is vital in fostering long-term business relationships.

Here are a few strategies that can help you keep the communication lines open and consistent:

  • Use preferred communication channels: Find out your clients’ preferred communication methods and use them. Whether email, phone calls, or in-person meetings, using a convenient communication channel can make a huge difference.
  • Regular updates: Proactively provide regular updates on the project’s progress and status, rather than waiting for the client to inquire. Keeping the client informed shows a commitment to transparency and accountability.
  • Promptly address issues: Address any problems or concerns that arise quickly and professionally. Engaging in difficult conversations directly rather than avoiding them can help resolve issues swiftly and prevent escalation.
side by side of a status report showing a time gauge labeled right now and a progress report showing a flow chart and up until now

Proactive reporting plays a pivotal role in maintaining open communication. Regularly updating your client with concise status reports, brief emails outlining progress, upcoming milestones, and any unexpected changes to deliverables keeps them well-informed. 

8. Always follow up

Your approach to billing and follow-ups can significantly influence your company’s reputation. A well-structured billing process that includes regular follow-ups can show your clients that you are professional, organized, and reliable. It demonstrates that you respect your work and expect others to do the same.

Following up is not just about getting paid; it’s also about maintaining open lines of communication with your clients. Regular follow-ups can provide opportunities for feedback, help resolve any issues promptly, and show your clients that you value their business.

Automating this process is a feature covered by most invoicing software.

9. Make the payment process easy

A seamless payment process can significantly boost your billing success, improving cash flow, customer loyalty, and satisfaction. How exactly can you make the payment process seamless for your clients?

Simplify your payment terms

Firstly, make sure that your payment terms are easy to understand. Avoid legalese and jargon that can confuse your clients. Make sure to specify the due date, late payment penalties, and any discounts for early payments.

Make your invoice clear and detailed

A well-structured invoice can make a world of difference. Include your bank details and clear payment instructions on the invoice. Also, the invoice amount should be prominently displayed on the document.

The easier your clients understand what they’re paying for, the more likely they are to pay promptly.

Offer multiple digital payment methods

Whether it’s a bank transfer, credit card payment, or online payment platforms like PayPal, providing various options can cater to your clients’ preferences and make the payment process more convenient.

Show appreciation with a “Thank You” message

Always thank your clients after receiving a payment. A simple thank-you message significantly contributes to fostering a positive relationship. It demonstrates your appreciation for their business and your dedication to excellent service. 

While most invoicing or payment apps can automate sending thank-you messages, don’t overlook the impact of occasionally sending a customized message.

Frequently asked questions

What is a good practice for invoicing?

A good invoicing practice is sending invoices promptly, clearly, and accurately. You should also use reliable invoicing software that can automate reminders, track payments, and provide insights into your business.

What is a billing strategy?

A billing strategy is a plan that outlines how you charge for your services, what billing model you use, and how you communicate with your clients about billing. A billing strategy can help you align expectations, improve cash flow, and increase profitability.

What are the basic billing methods?

The basic billing methods are fixed-price, time and materials, value-based, and hybrid. Fixed price is suitable for simple, well-defined projects with clear deliverables. Time and materials work well for complex, uncertain projects that require flexibility. Value-based billing can be a good fit for high-impact, innovative projects that deliver significant value. Hybrid models can be useful for mixed, dynamic projects that involve different tasks and stages.

What are the billing procedures?

The billing procedures are the steps to bill your clients, from setting up the contract to receiving the payment. The billing procedures can vary depending on your billing method. But, they generally include defining the project scope and objectives, choosing the billing model and terms, tracking time and expenses, sending invoices and reminders, collecting payments, and providing feedback.

Improve your billing process

Consistent and thoughtful billing practices can help minimize disputes, improve client retention, and boost your bottom line. By leveraging apps like 7pace Timetracker, you can automate time tracking, increase billing accuracy, and gain valuable insights into your project’s progress and profitability.

The benefits of adhering to billing best practices are manifold. It’s not just about getting paid on time, but also about fostering stronger, more transparent relationships with your clients.

See how 7pace Timetracker can amplify your billing workflow on Azure DevOps or

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