Time Billing vs Value Billing

Time Billing vs Value Billing

First published on the ABN Her Business Blog

As service professionals, most of us are tracking our time, whether that is for the purpose of charging clients per billable hour or measuring our time spent on projects for which a client is paying.  How can we satisfy our need to track our time for “billable” purposes with the requirement to satisfy the needs of our clients?

The need to track our time so we are charging accordingly is an obvious one, but it can backfire in the eyes of our clients.  Take accounting firms as a prime example.  The majority of them track their time in 6 minute increments and bill clients accordingly (as most lawyers do), and this is where the problem can occur.  Clients become reluctant to call their accountant or lawyer as they know that the “clock” starts as soon as they say hello.  I’m not saying professionals shouldn’t charge for their time, they most definitely should (otherwise I wouldn’t be making a living at all).  But when that charging impedes you from delivering your best service to your clients, surely something has to change.

From this dilemma, new models have developed where clients are given a yearly proposal fee that is paid monthly, a little like a retainer type agreement, which clearly sets out the scope of tasks that are to be included within that fee and can include unlimited phone calls and emails.  Unlimited, I can hear you all in shock now.  How on earth would you handle that. Surely some will abuse that?  Yes, the minority probably will, but the majority will probably not use it much at all.  The perception that they can call or email you at anytime knowing that you will answer them and it’s within their existing fee is comforting to a client.  They feel supported all the time just knowing they can do that.  They are not likely to make their own “uninformed” decisions for fear of incurring more fees.

Rather than thinking about billing your time to clients, how about billing value?

Does this mean you stop tracking time?  No, as you need to be able to measure the time you are spending against the budget (ie the proposal fee you set) to make sure that that figure was indeed on the mark.  From this, you can determine what the true hourly rate for that client was at the end of each year. Then, adjust accordingly for next year’s proposal and/or improve your own systems and those of your clients to make sure the tasks are not taking as long.

Rather than thinking about billing your time to clients, how about billing value?  The hard part lays in determining how that value is expressed in $ terms.  Start at a base, tweak it and just give it a go.  You’d be surprised the change that will occur in the relationship with your clients.  Is this hard to introduce with existing pay by the hour clients? Yes, but you can choose a transition time and phase it in gradually. Whereas, all new clients now start with your business under the Value Billing system.

Do you have a Value Billing System? Would you implement one?

One comment

  1. Value billing, its a quite suggestive term that I came across. As of now I have always focused on the time billing. I have termed the time as the most precious value so far and have managed to be regular on the basis.

    I am running a service based industry and for me the time billing carries more importance than any other terms in the industry because its the time on the basis of which I can manage to bill my clients. But have ignored the value of the same.

    After going through this wonderful post I am impressed to come across such a nice term managing the company. I will surely target the value of the company. As of now I have been deploying the time tracking software which carries the utmost importance for my company. Its none but the time tracking software from Replicon – http://www.replicon.com/time-tracking-softwares.aspx that is hassle free in nature and manages well enough to keep good track of the time and billing as well.

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