A prospective client contacted me a few weeks ago for a special project that was a rush, and he wanted to know what I would charge and when I wanted to get paid. He told me that he spoke to another accountant who said he wanted to be paid up front, before he did any work, and wanted to make sure I would not do that. I told him he was wrong, and I wasn’t interested in doing the work for him.
This brings to mind how we should be paid.
There are many different situations, and each accountant has their own methods based on the engagement and relationship with their client. The following are some of the ways payment could be received:
- For ongoing continuous engagements, payment can be made monthly by automatic credit card charges or ACH payments.
- Where a client is visited monthly by a staff member, the check could be picked up, or the payment could be made by automatic monthly charges at a predetermined day of the month.
- The subscription model for bundled services is becoming more popular (although I have been doing this for over 50 years) and you would get paid monthly by the ACH charges.
- Where there is a time-based pricing method, a bill would be sent at the beginning of the month following the month the services were performed. Note that this delays payment for a full month versus the fixed fee model.
- An alternative to the previous method is to have an estimated automatic fixed payment made monthly and an adjustment made semi-annually or annually based on the time charges
- For tax returns, there are four choices:
- Send an invoice with the completed return.
- Get the payment when the return is ready to be sent to the client (or picked up).
- Get the payment when the client provides their information (based on last year’s fee).
- Send a time-based bill when you get around to it based on your time system, sometime after the return is sent to the client.
- For special short-term projects, I suggest a retainer. I try to get a retainer of about two-thirds of my estimated fee or the fixed price for that project. Alternatively, you can get paid in full when you are retained or wait until the project is completed to get paid (why wait to get paid?). If it’s a time-based fee, try to estimate a retainer of about two-thirds of what you think the fee will come out to. If you can estimate the fee, why not make that a fixed fee? If it‘s a short-term project, why would you wait to get paid when you are finished? Someone has to “trust” the other party. I am reluctant to start any short-term special project without getting paid something, i.e., two-thirds, upfront. If it is a relatively low-priced project, then I want to get paid in full before I start. One thing I do not want to do is to start mailing invoices and possibly making collection calls on a small one-time project.
- For long-term projects I always request a retainer before I start. You can handle the retainer two ways. When the retainer is used up, you can start billing for the ongoing work, or you could apply the retainer to the final billing and get paid as you proceed for what you are doing. I try to set fixed fees as much as possible and I break a large job into phases, with a price for each phase. For open-ended projects that are on a time basis, such as a matrimonial investigation, time is the only way to handle this, and I request a substantial retainer before I start. On some of these jobs, the parties can change their minds, or it could result in protracted litigation and any unpaid fees seem to get lost in the shuffle or, if I am “lucky,” I am asked to give a discount on the remaining unpaid fees. One thing about matrimonial disputes is that both sides usually end up unhappy. The person making the payments always thinks they are too high, and the person receiving the payments always thinks they are too little. This work is not for the faint of heart.
I am sure I left out some methods, but you can use these as a guide. Also, every accountant has a model that seems to work for them. These models vary based on the client relationship and nature of the services being performed. When collecting fees, try to be flexible but keep in mind that the goal is to always get paid for what you do. I have found from experience (which was a dear teacher in this regard) that most clients who either do not come up with the full requested retainer or try to bargain the retainer down will likely not pay the final balance due.
Here are some general rules to follow:
- Getting paid is a different function than determining or setting the fee. Also, unless you receive full payment before you start, or before you are finished, you will need to have a mechanism for sending the invoice for the balance due and then collecting it. Sending is step one. Collecting it is step two.
- The client’s perception of the value of your services decreases as the time between the performance of the service and the payment date increases. Actually, the greatest value of your service is before you do any work. So, try to get paid as much as you can before you start.
- The longer the gap between the work being done and the bill being received, the less likely you are to be paid in full. If you do not get paid in full by the time you are finished with your services, then provide the bill quickly.
- Quick billing equates to the clients’ perception of a professional business attitude by the accountant.
- Clients get nervous when they are not billed promptly — they expect to pay and don’t understand why they are not being billed.
- Delayed billing of ongoing services or services for special projects means a greater amount that will be due the accountant. No single bill that you send is significant in and of itself to the client. However, accumulated billings lumped together can be significant and cause payment delays and collection problems. This also applies to past due invoices that you let accumulate.
- Accept credit card and ACH payments on your website and portal.
Performing services is an important part of being in business. Getting paid for the services is a more important part of being in business. Not getting paid depreciates your business. Make getting paid a conscious part of your job. If you are going to get paid sooner or later, make it sooner!
Do not hesitate to contact me at
Edward Mendlowitz, CPA, is partner at
