Hourly vs. Fixed Rates: What’s the Best Way To Bill for Services?

Among the many challenges service-oriented businesses face is knowing how to bill for their “product.” Hourly versus fixed-rate billing is an issue that lawyers and accountants have grappled with for years. Trends in those professions indicate the model that small-business billing may also adopt in coming years.

Hourly billing is still the most popular model in professional-service firms. During the recession, however, many law firms and CPAs moved away from the billable hour in favor of flat-rate arrangements.

Flat-rate billing is seen as a simpler model that puts the customer first. While hourly billing is standard in many contracting and service industries, it may seem like a foreign practice to some customers. To them, the hours may seem to add up too fast, or the invoices arrive too frequently. Many customers simply prefer a one-and-done invoice and payment schedule rather than ongoing hourly bills.

On the other hand, hourly billing is an efficient, reliable way to account for the labor that your business puts into delivering services. It may be intimidating to think about setting fixed-rate pricing. What if your total price is too high or too low? What if labor on a project runs over?

Avoid these pitfalls by reviewing the billing records of your hourly accounts. An analysis of past projects’ time to deliver, total hours billed and customer satisfaction will help you set your flat rates.

There are pros and cons to both billing models. Analyze your options and go with the rates that are right for you and your customers.

Source: http://www.manta.com/resources/tip-of-the-day/hourly-vs-fixed-rates-whats-the-best-way-to-bill-for-services/?utm_medium=Email_Marketing&utm_source=Newsletter&utm_campaign=TOTD&utm_content=TOTD_NewDesign2015&utm_term=19185&su=hq344mgu9vl41l