Value Billing in BillQuick

Part 1 of the Value Billing series focused on the three most common ways professionals set fees – Cost, Market and Value. Most professionals think they use cost-based fees but actually employ market-based fees. In other words, they ‘follow the other guy.’ Mimicking fees like this leads to the Death Spiral known as Commoditization, which is the greatest threat to profitability.

Part 2 focused on the central truth of value billing: Value is defined solely by the client (and the market overall). How a customer perceives (and judges) your services and company – their entire experience with your company before and after they know you – determines the worth of your services. While you do not control what clients and prospects think, you can influence how they perceive your company and your services.

Part 3 focuses on how to value bill using BillQuick.
 

Value Defined Up-Front

In many situations the value of your services is determined before you do any work. You discuss and negotiate project goals, how to achieve them, costs and billing arrangements. To formalize decisions you might give them an estimate, engagement letter or a letter of intent.

Within BillQuick, you record the details in a project record. If you agreed to complete the work for a set amount, for instance, $25,000 for an architectural project, you would set the contract type to Fixed. If you took on a consulting project at an hourly rate of $125 per hour and agreed to complete the project for a total fee not to exceed $15,000, then the contract type would be Hourly Not To Exceed.

In any situation in which you agree to a maximum amount for your services, if accumulated time and expenses are less than the contract amount, you should bill the full contract amount.

The client has defined the project’s “value.” That your knowledge, experience and efficiency brought the work in under contract does not change the perceived value. (Your negotiation skills might have helped establish a higher value up-front too.) Your client received “full value” as they perceive it. Charging materially less than the contract amount negatively impacts their perception of the value received. Doing so, you also de-value your professional services.

BillQuick allows you to recognize the remaining value in a project contract with a quick click of the mouse. On the BillQuick Review screen, select the project billing record you want to value bill. Point anywhere in the row and click the right mouse button. On the context menu, select Bill Final. BillQuick re-computes the bill amount:

Net Bill Amount =
Project Contract Amount – Project Billed to Date

Of course, if you have already billed up to (or more than) the contract amount, or the current net bill amount is greater than the difference, the original net bill amount (Value of Billable Hours + Value of Billable Expenses + Taxes) does not change.

Like any change you make to the Net Bill Amount on the Billing Review screen, the difference between the original and final bill amounts is an adjustment to the value of the work. Such an adjustment is called a ‘write-up’ (increase) (or a ‘write-down’ if it decreases the net bill amount). The Write-Up/Down by Project report tracks these adjustments.

The Bill Final option is available for all contract types – Fixed, Hourly, Hourly Not To Exceed, Percentage, and Recurring.
 

Value Adjustment

During the review of time entries, a project or other manager's intimate project knowledge allows them to identify billable items that were materially more or less valuable than the amount computed in BillQuick. For example, a structural engineer nervous about the birth of his first child makes a calculation mistake. While it is caught, his work is already charged to the project. Its cost should be part of the project regardless of its value (if it is not, profitability is skewed). However, when making decisions about how much to bill, the question arises: Should I bill the engineer’s time to the client?

Commonly a billing manager chooses not to bill the engineer’s time because it contains no value. You would, however, bill the time for the person who corrected the mistake. Of course, if your client found the mistake, you may be forced to decrease the value of the original and corrected calculation work to zero (either when making billing decisions or after the fact as a write-off or credit memo to an invoice).

This ‘mistake’ scenario exemplifies the incomplete billing mindset of professionals – readiness to adjust billable value downward. A complete billing mindset includes increasing billable value when managers and staff are more efficient than planned or expected because of skills, knowledge and/or technology. Or if the value of what is delivered provides materially greater benefits. For example, if a task should have taken 15 hours and it was done in 10, then you should adjust the hours billed to a client (Billing Hours) to a higher amount to reflect its true value.

Using BillQuick's Project Journal feature to track items likes efficiency and greater benefits can help billing managers make better value billing decisions.

In BillQuick you can adjust the value of individual time entries in 2 ways:

1. Write up or down individual or groups of time entries

2. Adjust Billing Hours for the time entries

Write-Up/Down

To execute your billing decision to write up or down individual time entries, go to the Billing Review screen and click the Write-Up button. Highlight the items you want to adjust, then enter the percentage (or amount) of the adjustment. To write down the work to zero, enter -100 and click Apply. When you return to the Billing Review screen, click Refresh to see the updated totals.

BillQuick automatically tracks this type of value adjustment on Write-Up/Down by Project and by Employee reports. Also you can view the adjustment multiplier (called a Write-Up/Down Multiplier or WUD) on the Sheet View screen. (Use the Field Choose feature to turn on the WUD column in the Sheet View grid.)

Adjust Billing Hours

To adjust hours billed to a client, you have two options. Which one you choose depends on when you make this billing decision –

• When you review and approve time entries for billing

• When you execute billing decisions

To adjust time entries during the approval process, go to the Sheet View screen and turn on the B-Hours column (select Edit, Field Chooser from the menu). With the entries you want to review in the grid, select the item you want to adjust and edit the B-Hours. Do not change the billable status of the entry to Non-Billable (see below).

Alternatively, to adjust the value of time entries during the billing process, go to the Billing Review screen. Select the desired project billing record. Click the Details button and select Time Entry Details. Select the item to edit and change the B-Hours.

Using either method, you can view the details of your value billing decision on the A-Hours B-Hours Analysis reports. They show Actual Hours and Billing Hours, both the hours, value of the hours, and the difference. Using various filters, you can fine-tune the reports to the projects and employees you want. These reports can be found in the Analysis report category on the More Reports screen.

You can also view the impact of value adjustment decisions on staff and project profitability reports.