What toll is legacy billing really having on your accounting firm?

The pace of digital transformation has brought accountants, tax professionals, and other professional services providers to a crossroads. 

These are firms that are billing by the hour, manually tracking billable hours, creating and reconciling invoices manually, and chasing clients for payments.

Sure, sticking to the old ways might feel safe, especially if it’s the way it’s always been done. But these often-outdated systems present a number of challenges. 

They can not only hamper efficiency, but also jeopardize your client relationships, and your brand reputation when billing mistakes happen. 

As someone who has navigated the complexities of technological innovation in the accounting industry for over 15 years, I've seen firsthand the transformative impact that modern billing solutions can have. 

At Ignition, where I’m the Managing Director for the Americas, we've been at the forefront of providing technology that streamlines client billing and helps firms unleash untapped revenue streams.

Fortunately, the path to transforming your billing model is lit with solutions, including tech that can help you streamline client billing and unleash untapped revenue streams. 

Here, I share some of the factors you should consider for a successful billing model overhaul. 

I’ll explore the future of billing in the accounting and tax profession and how embracing this inevitable shift can both prepare firms for what lies ahead and position them at the forefront of our profession.

Essentially, a lot of accountants have been trained to do certain things in a certain way, and it's comfortable, so they stick with it. It’s human nature and understandable. 

So, when you consider invoicing and client payments – and how important that is for any small business – firm owners don’t want to mess with it, because that’s how they get paid themselves. 

It feels risky to change things up – the old “if it ain’t broke, why fix it?” adage.  

And despite what we've seen in Ignition’s State of client engagement report, I think much of the profession feels, “I'm doing all right”. Invoicing and payments are not challenges they’re focusing on as a business. 

The State of client engagement report shows that in the United States, accountants are, on average, leaving $76,636 in unbilled or unclaimed out-of-scope work on the table annually. That’s a major issue. 

Frequently, firms don't audit themselves to identify problems or pinpoint where they could be more efficient, and could increase revenue. 

And often, these issues stem from invoicing and payments – usually, the firms are taking an inordinate amount of time to collect on unpaid, invoiced work. 

But peeling back the layers of the onion to see where the legacy billing and invoicing models might have an issue is difficult to do, so there’s an inertia – a feeling of, “That’s the way we do business, and that's the way we're going to keep moving forward”.

Because of this, there are a number of consequences to holding on to legacy billing models. 

One is a form of death by a thousand cuts, where you aren't collecting payment for the work you've done. 

If you’re only billing hourly, you’re likely writing off a number of hours, and that's detrimental to your business in the long run. 

Plus, if you don’t have a way to effectively charge ad hoc for additional or out-of-scope work, that means extra hours with no additional money coming into the firm.

So there are cash flow consequences for the firm, and that has tremendous downstream effects, such as lack of profitability and unhappy, overworked team members at a time when the industry is already suffering staff shortages. 

Legacy billing models and potentially costly mistakes

What’s more, when you consider any communication going out to a client, that’s your corporate brand interacting with that customer. 

You want to make sure that every one of those touchpoints is seamless, and happens in as few clicks as possible. 

So, when you look at cloud accounting today and how you can service customers – not just in your area but across the country or around the world – you want to make sure anything you're communicating reflects your brand and the experience is easy, clean, and coherent.

They're going to say, “I'll deal with this later,” and you won’t get paid. 

You want to make sure that none of your communications presents a chance for that client to say, “This is too hard. I'd rather go work with someone else.”

The first step to transforming your billing model is looking at your current process and determining whether it’s working the best it can. 

Have you received customer feedback? Have there been instances where you cannot collect payment for whatever reason? 

What to do next

Next, if you’re still working on an hourly basis, identify how much money you are actually writing off every year because of that invoicing. 

Basically, you want to audit your payment solution and processes, and see if there’s a better way. 

This can be challenging, as you may not notice the problem or realize that something is costing your business. 

In fact, when we talk to accounting and tax professionals about Ignition, the platform is often a solution to an unknown problem. 

So, when folks first see what Ignition can do – like automating and optimizing proposals, billing, payment collection and workflows – they’re surprised that it’s a complete revenue generation platform, rather than a range of technologies plugged into your tech stack. 

Then, when you think about automating payments, you have to determine what you’re comfortable with. 

Do you want to collect on ACH? Do you want to consider credit cards and how best to manage that? 

Then again, you have to look at your current (hourly) billing process. 

Do you have a path forward for changing how you bill, such as upfront payments, percentage increases, or upon completion of work? 

That will be a big factor in how you determine an effective way for your firm to manage producing and delivering your services. 

Finally, you have to look at providers. It’s crucial to remember that transitioning your billing model is not just about automating invoices or moving away from hourly billing – it’s about making life easier for your clients. 

Platforms like Ignition, which integrate seamlessly with software in your tech stack, such as QuickBooks, can automate billing and invoice reconciliation. This helps to reduce errors, streamline your processes, and free up your time. 

Plus, with Ignition, your clients can easily pay for your services, adding convenience and professionalism. Managing your firm’s revenue in this modern way is key to updating your billing model.

So, what does the future hold for billing models in the accounting space? 

It’s really looking at that upfront billing and moving to that subscription-based model that we've all become familiar with, such as with our streaming services or other items we have on recurring billing.

Plus, the future is all automation. Once you complete the work, the invoice goes out. Reminders go out automatically through the platform you choose, and you receive automated payment. 

You're collecting everything you’re owed, and there's no longer that anxiety or risk that you're going to have to spend your Saturday or Sunday emailing clients about the money they owe you.