Sending bills improperly to clients can be like dropping a huge bomb on their laps and the far-reaching fallout can negatively affect web designers. The important issue would be finding a way to collect money safely without compromising the relationship.
Like many professionals, web designers would also consider cash flow as an important factor for their businesses. They need money to pay rent and cover costs, so handling bills improperly can cause a web design business to spiral quickly into the dreaded Chapter 11 filing. Designers who are also sole proprietors often find that the stakes are much higher. Getting evicted from an office building due to late payments of rent is one thing, but designers who run their business from homes can face a more dire consequence, since they can run the risk of being homeless. A common way to avoid the problem is by having enough money in the bank and maintaining good credit score, so designers can apply for a loan, when needed. Another solution is by doing things that generate passive revenue; but this could turn into a full-time activity in itself, which would be lucrative only after years of hard work.
Finding Better Billing Strategy
Web designers may need to apply different billing strategies to ensure smooth cash flow. Some apply fixed per-project fees, while others charge hourly. With the former, designers need to estimate accurately the amount of effort and time needed to complete a project; and try to achieve the highest efficiency in their work, with the latter, they need to record the number of work hours and bill extra hours when necessary. Determining how much designers should bill the client can be a rather difficult thing to do. But, to get a good sense of how much professionals charge per hour, we can divide their annual income with about 2000 billable work hours or 240 effective work days, if they are booked solid. It is important to get realistic figures for a more accurate comparison; so we can define how much profit we should get in a year, while taking into account low season and holidays.
Avoiding Billing Problems
Eventually, it is necessary for designers to negotiate a better contract, although this can be extremely difficult. To make the negotiation successful, both parties need to have keen insights in each party’s needs. They need to fully understand all the available options, which may create more values for everyone. Discussions with clients can set the tone for our future negotiations. Before the project starts, everyone should be clear about how much the entire web design project would cost and how much specific web elements would cost. Most clients don’t have any idea how much they should spend, since estimating costs may not in their skill set. When clients plan their project, money is usually earmarked before they even know how it will be spent. Budget for web design could be set aside for varying categories, such as “advertising”, “marketing” or “IT”. They will implement a price ceiling and try to get the best deal when negotiating with designers. They may assume that any creative work, including web design can be complicated with fixed costs. In practice, web design tasks take a variable amount time to complete and we can’t really pretend to know how much a task will cost. Instead of worrying about work hours or whether fixed-bid assignments can pay their bills, web designers can also bill on monthly, bi-weekly or weekly cycle.
Dealing With Delays
People, including clients, are imperfect and they have many concerns in addition to paying our bills. So, if clients say they will get to us by Friday, then more often than not they will update us on Monday. Web designers typically agree when clients ask to delay the completion of a project, but what if it gets for more than a month? Unfortunately, web designers are not protected against clients delays. Any unexpected delay may cause them to lose billable hours and to offset the risk, some design firms are forced to charge the delay penalty and restart fee. Not all clients would agree to this idea, but designers should protect themselves against any of the risk, by being fair and up front with the clients.
Working on a time-based billing cycles can be a big challenge for clients, since they could end up paying for delays. It is surely important to protect their interest while addressing our concerns. As an example, web designers may allow clients to place up to four days of stop-work orders per month, if something takes a bit longer to complete on their end. We should add these days to the contract to ensure clients won’t shoulder extra costs caused by small delays. This way, designers may also protect their work schedules form significant overlaps. Instead of putting a project on hold, the client may cancel it. Clients may pay half up-front and project cancellation could cause some problems, since clients feel that they should get a portion of the deposit back. Cancellation should be included in contract agreement and clients may get some of the deposit back, depending on efforts delivered by web designers so far.
Most designers and even clients are reluctant when discussing money, but we need to have a good billing agreement that protects client’s interests and guarantees our cash flow.