How to minimize invoice disputes at a glance:
- Avoid providing fixed price quotations; offer project estimates instead.
- Stick to a highly detailed scope.
- Account for all project components in your estimate, including miscellaneous tasks.
- Track your time as you complete tasks—in small, detailed increments is best.
- Provide full, transparent timesheets.
- Be prepared to mark some time as non billable.
Most consultants who bill for their time will have a client dispute an invoice at some stage—even if it’s less of a dispute and moreso a client seeking clarification, it’s almost inevitable that you’ll be asked about your invoices at times throughout your career.
That said, it is possible to both reduce the risk of invoice disputes from happening in the first place, as well as to reduce the severity of the dispute when they do.
This is important for both maintaining positive working relationships with your clients and charging properly for your time—factors critical to your business’ success.
Here’s how to minimize your risk of an invoice dispute.
Set expectations early
You’re consultants, not fortune tellers. Although you’re probably pretty good at estimating how long a job may take based on your past performance, the key here is the word ‘estimate’, which means a rough or approximate calculation. Every project is different, and each comes with its own set of tasks and challenges—some unexpected—and good clients will understand this.
Make it clear to your client from the outset that if there are too many unknowns, you can provide an estimate only. If you’re forced to provide a fixed price quote, you may want to walk away.
Scope, scope, scope
Is every project requirement laid out for you? Do you have all the details you need to do your job? It is your client’s responsibility to scope the project for you in 100% unambiguous terms. If the client is unable to do so, you may want to offer to do the project scoping for them, but of course, make it clear that you will have to charge for it.
With a clear and detailed project scope, you can provide a more accurate estimate for your client, and you’re less likely to deal with an invoice dispute when the time comes to bill for your work.
Because you will have given your client an estimate of costs related to a detailed project scope, you are setting expectations early, and your clients can better understand and accept additional out-of-scope costs if they occur.
Even with a detailed project scope, don’t forget to incorporate into your estimate the inevitable time you will spend on administration and miscellaneous tasks. This time is often overlooked by consultants, resulting in unforeseen additional costs for the client, which they are likely to dispute, and perhaps unbillable hours that could have been billable for you.
Track your time from the beginning
Good time tracking software for consultants is invaluable to your business.
When you and your team members can keep clear, detailed logs of the time you spend on your tasks, you can do two important things:
- You collect data and gain great insight on your consultancy’s operational performance on several levels—to a billable vs non billable, client, project, and staff level—thereby allowing you to work more efficiently
- You can provide real evidence of all of your billable time spent on a project for a client.
The more detailed time tracking the better, so time tracking software that allows for accompanying annotations to your logged time is best. That way, you can track your time in increments, adding comments as you go.
You won’t be left with large blocks of time on timesheets with little explanation, which can become a problem if invoice disputes arise.
An example of the customisable billing reports in todo.vu that you can attach to client invoices.
Understand your progress with real-time reporting
Time tracking tools also benefit consultants as they allow you to track your hours in real time, providing you with accurate, up-to-the-minute project progress reports. This is particularly helpful when you have a team, with each team member tracking their time to different tasks in todo.vu.
In an instant, you can see a real-time report of your team’s progress on any given project or task or for any given client.
If you’re tracking your time on a project from the beginning, be sure to check in carefully when you’ve swallowed about 25% of the project’s estimated costs. If it’s not looking like you’re going to finish the project within the amount you budgeted for, then you may need to start a conversation with your client.
If you leave it until the end of your project to talk to the client, more often than not it will be too late.
Most of the time, the reason you’re off track is due to a lack of detail in scoping. If you call this out early, you have the opportunity to readjust.
As an admin user in todo.vu, you can see your team members using their timers in real time.
Prepare for some concessions
We are all humans and humans make mistakes. Depending on the contract, there will likely be instances when it may be wise to accept errors and mark some of your time as non-billable.
Clients will appreciate your honesty, and you will strengthen your relationship with that client, increase the likelihood that they will work with you again, and become known as a reputable business that your customers can trust.
If you’re using a time tracking tool like todo.vu, this is where it pays to have you and your staff tracking time to detailed increments. That way, you have the advantage of marking most errors as non-billable in isolation, rather than marking an entire and extended block of time as such.
Invoice disputes are inevitable in business, but they don’t have to damage your client relationships or your billable hours. With a good time tracking tool in place, consultants can keep a detailed record of the time logged for any client, providing real evidence that’s challenging to dispute, and allowing for non-billable concessions that won’t hurt your bottom line.
You can get started with a free, 14-day trial of todo.vu today simply by clicking the button below. Here are some tips to help you on your way.