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I've been thinking of ways for my business to charge clients and am having a difficult time in choosing the preferred way of billing.
The fees for our service varies, and thus, cannot be predicted in an accurate way. The fees accumulate with time and ends when the client ends their relationship with us.
Right now, I have three ways of billing my clients:
Option 1: Invoice them for every $#*$!.xx dollars collected, and invoice the remaining charges when they terminate our services.
Option 2: Invoice them on a monthly basis. Actually, it doesn't have to be monthly, but that's really not the point here.
The benefit of Option 1 is that it keeps the cash flowing in at a predictable rate for us. The negative would be that the clients will not follow a time-routine in paying us, which might result in some hesitation since it may create a cashflow problem for the clients.
The benefit of Option 2 is that the client will expect to pay us at around the same time every month, which will help them remember in actually paying us! and helps them manage their cashflow a bit better. The negative is that they might be forced to making micro-payments if the service that we offer performs poorly.
Option 3: This would be a mix of these two. If the fees accumulate to the point of $#*$!.xx dollars then we charge them by that much for that particular month. If it doesn't, then we wait until the fees accumulate to that much and invoice the customer at the end of the month.
The benefit of this is that it allows our clients to make batch payments of acceptable sizes (and not tiny payments or large payments). The negative is that it might be complicated enough to deter clients in paying on time.
Also, I'm looking at online payment vendors to invoice the clients based on these invoicing methods.
Do you guys have any suggestions for me? Which option should I pick? Which payment vendor supports the option? I've been looking at Paypal and Authorize.net and they offer many ways to invoice your customers...
This way it is uncomplicated the clients know each month what the charge is going to be. Good cash flow can be easiely figured.
This will also keep ya from biting the bullet when they leave and won't pay.
This will as well give you a wonderful information on the better performing companies and what they are doing to do better than the others. This will give you valuable information to maybe do a question and answer to see were you can help the poorer performers.
I have a reporting tool that will give me detailed insight on what performed well and what didn't, but your method works well since it attaches financial information to the performance.
I have decided to go with the billing threshold model. So, customers will be charged each with each $#*$!.xx accumulated. The threshold will grow each time it has been met.
Thanks for your comments.