How do you bill for extras over a fixed fee?

Feb 18, 2013 | Pricing

We’ve all done it haven’t we? Estimated a fee (or maybe even quoted a fixed fee) for a specific piece of work and then the scope of the work has changed slightly. And then a bit more. Perhaps we’ve delegated the work and have not kept in touch with how much extra time the ‘tweaks’ have involved.

And then we see the WIP reports and realise that the cost over-runs are more than we anticipated and certainly more than the client might have expected.  So what do we do? Swallow the ‘loss’? Promise ourselves to be more on top of things next time? Or do we write a bit off and then approach the client with what we consider to be a reasonable amount to bill them on top of the expected fee.

If we’ve taken the coward’s route we await the dreaded phone call or letter; and if we hear nothing for a few days we relax. We got away with it!  We can bill the extra and we’ll get paid.  Of course we still don’t know the client’s reaction. They may be fuming and bad-mouthing us all over the place. We promised one fee and then charged a higher one. It’s not good PR.

I’ll admit that, in the dim and distant past, I pursued that approach.  I later learned that although a letter/email may be a good way to broach the subject it is critical to proactively follow up with a prompt phone call. Much better than simply to just wait for a reaction.

I recently found myself on the other end of such an arrangement. As a result I am now more convinced than ever before as to how important is that timely follow up call.

If you’ve underestimated a fee and want to increase your prospect of recovering more than the expected amount you MUST take the initiative. Set out your justification and plan your approach to the client. Don’t just send the bill. Don’t even send the bill if you hear nothing back after sending the client a note of the proposed additional fee. Even if it gets paid you cannot assume the client is happy. They may well be looking for a new accountant.

You will only know what your client thinks if you SPEAK to them – and you trust them to tell you the truth!

How do you deal with such situations in practice?

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