We’ve all done it haven’t we. Estimated (or maybe even quoted a fixed) fee for a specific piece of work and then allowed the scope of the work to evolve 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? Do we:
- Bill the full time costs regardless of the quote we gave?
- Write-off a bit and then approach the client with what we consider to be a reasonable amount to bill them on top of the expected fee?
- Write-off everything over and above the quoted fee? or
- Speak to the client to discuss what happened?
Some will say it depends on the circumstances, on the reason the work went over budget, how much of this can be attributed to the change in scope of the work and how well we know the client and can anticipate their reaction.
If we’ve taken the coward’s route we follow options 1 or 2 and then await the dreaded phone call, email, letter or visit. 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.
I’ll admit that, in the dim and distant past, I probably 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 rather than to just wait for a reaction.
More recently I recently found myself on the other end of such an arrangement and 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!
I welcome your comments and ideas as to how you deal with such situations in practice.