How To Realistically Set Your Fees - Part 4Written by Chuck & Sue DeFiore
Effect Of Bad Debts
So far, we have covered major factors involved in setting your fee structure. We have set a realistic number of billable hours, calculated effect of expenses and taken into account cost of a benefit package.
This has brought us to an hourly rate of $77. By charging $77 per hour, you will have an income of $46,000 per year, plus benefits.
What happens when you have a client that does not pay you for your services? What happens if a customer goes out of business before your invoice is paid? How will these events affect your own planning? Do you want to take a bad debt write off on your taxes? Do you want to try to include for these contingencies in your fee structure? Your answers to these questions will have a direct impact on how you operate your business.
Thankfully, unless you provide very poor service, most clients will eventually pay you. However, it may take you awhile to collect your money and you may have to settle for less than originally billed amount. You have option of adding late fees to your invoices, but keep in mind, more time you spend trying to collect a past due invoice, less time you have to devote to paying customers. Also, if you need to engage an attorney or collection agency, you will in all likelihood, not see full amount of your invoice because of their fees.
One way in which you can protect yourself is to build into your fees an allowance for bad or uncollectable debts. If you estimate that 5% of your invoices will be either unpaid or underpaid, then add 5% to your hourly rate. For example, your hypothetical fee is now $77 per hour, 5% of that is $3.50, added together gives you a rate of $80.50 per hour. If we round this off to $80, you would have approximately $3300 per year cushion.
How To Better Handle Your Mail Written by Susan and Chuck DeFiore
Letters, magazines, bills, flyers, what to do with them all. There should be only two responses to every piece of mail or e-mail, do something with it, or toss it!
The best way, as always, to deal with it all is in an organized fashion.
One of quickest ways to do this is to have following folders:
A red one for things that must be dealt with immediately. This would include anything that needs an immediate response, something that has to be done today. A letter you must respond to, a meeting you have to schedule, a report you need to do, a telephone call that needs to be made. Within this folder you will need to prioritize what needs to be handled first, second, etc.
Bills that come in and need to be paid should be placed in your tickler file a couple days before their due date to account for mailing time. So as you are opening your bills that come in mail, check due date and place them in your tickler file. If it has to be paid upon receipt, put it in red folder so you can deal with it immediately.
Meetings (flyers) that have to be attended are placed in a gray folder. Be sure to check dates, highlight them. Your next step is to be sure to place them on your calendar, and then to tickle them two days before for your review or if there is anything you need to do or prepare for meeting.