5 Reasons to Consider Minimum Monthly Billing
Kevin Schimmel
Helping professional services firms automate their back-office processes to eliminate manual work
If your professional services business isn’t doing minimum monthly billing - then it is time to consider doing so. Here are five important reasons you should feel confident about setting monthly billing minimums.
Client Commitment: Monthly billing minimums helps maintain client commitment to the relationship and keeps them engaged in the work. Clients who are not meeting the minimums may not be as invested in the work or may not see the value in the services being provided - knowing this along with other client data such as the project and account margins can help you manage that client and get them engaged or reset service expectations. Make sure you have the reporting to see margins quickly and also quickly see which clients are meeting minimums.
Predictable Revenue: Seems obvious, but monthly billing minimums help ensure that the firm has a predictable revenue stream, which helps with budgeting, forecasting, and planning for future growth. It also helps the firm avoid any unexpected dips in revenue that could impact its ability to pay expenses or invest in new opportunities.
Client Acquisition and Onboarding Cost Recovery: Professional services firms invest significant resources in attracting and retaining clients, including marketing, sales, and training. Monthly billing minimums help ensure that the firm can recover these costs and maintain profitability.
Resource Allocation based on Client Value: By setting monthly billing minimums, firms can ensure that they are allocating resources effectively. They can prioritize high-value and engaged clients who meet or exceed the minimums, which can help them achieve their revenue targets more efficiently.
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Financial Stability: Finally, monthly billing minimums can help ensure the financial stability of the firm. By maintaining a consistent revenue stream, the firm can weather any unexpected expenses or downturns in the market. It also helps ensure that the firm can continue to provide high-quality services to its clients over the long term.
So think about your organization and if monthly minimums would benefit the business. Are yours contractually agreed upon minimums or more internal reference minimums? If it is the latter, you may want to look at all of your client margins and start there as a basis to consider monthly minimums.
In my next post, a follow-up to this one, I’ll discuss how to arrive at and automate the monthly minimum management and billing process. In the meantime, think about what monthly minimum billing would mean to your business.