Mastering billing increments: advantages and best practices
The well-known adage “time is money” is particularly relevant when it comes to billing increments. This is a method commonly employed by those looking to charge for a specific period spent on a project or task.
Billing increments are commonly used by legal professionals, like attorneys, – but they can also be implemented by anyone providing high-value services on a time-sensitive basis for fair and transparent compensation.
If you’re uncertain whether billing increments are suitable for your business or freelance work, you’ve come to the right place. Our blog post covers everything you need to know, including when and how to use this billing technique effectively.
Want to get the most out of your time?
Try DeskTime for free!
Try free for 14 days · No credit card required.
What does billing in time increments mean?
When you bill in time increments, you charge clients based on the amount of time you spend working on their project or task in predetermined intervals, such as every 15 minutes or hourly. This method enables precise tracking of the time spent on work, ensuring that clients are charged exactly the corresponding amount. Plus, it provides a systematic way of documenting and invoicing for any extra work or revisions that may be requested by the client.
Billing increments refer to the units of time used to calculate and bill for services provided by a business.
For example, lawyers often use billing increments to accurately charge clients for their time. They usually bill in increments of six minutes (commonly known as “tenths of an hour”), meaning that any time spent on a case is rounded up to the nearest six-minute mark. This helps ensure that clients are billed only for the actual time spent on their case rather than rounded up to the nearest hour.
Why use billing increments?
Using billing increments can offer several benefits – let’s look at why freelancers and companies should consider implementing this approach.
Billing increments ensure fair compensation for your work
Imagine you are a freelance writer, and you have delivered an article to the client – only to receive a request for multiple tweaks and revisions. These changes can accumulate to the point where it feels like you are rewriting the entire piece without any additional compensation.
This scenario can be frustrating, but there is a solution: implementing billing time increments. By breaking down each revision or tweak into separate billing increments, you can ensure that you receive fair compensation for the additional work you put in.
The concept of billing increments is simple – all work should be documented and compensated accurately, and there should be no instances of freebies. If you believe that your services merit this approach, then billing increments are the way to go.
It provides valuable insight into your own productivity
Keeping records of your time can also provide valuable insight into your own productivity. Analyzing your billing increments can help you pinpoint specific areas where you may be spending more or less time than necessary. This can enable you to make informed modifications to your workflow or time management practices.
Tracking your time in this manner can also help you to identify which tasks are most time-consuming and require the most effort. This information can be used to prioritize tasks and make more informed decisions about which projects to take on in the future. Plus, having a clear record of the time spent on each project can be useful when it comes to setting rates for future work and negotiating with clients.
Encourages efficient use of time for both you and your clients
When billing is tied to increments of time, it incentivizes both the client and the service provider to use their time as efficiently as possible. If both parties act in good faith, the client can minimize small or unnecessary requests, and the service provider can use their time more efficiently by being more focused and intentional.
This can lead to more productivity overall, as the focus is on completing tasks within a given time frame rather than stretching them out unnecessarily. Plus, if the client knows that every additional request will incur a cost, they are more likely to think carefully about what they truly need and what can wait until the next billing cycle. This can help streamline communication and, as a result, overall workflow and productivity.
Implementing billing time increments: a step-by-step guide and best practices to follow
Let’s dive into the process of implementing incremental billing and the essential best practices to keep in mind.
Instructions for implementing incremental billing
- Determine your billing increment: Decide on the length of time for each billing increment, such as 15 minutes, 30 minutes, or an hour.
- Communicate the billing approach to your clients: Make sure your clients are aware of the billing method you intend to use and how you plan to track your time. This can be done through a contract or agreement that outlines your billing practices.
- Track your time: Find a dependable method to monitor the time dedicated to each task, such as time-tracking software. The goal is to ensure accuracy and reliability in billing clients.
- Include a detailed description of your work: When invoicing your clients, include a detailed description of the work you completed during each billing increment. This will help your clients understand the value of your services and reduce the likelihood of billing disputes.
- Be consistent: Apply your billing increment consistently across all projects and clients. This will help you to establish a reputation for fair and transparent billing practices.
Consider industry standards when deciding on the type of time increment to use
Different industries have different practices when it comes to billing time increments. As mentioned, lawyers usually follow a 6-minute increment. Web developers, on the other hand, may opt for a 15-minute increment. The general rule of thumb is that the higher the value of the provided work, the smaller the increment should be to ensure that the work gets billed as accurately as possible.
It’s a good starting point to research the practices of your particular industry and determine if they align with your own work approach. If your industry has an established standard for billing increments, it’s usually best to follow it, as it can facilitate communication and streamline the billing process with clients. However, there may be some room for flexibility, and you should adjust the increment according to your own work practices.
Establish clear guidelines
In order to successfully implement billing time increments, it’s important to have clear and concise guidelines in place. These guidelines should outline the specific billing increment to be used in different scenarios and the consequences for exceeding or falling short of the minimum billing increment.
Precise documentation and communication of billing guidelines to employees and clients is essential to prevent disputes or confusion. Providing industry-specific examples and use cases can also assist employees in accurately implementing these rules.
It’s also important to keep refining your billing policies to ensure they’re fair and effective, covering as many use cases as possible. Establishing clear guidelines and continuously enhancing them will ensure precise billing and a positive relationship with your clients.
Be detailed and transparent with your clients
When it comes to invoicing your clients, it’s important to provide them with clear details about the work done. Aim for brief yet comprehensive descriptions that clearly convey what was accomplished without ambiguity.
Suppose you work as a freelance writer. Here’s an instance of poor invoicing practice:
Conducting topic research, doing interviews, and composing an article (10.6 hours).
This is an example of what is known as “block billing”, which combines multiple tasks or time spent into a single billing entry. Clients may feel hesitant and doubtful about the accuracy of such an approach. Naturally, it raises several questions: How much time was spent on research? How long were the interviews? And how much time was dedicated to writing the actual article?
To alleviate your clients’ concerns, you should provide a detailed breakdown of tasks and the corresponding time devoted to each one. Here is a good example:
- Conducting topic research: 3.2 hours
- Conducting Interview 1: 1.5 hours
- Conducting Interview 2: 1.8 hours
- Conducting Interview 3: 1.2 hours
- Composing the article: 2.9 hours
The total billing amount is 10.6 hours.
It’s crucial to invest the effort required to precisely document your work and provide clients with all essential details. One option to ensure it is to use time-tracking tools like DeskTime. Keep in mind that being transparent is critical in building client trust and fostering long-lasting relationships.
Billing increments chart (1/10th of an hour)
If you’re curious about how incremental billing works in practice, take a look at this chart as an example.
The chart is designed with billing increments of 1/10th of an hour. For example, if you worked for 45 minutes at a rate of $200 per hour, you can refer to the chart to determine that the time increment is 0.8. By multiplying 0.8 by $200, your billing amount would be $160. If your billing increments differ from the chart, you can adjust it accordingly.
Billing increments: respecting your and your client’s time
Billing increments can be a beneficial approach to invoicing and billing, particularly for businesses and freelancers who offer high-value services on a time-sensitive basis. When you adopt billing increments, you can guarantee that your work is fairly compensated and that clients receive evidence of the services provided.
The key to making this invoicing approach work is setting clear expectations and maintaining complete transparency throughout the billing process. Remember – the underlying goal is to show respect for your and your client’s time.
Did you find this article useful? Give it a clap!
Psst! You can clap more than once if you really loved it 🙂