Improve Profitability & Efficiency: Set Fixed Fees for Recurring Services

For small business owners, long-term financial success hinges on a steady cash flow. Balancing the ebb and flow of cash in an organization contributes to a business’ growth and sustainability. Learn cash flow tips by requesting our free report, 105 Ways to Speed up Cash Flow in Your Small Business. In service industries, one of the most important financial decisions that business owners make is where to set their prices. Charge too much and they’ll l lose business because clients will find cheaper services elsewhere. Charge too little and they curb cash flow, making it more difficult to remain viable in the long run.

The pricing of services tends to be a subjective task. Business owners typically base service fees on the value being provided to the client. Owners consider factors like the service provider’s education and skill that’s necessary for the job, the time involved, the client experience, and other factors. They look at the direct and indirect costs associated with their services. For more advice regarding setting prices for services, check out How to Price Your Business Services by the U.S. Chamber of Commerce. 

Once fees are set, invoicing is the next natural step. For recurring services, I recommend charging a fixed fee. The obvious benefit of charging a fixed fee for recurring services is efficiency. Service providers simply create invoice templates that are quick and easy to reuse. Typically, templates are intuitive to customize. Accounts Receivable personnel add information like the client’s name and address, date of service, service performed, and the fee for the job. In the case of weekly, biweekly, or monthly services, companies can schedule regularly recurring invoices. Invoicing runs on auto pilot, once the initial invoices are created. Plus, businesses have the choice to send invoices before or after the services are delivered.

Businesses can take automation a step further by recording credit card or Automated Clearing House (ACH) payment information from their clients. Service companies keep the data on file and schedule recurring payments via accounting and bookkeeping software like QuickBooks. Automated payment processing reduces the Accounts Receivable headaches associated with unpaid or late invoices. Businesses want their customers to pay them sooner rather than later because on-time payments are essential to business operations. 

Clients appreciate fixed fee pricing because they know, with certainty, how much services will cost them. This knowledge minimizes the number of fee disputes between service providers and their customers. Service providers appreciate fixed fee pricing because fixed fees reduce the need for burdensome time tracking and other manual reporting tasks. As long as a small business calculates a desirable profit margin into the billing rate, charging fixed fees for recurring services is a profitable and efficient pricing method.

For other profitability and efficiency business tips and strategies, contact Prosperity Bookkeeping.Prosperity Bookkeeping offers proven systems that help small business owners put their money to work for them. We teach our clients how to become and remain financially sound, so that they are prepared for growth and setbacks.