8 Expenses Businesses Should Pass on to Customers
Starting a business can be difficult, both mentally and financially, and there are plenty of mistakes to be made. One common error among fledgling companies is invoicing.
As a small-business owner, you not only deserve to be paid for your hard work, but your livelihood depends it. Even knowing this, the most diligent entrepreneur can occasionally miss a line item or two when billing a client. After all, in the name of good customer service, you want to do the best job possible. It’s important, however, that you get paid for every minute you work and every expense you accrue.
To keep your cash flow as solid as possible, here are eight things business owners often miss when billing customers. Check your own invoices and see if you might be missing a few of them.
1. Consulting fees
Before you begin any new project, you’ll likely spend a great deal of time communicating with a customer to lay out the full scope of the work and provide an accurate cost estimate. Many businesses offer this initial consultation free but avoid giving any concrete advice. Once signed on as customers, however, those constant calls with questions eat into your time. It’s important to place a value on that time up front to avoid spending hours on the phone at the expense of your other customers.
2. Travel costs
If your work with a particular customer requires traveling, you should bill for that cost as part of your invoicing process. There’s no reason for you, the business owner, to eat that expense. If the customer asked that the same traveling be conducted by one of its full-time employees, it would have reimbursed for it. Make sure you stipulate when the request for travel is made that you’ll expect your costs to be reimbursed to avoid any misunderstandings when the invoice is issued.
3. Related expenses
Whether you hit the road for a customer or your work keeps you around town, you should bill for any expenses you incur in the course of doing business with the customer. This means if you’re required to travel as part of work for a customer, you should bill for every meal and incidental expense that occurs during that trip. Of course, as a professional, you’ll know not to abuse that privilege, but don’t be offended if the customer contacts you to question one or more of the expenses. Have receipts on hand to back up your claims in case you’re asked about them later.
Any work you do for a customer has the potential to be billable, including the time you spend thinking of ideas. However, one easily provable billable item is research. The hours you spend, hunkered down in front of your computer screen, researching information for your customers, is definitely billable.
If you want to be exact about the time you spend researching, try a time-tracking app that will capture every minute you spend on your customer. This will not only serve as documentation if you’re ever questioned about it, it will also help you keep track of how much time you’re spending on each customer. Based on this information, you’ll also be able to determine where your time is being allotted each day. This information will help you make decisions on how to bill clients in the future.
You probably already have most of the supplies you’ll need to service the vast majority of your customer base. Your hardware and software infrastructure is in place and basic office supplies are part of day-to-day operations. However, it’s important to bill customers for items you use specifically for their projects, including printing and copying costs, if paper is necessary.
If a project requires that you purchase a specific supply and it’s a supply you’ll use with other customers moving forward, you probably shouldn’t bill for it. On the other hand, if you’ve purchased an item for one-time use on a customer project, recovering that expense is essential.
6. Mailing costs
Much of your work will likely be conducted online. However, you’ll probably occasionally need to ship items that can’t be handled electronically. When that happens, postage and shipping costs should be passed on to the related customer. Don’t forget to include the supplies you purchased to mail the item in. Boxes, mailers and packing materials should also be billed to the associated customer.
7. Credit card fees
To make things as convenient as possible for your customers, you should accept credit-card and online payments. You’ll be paid faster and they’ll be happy that they don’t have to cut a check. However, each credit-card payment means fees for you. Whether you decide to pass these fees on to your customers is up to you, but over time, those 2-percent-plus transaction costs will add up, especially if you’re billing for thousands of dollars of work.
8. Pain and suffering
No, you can’t put a price on the mental anguish some customers cause, but if you look at your customer roster, you’ll likely find that one or two customers are taking up a large chunk of your time. The number of time-consuming customers goes up as your customer base grows. Those customers likely require more phone time than your other customers or they fill your inbox with questions on a daily basis.
You can phase those customers out over time, but they’ll likely just be replaced with new ones. Instead of cutting time-eaters from your customer roster, it might be more effective to put a limit on the number of consultations you’ll do for each project. After those consultations have been used up, you’ll bill for each phone call or email at a stipulated rate.
Once you’ve decided what your billing procedures will be, make sure you’ve included them as part of your initial proposal. When customers know up front what they’ll be charged, they will be less likely to be upset when they see those charges on their invoices.