Make Your Billing Strategy Work for You

By Peter L DeHaan, PhD

Peter L DeHaan, publisher of TAS TraderThere are likely as many billing plans as there are telephone answering services. It seems that everyone has his or her own idea of the right way to bill clients, with each answering service viewing its method as superior. Yet privately, they comprehend its shortcomings. In reality, there is no perfect billing philosophy and no single right way to charge clients. Successful billing requires that TAS owners understand their selected rate structure and operate their answering service that enables them to capitalize on their billing structure’s strengths and weaknesses. Here are some typical TAS billing plans:

Flat Rate: Every client is billed the same fixed rate every month. Though not used much any more, it was common when client expectations were uniform and call-processing systems were manual.

Advantages: Bills are easy to generate, explain, and understand; all revenue is fixed; and clients know exactly what to expect and can budget accordingly.

Disadvantages: It is not fair – essentially half of the clients are profitable, subsidizing the other half who are not. It also attracts high-volume (unprofitable) accounts while discouraging low-volume (profitable) ones.

Possible abuses: Revenue stays the same regardless if work is done; therefore, there is no direct financial incentive to answer calls.

Strategy: Seek low volume accounts; streamline and automate high volume accounts.

Modified Flat Rate: Each client pays a flat rate, but that rate differs from client to client based on his or her historical usage.

Advantages: There are the same benefits as with flat rate billing, and the disparity between profitable and unprofitable clients will be largely eliminated.

Disadvantages: Knowing what to bill a new client is hard, it neglects seasonal fluctuations, and you must continually review client traffic for changes in usage.

Possible abuses: The initial rate might be set too high or too low for new clients. Failure to lower rates if usage drops significantly will result in overbilling.

Strategy: Analyze client profitability each billing cycle by calculating client revenue per minute. Clients with a pattern of low revenue per minute (unprofitable) may need their rate increased or their account streamlined and automated.

Unit Billing: Tracks and bills units of work, such as calls answered and calls made; some services charge an additional unit if a message is taken. There is usually a base rate that includes an allowance of units, with excess units being billed additionally.

Advantages: More work can be tracked and billed; high volume and active accounts pay more.

Disadvantages: Not all units of work require an equal amount of time and effort.

Possible abuses: Performing unnecessary units of work under the guise of being thorough, such as double dispatching.

Strategy: Count every measurable unit of work. Automate time-consuming processes.

Time Billing: The time operators spend working for the client is tracked and billed. As with the unit billing, there is generally a monthly rate that includes a block of time; excess usage is billed separately.

Advantages: Billing will directly reflect the amount of time spent for that client.

Disadvantages: Billing complaints are harder to resolve.

Possible abuses: Talkative operators inflate bills.

Strategy: Provide the client with the services they need, coach operators to be thorough yet efficient, and make sure that all time is tracked and billed.

Tiered Time Billing: Agent time is billed the same way as time billing; any system time or automated activity is also billed, but at a lower rate. System time includes non-operator activity, such as automated dispatching, call screening, IVR, voicemail, patching, and conferencing.

Advantages: All of the benefits of minute billing; automated activity also produces income.

Disadvantages: There are more items to track; not all systems provide adequate statistics.

Possible abuses: Same as for time billing.

Strategy: Be sure to track and bill all appropriate time elements.

Other items to be considered for any billing method are ancillary charges (fax, email delivery, and on-call schedules), pass-through charges (local, long-distance, and toll-free costs), or surcharges (holiday fees). Other issues are the length of the billing cycle (monthly versus twenty-eight days), late fees, and discounts for early payment.

Regardless of which method you implement, be sure you know its strengths and weaknesses, follow it ethically, and pursue it strategically. With the right approach, any of these methods can be successful.

Peter L DeHaan is publisher of TAS Trader and Connections Magazine. Read other articles by Peter L DeHaan or receive his newsletter about writing.