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Basic Coaching For The Golfing Beginner
Golf continues to be one of the most popular sports in the world and it seems that almost everyone you know plays the game. But what do you do if you're a beginner and your golf lessons aren't yet paying off? The thing that beginner golfers need...
Delegate or Drown
Why waste your precious time working on tasks, which are definitely not your forte when you can delegate or invest your money on a product or service which will free up your time? You can then focus on the more important areas in your work and...
Managers Don't Know Any Better!
Managers Don’t Know Any Better! 90% of managers today haven’t the slightest clue about how to perform their jobs. If they did we wouldn’t have the astonishingly high business failure rate, or job movement. But our managers have never been properly...
The Truth About Money!
How much money do you want? How much is enough? How much money is too much? The Truth is --- You don't need money! Let's find out why? Money is really just a form of exchange. Here is an example. 10 people are in a room. Only one person has $1....
Why Aren't You Using Online Fitness Coaching?
If I were to tell you that you could burn away as much fat as
possible by sitting at your computer twiddling your fingers and
toes, would you believe me? Well I sure hope you don't!
However, losing weight in the confines of your own home at...
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How To Realistically Set Your Fees - Part 4
Effect Of Bad Debts
So far, we have covered the major factors involved in setting your fee structure. We have set a realistic number of billable hours, calculated the effect of expenses and taken into account the cost of a benefit package.
This has brought us to an hourly rate of $77. By charging $77 per hour, you will have an income of $46,000 per year, plus benefits.
What happens when you have a client that does not pay you for your services? What happens if a customer goes out of business before your invoice is paid? How will these events affect your own planning? Do you want to take a bad debt write off on your taxes? Do you want to try to include for these contingencies in your fee structure? Your answers to these questions will have a direct impact on how you operate your business.
Thankfully, unless you provide very poor service, most clients will eventually pay you. However, it may take you awhile to collect your money and you may have to settle for less than the originally billed amount. You have the option of adding late fees to your invoices, but keep in mind, the more time you spend trying to collect a past due invoice, the less time you have to devote to paying customers. Also, if you need to engage an attorney or collection agency, you will in all likelihood, not see the full amount of your invoice because of their fees.
One way in which you can protect yourself is to build into your fees an allowance for bad or uncollectable debts. If you estimate that 5% of your invoices will be either unpaid or underpaid, then add 5% to your hourly rate. For example, your hypothetical fee is now $77 per hour, 5% of that is $3.50, added together gives you a rate of $80.50 per hour. If we round this off to $80, you would have approximately $3300 per year cushion.
Allowing 5% for bad debts may seem high, however, keep in mind the present state of the economy and remember this figure can be adjusted as the economic conditions change. Today, it is not unusual for businesses to take
longer to pay invoices then they did a couple of years ago. Most businesses expect to pay late fees for overdue invoices, however determining how much to charge and whether or not you are meeting the various legalities involved can be time consuming. It may be easier to add a percentage to your overall fees to offset bad debt. In a sense, you are spreading the economic risk over all your clients. For a small business this may be the safest and less time consuming course of action.
If your client base is large enough, a certain percentage of your customers will go out of business, leaving you with unpaid and uncollectable invoices. There is little chance you will collect any money in a bankruptcy hearing. To protect yourself, you can charge partial fees as your work progresses. This way you are assured of having received at least some of your money. Not all businesses are set up to take advantage of this option.
Remember, you are not in business to give away your services. Your goal is to provide yourself and/or your family with a reasonable income. Uncollected invoices are part of doing business, you owe it to yourself to consider this before you get stuck.
Copyright 2003, DeFiore Enterprises
Interested in having your own successful, home based creative real estate investing business? Chuck and Sue have been helping folks start successful home based businesses for over 17 years, and we can help you too! To see how, visit http://www.homebusinesssolutions.com for the latest FREE tips and tricks, educational products and coaching in creative real estate investing and home based businesses. No time to visit the site? Subscribe to our FREE "how to" Home Business Solutions Digest, it's like having your own personal coach: mailto:subscribeHBS@homebusinesssolutions.com
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