Ethical Billing Practices Depend on Your Honesty and Accuracy
As a professional services provider, you should only charge for hours you’ve actually worked. In turn, your client should pay for that time as per ethical billing practices. However, recent research shows that hourly time billing practices can lead to over-charging clients and over-working employees.
The billable hour system originated in the year 1960 with the intent to provide transparency to clients about the services for which they are being charged. From then on, employees recorded billable hours in hopes this would help their company meet its financial targets. The more an employee earned for the company, the more valuable that employee was.
With such a system, performance is measured by the number of billable hours submitted, which often leads to employees “padding” their timesheets to make quotas – a practice also known as time theft or timesheet fraud. Padding timesheets include overstating the time taken to complete a task. In other words, consultants bill their clients for the time they don’t work. This results in over-charging clients for the same amount of work completed, which is against the ethical billing practices in service organizations.
Unethical Billing With Time Theft
Time theft can be accomplished in several ways, like taking long breaks, rounding timesheet hours, and doing personal activities during work time. The most difficult part of time theft is that it is very hard to detect the stolen time. The longer it takes for a client or employer to discover timesheet padding, the costlier it becomes.
No industry is immune to timesheet padding. The consequence of this unethical practice is that it gives rise to the feeling of suspicion among clients. Moreover, employers are nowadays more susceptible to time theft due to remote work culture.
Even more disturbing is that many researchers have found that some professional service firms place clients into groups according to their sensitivity to billing accuracy and charge or overcharge accordingly. Clearly, that’s not ethical.
For consultants, maximizing income is always top of mind, and consequently, scope creep can happen “by accident.” That’s not ethical, either.
For most organizations, time theft is not the norm. However, ethical concerns can still arise over billing practices resulting from inaccurate time tracking. For instance, a graphic designer spends 15 minutes tweaking a website design for Client A. Then, he gets into an impromptu meeting for Client B. The meeting starts 15 minutes past the hour, so it’s really only 45 minutes long. But the designer forgets about the website work for Client A and mistakenly bills the full hour to Client B. Client A gladly pays a smaller bill, while Client B feels cheated.
For many professional services organizations, time accounting is arbitrary, and the resulting inconsistency and inaccuracy can lead to lost trust and a damaged reputation. Worse yet, consultants may fail to log all the time they actually spent on projects and end up selling themselves short. How do you ensure ethical—and fair—billing practices when time tracking mistakes run rampant?
Things You Can Consider When Billing Your Client
- Use automatic time tracking and billing software that can track the consultant’s billable hours precisely and provide a detailed audit trail.
- Use the client’s preferred billing method instead of the one you find most convenient. This can mitigate the chances of unethical or inaccurate billing practices.
- Review the bill before forwarding it to the client. Re-checking the bill and looking into the details can save you from errors that may make you look sloppy and untrustworthy in the eyes of the client.
How to Foster Ethical Billing Practices in Service Organizations
Less Hassle = More Honesty
One of the most promising ways to eliminate unethical billing practices is by using time tracking software. Employing an automated time tracking solution for billable hours encourages more ethical billing practices by eliminating errors and creating accountability and transparency. Since timesheets are automated, consultants have less chance to pad their hours and save time to boot.
In automated systems, timesheets accurately capture logged hours and time spent on tasks. Therefore, it provides clear visibility into their work activities to the client. But these time tracking solutions have to be easy to use. Otherwise, consultants may use them incorrectly, inconsistently or not at all.
Here are some key attributes of time tracking software that might just help you to be more fair and ethical in your billing practices and ensure you get paid for the work you’ve done:
- Cloud-Based for Easy Access: With time clock software accessible over the web, consultants can easily log their time from anywhere—even on a mobile device when they’re on the road.
- All Clients, All in One Place: A centralized solution that enhances client visibility into all billable hours and items, which encourages completeness and accuracy.
- Automated Email Reminders and Reports: Reminding consultants to report their time consistently and completely—and checking on it—creates accountability and helps to ensure all billable time is captured.
- Simple, Easy-To-Use Interface: Clearly defined fields, intuitive navigation and a unified view simplify time capture and eliminate confusion.
Remember, your clients trust you to be truthful in your billing practices. Anything less than honesty is not only unethical, it is a violation of your client’s trust. Therefore, ethical billing practices in service organizations plays a big role. Implementing time tracking software that encourages accurate time billing and provides a detailed audit trail will help you get paid for all the time spent on your projects and avoid disputes.
Additionally, time tracking software not only promotes billing accuracy but also helps maintain an open line of communication between the consultant and the client. As communication about impedances and work progress will foster transparency between the client and consultant.
*“The Tyranny of Billable Hours,” Cass Business School, London, August 17, 2012.