This month I am focusing on an area where I get a lot of queries, which is where you set up a standing order to spread the cost of my fees. Firstly, a number of people confuse standing orders with direct debits; there is a significant and fundamental difference. With a standing order you instruct your bank to make monthly/quarterly payments to me, which you can change/cancel at any time. With a direct debit, you authorize your bank to accept request from me to pay out money. I do not use direct debits as I never wish to be accused of taking money out of any clients account in a way that was unexpected.
The second point is that whilst the standing order spreads the impact of my fees, it will not necessarily always fully cover them. This is because my prices, like yours, go up from time to time. Normally I raise them by around 3.5% per year to cover inflation (I know inflation is running much higher at the moment, but I take the long view that it is slowly coming back down). This means that over time, your total paid by standing orders falls behind and therefore I show on the invoice a Balance Now Due. This will always be the sum required so that your standing orders paid in the six months after the invoice date, will clear the rest of the invoice, provided the Balance Now Due is settled. When first setting up a figure for your standing order, I aim for it to be sufficient to fully cover your fees for at least the first two years.
One further point to bear in mind here is that if you were to send in one year’s accounts late and the following one early, then there would not be an appreciable sum of standing orders paid in advance, which then means that the Balance Now Due would be higher. As an example:
Year 1 = you send in accounts for year ended 31 March in December, at which time I am holding 6 payments. I complete the work in January and then allow your standing orders February to July against the invoice.
Year 2 = you send in accounts in September, which I complete in October. This time I am only holding 3 payments when I send out the invoice, so there would be a Balance Now Due roughly equal to three months payments.
Thirdly, not all services are covered in the standing order unless specifically agreed. The main services not usually covered are payroll and VAT services; I am more than happy for you to amend your standing order to include these services if you so wish. And if you are not already using standing orders to spread the cost, but would like to do so, please get in touch and I can get the relevant paperwork sent out to you.