Imagine walking into a pizza joint but only wanting a slice instead of the whole pie. Then why should you pay for the entire thing? Imagine being charged just for what you consume. This is the essence of prorated billing— The customers only pay for what they use.
For freelancers, prorated billing provides a flexible way to charge clients based on actual service usage within a specific time frame. This approach not only ensures fairness but also helps maintain strong client relationships.
Let’s break this down further with real-life examples.
What is Prorated Billing?
Think of prorated billing as the middle ground between a buffet and a pay-per-portion model. It allows freelancers to charge clients fairly, based on actual usage.
Especially, when a client starts or ends a service mid-cycle.
If they sign up for a subscription on the 10th, for a service that bills on the 1st of every month, it can be balanced through prorated billing. This billing allows for partial payment instead of paying for the entire month. This example is from the 10th to the end of the month. This makes a fair pricing model both for the freelancers and the businesses.
How Does Prorated Billing Work?
As an example, let’s consider that you are contracted to work for a client on a project for $30/month. However, they only want your services for 16 days out of the month.
Simple math! If October has 31 days, and you have only worked 16, the prorated bill will be calculated as:
COST= (Remaining Days/Total Days in a Month) x Monthly Charge
Total days in October: 31 days
Days used: 16 days
Monthly charge: $30
Prorated Bill= Daily Rate × Days Used
Prorated Bill= 0.9677 × 16≈15.4839
So, the prorated bill would be approximately $15.48.
This formula ensures that the client only pays for the time that you worked, just like ordering a slice instead of the whole pizza.
Benefits of Prorated Billing: A Fair Slice for Everyone
Flexibility: Adjusts billing based on the amount of work done. If a project scope changes, prorated billing lets you charge accurately.
Client Satisfaction: Clients appreciate transparency. Knowing they only pay for what they use builds trust.
Fairness: Ensures clients aren’t overcharged for services they didn’t use, which can prevent disputes.
Accurate Accounting: For freelancers, accurately billing clients based on work done streamlines financial management.
Typical Use Cases for Using Prorated Billing
Freelance Projects: Though the work in a month is only partial, prorated billing may help freelancers charge clients for just the time spent on the project.
Subscription Services: In case a client subscribes to any service you are offering but discontinues the service mid-way through a billing cycle, prorated billing would ensure that you get paid for only the time you worked for the client.
Consulting Services: If you consult on an hourly basis, but the client wants you just for half the month, then prorated billing applies.
How to Implement Prorated Billing in Your Freelance Business
Incorporating prorated billing can be seamless with the right tools. Using invoicing software like Billbooks’ subscription billing software can automate the calculations and generate accurate invoices.
Imagine having an invoicing assistant that ensures every dollar is accounted for!
This automation helps with:
Project-based services: Easily charge for the specific days or hours worked.
Retainer clients: Adjust the billing based on usage for ongoing clients.
With software like Billbooks, you can implement prorated billing efficiently and keep invoicing organized. The only thing worse than a surprise bill is a confusing invoice!
How to Prorate a Bill for Your Clients
The process of creating a prorated bill can seem complicated, but it is quite easy. Here is how to do it in three simple steps.
However easy it might be, a roadmap always helps:
Set a Daily Rate: Divide the monthly fee by the total number of days in the month.
Calculate Based on Usage: Multiply the daily rate by the number of days worked.
Send an Invoice: Use tools like Billbooks to automate this process and ensure accurate billing.
Why Prorated Billing is a Game-Changer in Freelancing
Prorated billing can significantly improve your cash flow management. Instead of estimating hours or overcharging clients, you can maintain a transparent billing process that reflects actual work done.
This clarity not only strengthens client relationships but also improves your professional reputation.
Freelancers who use prorated billing are perceived as fair and honest, making clients more likely to return for future projects.
Additionally, with tools like Billbooks, you can automate invoicing, allowing you to focus more on your work rather than on calculations.
Slice It Fair with Prorated Billing
Prorated billing empowers freelancers to charge clients accurately and fairly— like ensuring everyone pays for just the right amount of pizza they ordered. Understanding and implementing prorated billing in your freelance business can help you manage your finances more effectively, foster better client relationships, and, with the assistance of Billbooks, keep your invoicing straightforward.
Let Billbooks take care of the slicing while you focus on what you do best— delivering quality work to your clients!
Sign up for our 30-day free trial of Billbooks, and leave your credit card at home! It is the only date where you get to eat cake without worrying about the check!
