Milestone billing is a billing model popular in professional services management and companies with project-driven revenues. Milestone billing has proven to be so beneficial that leading companies like Boeing have incorporated it into their invoicing and payment process guidelines. While this event-based billing structure does have its challenges, it’s important to understand when the milestone billing structure is beneficial and what cases require advanced functionality with milestone billing automation.
What is milestone billing?
Milestones are sub-goals that help achieve the main project goal. Milestone billing is a payment cycle that uses agreed-upon events or deliverables as billing deadlines.
The definition of milestone billing according to Law Insider is:
Why use the milestone billing technique?
Project-based billing, an alternative billing technique that’s popular in professional service organizations, offers upfront pricing with all project cost issues negotiated and resolved before the start of the project, in addition to simplified invoicing and better cash flow.
While getting an upfront agreement on what a project should cost is great for short-term projects, it’s unsuitable for projects that run two, three, or four months or more. This is where milestone billing can be invaluable.
One of the main benefits of milestone billing is that it spaces out invoices and payments to make larger project fees more manageable for clients. It also helps business owners maintain a steady cash flow over many months and set specific goals service providers know to work toward.
Companies often use milestone billing because it helps structure budgets and ensures all parties stay within them even if the project takes longer than anticipated. This payment method also helps both sides see a concrete relationship between payment and progress.
The amount types (percentage, dollar value, etc.) and milestones (project phase completion, shipped goods, etc.) are determined by the parties involved and will reflect the unique needs of the agreement. Because of this, the details of milestone billing plans are often project-specific and determined on a case-by-case basis.
How do I know if milestone billing is right for my company?
Milestone billing is right for your company if you often conduct mid to long-term projects and are looking to avoid the focus or scope of a project extending beyond its expected parameters, otherwise known as scope creep. It’s also great for defining objectives, deliverables, and deadlines.
Automate billing processes with SOFTRAX
With the right milestone billing automation solution, multi-faceted billing scenarios are made easy through the infrastructure of automation in several ways, including:
Gain these abilities and tailor your billing processes to your customers’ needs by implementing SOFTRAX Billing Manager into your revenue management process. SOFTRAX Billing Manager is a component of the SOFTRAX Revenue Management System (RMS), a flexible revenue management platform that supports all the above capabilities with full support for both legacy point-in-time and milestone billing models as well as modern recurring and consumption models. SOFTRAX Billing Manager can completely automate your billing process while helping you migrate to recurring revenue offerings.
SOFTRAX RMS is designed for businesses whose processes have grown beyond the scope of their existing systems, forcing them onto spreadsheets or highly customized solutions. Billing Manager supports transaction and recurring revenue businesses across all industries with modular architecture, plug-ins, and components, and can be configured to meet almost any business model.
Businesses that implement SOFTRAX Billing Manager have the capabilities to build a base for their transactional or recurring offerings, then add advanced contract and renewal management, advanced revenue recognition, or further billing options and features. See what CFO’s, controllers, and directors have to say in their testimonials or read the detailed case studies of companies and businesses like yours that solved their challenges with SOFTRAX’s revenue management software.
To find out if SOFTRAX Billing Manager’s milestone billing automation capabilities are right for your company and projects and to learn how to get started with milestone billing automation, reach out to an expert today for a short discovery call.