This article is an extract from the book 'Everything you need to know about Xero Practice Manager'
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There are some settings in XPM you need to get right. In this section we’ll be reviewing the essential settings to ensure your practice is set up to succeed.
To get started, go to ‘Business > Settings > Practice Settings’ in your XPM.
One of the most important settings to get right in XPM is your billing basis. This single setting dramatically changes the way we use XPM for quoting, job management and invoicing.
XPM’s billing basis offers only two options: staff-based billing or task-based billing. Too often this is found arbitrarily set unknowingly costing practices thousands of dollars in miscalculated monthly revenues. This setting can be changed at any time, but shouldn’t be done light-heartedly as it will affect all future invoices.
Staff-based billing describes the way you value time in your practice. It says that you sell the services of your staff in order to make money. If different people in your organisation have different billable rates, then this setting is for you, even if those rates change between tasks.
Task-based billing also describes how you value time in your practice. In contrast to staff-based billing, this option says that you value time by charging for a service, irrespective of who works on it. The assumption here is that your staff are fully interchangeable or share the same or similar set of skills. It assumes that two different people performing the same function will be priced and invoiced the same.
To make things simple, you always want to select staff-based rates in your practice settings. If your practice uses a combination of both methods, you can set up custom task rates for staff. This allows you to have a standard rate for a staff member, then override certain tasks depending on the task they are working on.
Let’s look at an example:
David has a billable rate of $200 per hour, but for tax queries we want to capture his time at $250 per hour because this task is a specialist skill that only David can provide. We therefore want to bill his time out at a higher rate. We still have the organisation settings set at staff-based billing, but have applied an override for this specific task. We’ve done this by using a custom task rate to override David’s billable rate to a higher tax queries rate. We’ll be covering this in more detail in this section.
The move to fixed-price agreement billing is a growing trend in the accounting industry, so many people begin to think it is not necessary to set up billable rates because they never bill time sheets. This is often caused by confusing how we invoice with how we value our services. Even if we never charge an hourly rate for our teams’ time, we should still apply a value to this time, and we should certainly apply a cost. This enables us to measure write-ons and write-offs correctly, which is used for Staff Performance reporting. This is covered in Chapter 13: Management Reporting for your Practice.
You want to be using staff billable rates, but changing over from task billable rates needs to be done with caution as it will affect your value of work in progress (WIP), financial reports and the way XPM calculates your next invoice. What is important here is that you pick a date right after you’ve finished month-end invoicing, change it over, and don’t touch it again. You’ll also need to communicate the reason and impact of this change to other members of your management and invoicing team.
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