Recession-proof your services business: Why it’s time to flip the billing model

I’ve seen cash flow issues close business doors countless times. We’ve all heard the potential recession talk, and as we head into unsteady economic times, it’s critical that service-based businesses take control over their cash flow.

“Bill me later” and hourly billing are outdated practices that professional services businesses can no longer afford to entertain. Working in SaaS for over 15 years taught me that getting clients onto upfront, recurring billing is key to financial stability. It’s time professional services businesses learn from e-commerce and SaaS—and ditch outdated billing models for good.

Take Tiffany Davis, the CEO and President of Washington & Co Inc., an accounting firm in the Washington DC metro area. Four years ago, she decided she was done processing payments manually and worrying about cash flow. Tiffany was already managing the business and her staff, pitching and closing clients, providing services, and handling payments every month. In the wake of the pandemic, she revamped her business model, structured her services into tiered pricing packages, and tied those packages to upfront, automated payments.

Today, she runs an innovative and client-focused business with zero accounts receivable and never worries about cash flow.

If you’re a small business owner providing professional services, this may sound like an unattainable dream, but Tiffany will tell you it’s not. Automated upfront payments are a critical part of reversing the cycle of working for cash flow and instead getting cash flow to work for you.

For small businesses, cash flow is king. Late payments jeopardize that flow. When payments don’t come in on time, companies can struggle to meet payroll, pay rent, or cover essential business expenses. If revenue is unpredictable, you can’t plan for hiring or capital investments.

Yet more than half of all small businesses are not paid on time. This problem is even worse for professional services. Most service-based businesses still invoice and accept payment after services are provided. Last year, a Federal Reserve Banks survey of 12 major U.S. cities found that slow-paying customers are more prevalent in businesses that accept payment after delivery.

In some industries like accounting, it’s even more pronounced. Our own Ignition survey found that 94% of firms experienced late payments.

The upshot: Eliminating late payments starts with taking client payment details upfront—or better yet, taking payment before the work even begins.

No business owner wants to spend time emailing, calling, and following up on late payments. It's also not the best use of your team’s time. That time could be better spent supporting clients or growing the business.

If you automate billing and collections, you’ll get rid of the friction on both sides.

Slow and late-paying clients force service-based businesses to negotiate twice—once to secure the contract, and again to collect payment. This shouldn’t be the norm. Once a contract is signed, payment should be a done deal on the agreed date.

Hourly billing emphasizes time spent rather than outcomes delivered. It also makes it harder for clients to understand the value they receive.

If you’re still billing by the hour and invoicing after the fact, your staff are wasting valuable billable hours with time tracking. Clients get frustrated when they don’t know where their hours go. You’re also risking contested bills when clients challenge how long a project takes.

Transitioning to upfront, fixed-fee billing simplifies relationships. With clear fees and payment terms established early, misunderstandings and disputes become far less common. Clients appreciate knowing what they’re paying for—and what results they can expect. It allows your business to clearly define the outcomes it delivers, aligning with what clients value most.

Upfront payment policies attract clients who value your services and are committed to long-term relationships. This helps weed out problematic clients who drain resources and are bad payers. It reinforces the value of your time and expertise and ensures clients understand expectations clearly from the outset.

E-commerce and subscription services have normalized upfront payments. Think about Netflix or business software like Zoom or Slack—all require payment upfront. Subscription models offer ongoing value and predictable revenue through automated billing.

If you’re still billing by the hour, chances are your business is endlessly stuck in the ‘work for cash flow’ cycle. Moving to upfront, fixed-fee billing is the first step toward more predictable cash flow.

Get a payment method on file at the start of every client relationship, before the work begins. Platforms that embed payment details into contracts are now widely available and user-friendly. This puts you in control of your cash flow and when you get paid.

Remove the friction of manual invoicing and collections after the fact by automating the entire payments process from the moment the contract is signed. As Tiffany Davis says, “Automation is the way to go. If you're not automating, you're wasting so much time.”

Switching to upfront, automated payments eliminates uncertainty and frees up time to focus on growth. Your clients get clarity. You get stability—and the holy grail of predictable cash flow.

Only then can you truly scale your business sustainably, whether that means increasing strategic hiring or investing in new services.