More and more practices are looking to adopt regular monthly billing with their clients. In this situation, despite the work being performed once per the client's financial year, certain services like Annual Accounts will mean the fee needs splitting into monthly recurring payments.

When taking on a new client part way through their financial year, this monthly billing approach will not cover the full cost of delivering the service for the client.

This is where a one-off 'Alignment Fee' can come into play, as it allows you to catch up or backfill the fee to cover the part of the financial year than has already passed.

Good news - Socket can automatically calculate alignment fees while you are preparing a proposal! Here's how it works, and how to set it up.

For example, you win a new client that you are completing annual year end accounts for:

Client year end: 31 March 2024

Your start date: 01 October 2023

Monthly fee: £100 (total £1,200)

Month 1 billing: 01 October 2023 = £100

+ alignment fee = £600 (6 x £100 for 01 April 2023 - 01 September 23 = £600

Remaining monthly £100 fee (5 x £100 for 01 November 23 - 01 March 2024) = £500

Total £1,200

This ensures you will have collected all your fees.

Before you can use alignment fees in a proposal, you need to enable it per Service in your Pricing Menu. You'll need to ensure that "can have alignment fee" has been toggled on for the particular Service within Services & Pricing. Alignment fees are only used with Services that are billed monthly.

When creating your Proposal, if you select "Yes" to applying alignment fees, Socket will automatically use the Planned Start Date and the Financial Year End date of the client to calculate the Alignment Fee.

Select "Yes" to apply an alignment fee on step 1 of creating a Proposal:

You can exclude the alignment fee on a per-service basis without turning it off for the whole proposal. This is useful if you want to waive the alignment fee for a particular service — for example a lower-value service or one you're offering as a goodwill gesture — while keeping it in place for everything else.

To exclude the alignment fee from a specific service line, expand the service on the Services step of the proposal wizard and click More Actions. Select Exclude Alignment Fee from the dropdown. The summary panel will update immediately to reflect the revised total.

Your view

On step 2 when choosing the services to be included on the proposal, you can see a live updating total of the alignment fee calculation:

If you click on the [?] icon, you'll see a detailed breakdown of how this has been calculated:

Client view

The client gets to see this exact same breakdown when viewing the "fees" page on the Proposal, they just need to click the [?] icon under the header 'Billed in your first month':

Within "Practice Settings" > "Billing" you can chose how to invoice the alignment fees.
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Socket calculates and bills the alignment fee as a single charge. There is no built-in option to automatically split it across multiple invoices.

If you've agreed with a client to spread the alignment fee over a few payments, the simplest approach is to let Socket generate the billing as normal, push it through to Xero, and then adjust the invoice amount directly in Xero to reflect the first instalment. You can then manage the remaining payments as separate invoices in Xero outside of Socket's billing cycle.

If you'd rather handle this entirely within Socket, you can use a Minor Adjustment after the first billing run to account for remaining amounts, but this involves more manual steps. For most practices, adjusting in Xero is the easier option.

At the moment, alignment fees need to be toggled on per proposal during the creation process. If you'd like to see this changed, you can submit a suggestion via the Socket feedback portal at feedback.usesocket.com.