What are alignment fees?
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.
Alignment fee example
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.
Applying a Proposal alignment fee
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.
You’ll need to ensure that “can have alignment fee” has been toggled on for the particular service within Services & Pricing.
Select “Yes” to apply an alignment fee on step 1 of creating a Proposal:
Viewing the alignment fee
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’:
Alignment fee settings
Within “Practice Settings” > “Billing” you can chose how to invoice the alignment fees.
