Billing Model

When billing structures are altered they impact on client numbers and in turn revenue and profit. Billing Model allows you to forecast what this impact will be. It does this using a Client Number Change Percentage. This is the percentage change in client numbers when your billing structure is changed. For each business this is influenced by the level of competition, differentiation of the business, client profiles, and type of service provided. An estimate of this percentage combined with basic data on average billing fees and cost percentages allow revenue, profit and client numbers to be forecast for the range of billing fee combinations. This model was originally designed to test changes in billing structures for a Medical Practice (Public versus Private Billing), however it is equally suited to any professional practice and can be used to test the impact of fee changes.

Billing Model

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This application is a spreadsheet developed in Microsoft Excel and will run on Microsoft Excel and most other spreadsheet applications. You can download Billing Model free of charge for evaluation. In evaluation mode some functionality is restricted. To license your application and fully enable all functions requires the purchase of an application license. If you have not already please consider buying a license to fully enable your application.

If you download the Compressed Zip file unzip/uncompress the downloaded file and save the content .xlsx application file. If you download the .xlsx file simply save the .xlsx file. Open the .xlsx file and follow the instructions. This application does not access or alter your system or system files in any way. To uninstall simply delete the saved files.

Application suitability must be independently assessed and use indicates acceptance of any and all associated risk.

Help Billing Model

Billing Model considers two billing structures, Current (1st) and Proposed (2nd). From basic billing and cost data break even points at revenue and profit will be calculated for the proposed billing structure. Break even points tell you the Client Number Change Percentage at which your current and proposed billing structures provide the same Revenue or Profit.

If you change billing structures and the Client Number Change Percentage is greater than the Revenue Break even your Revenue will decrease, if it is greater than the Profit Break even your Profit will decrease. You can input an Estimated Client Number Change Percentage to forecast the Revenue, Profit and Client Numbers for your business for the full range of current and proposed billing structure combinations. Full results are displayed in easy to interpret Charts and Table format. Details displayed include Revenue, Profit, and Client Numbers.

Input is required in the blue cells. Including billing structure identifiers, average fee per client and the current number of clients for each billing structure. If you currently only use one billing structure and are considering introducing a second (proposed) input the estimated average fee per client for the second structure i.e. if your are looking at a fee increase of 10% input your current fee plus 10% as the average fee per client for your second billing structure. Then provide your Fixed and Variable cost percentages. From this data break even points at revenue and profit will be calculated. To view result details select the required tab at the bottom of the window.

Billing Structure Identifier

Input an identifier for your two billing structures under consideration. For example Public and Private. The proposed (2nd) billing structure should be the one you are testing.

Client Numbers

Input the current number of clients for each billing structure. You can use any time frame you like month, year etc however it should reasonably reflect your normal business. If you currently have no clients for your second structure input 0 for that structure.

Average Billing Amount

Input the average amount billed for each billing structure. If you currently only use one structure you will need to provide an estimate of the average billing amount for your second billing structure.

Billing Amount

This is the calculated current billing from each structure for the time period used. It is Client Numbers X Average Billing Amount.

Fixed Costs as % of Total Billing Amount

Input your current Fixed Costs as a Percentage of Total Billing Amount. The Fixed Cost Amount (expense) calculated from this percentage will remain constant over the range of billing combinations.

By reducing your fixed coasts when using your new billing structure your profits will be further enhanced. If for example you are increasing billing fees and this will reduce client numbers you may also be able to decrease your fixed costs i.e. reduce administration, location costs etc.

Variable Costs as a % of Total Billing Amount

Input your current Variable Costs as a Percentage of Total Billing Amount. The Variable Cost Amount (expense) calculated from this percentage will change with the number of clients. However the Variable Cost Amount per Client will remain constant over the range of billing combinations.

Variable Cost Amount per Client

This amount is applied in calculating the variable cost and associated profit in the Calculation Table and for Profit Break even.

Profit as a % of Total Billing Amount

This is the calculated Profit (surplus) as a Percentage of Total Billing Amount after fixed and variable costs.

Revenue Break even is at ...

This is the Client Number Change Percentage at which there is no change in Revenue between your two billing structures. If the Client Number Change Percentage is greater than this revenue will decrease when you move to your second billing structure. If this percentage is negative it signifies a decrease in Client Numbers when you move to your second billing structure. The Client Number Change Percentage is the percentage of clients that will change their preference for your service (go to competitors if negative, come from competitors if positive) when your Billing structure is changed from your first billing structure to your second.

Profit Break even is at ...

This is the Client Number Change Percentage at which there is no change in Profit between your two billing structures. If the Client Number Change Percentage is greater than this profit will decrease when you move to your second billing structure. If this percentage is negative it signifies a decrease in Client Numbers when you move to your second billing structure. The Client Number Change Percentage is the percentage of clients that will change their preference for your service (go to competitors if negative, come from competitors if positive) when your Billing structure is changed from your first billing structure to your second.

Estimated Client Number Change % ...

Input your Estimated Client Number Change Percentage (how many clients will you gain (+) or lose (-) if you use your second billing structure). This is the percentage change in client numbers when your billing is changed from your first to your second structure. For each business this is influenced by the level of competition, differentiation of the business, client profiles, and type of service provided. If competition is high and your business provides basically the same service as competitors, your clients are price sensitive, and your service is elastic in demand (i.e. the percentage demand change is greater than the percentage change in price) your Client Number Change Percentage will be high and negative when the average fee for your second billing structure is greater than average fee for your first billing structure. This indicates a large percentage reduction in client numbers if you move to the second billing structure.

... billing Client Numbers are

This is the calculated Client Numbers when all your billing is based on your first / second billing structure and using your Estimated Client Number Change Percentage.

Revenue

This is the calculated Revenue when all your billing is based on your first / second billing structure and using your Estimated Client Number Change Percentage.

Profit

This is the calculated Profit when all your billing is based on your first / second billing structure and using your Estimated Client Number Change Percentage.

Billing and Profit Chart

Plots Billing and Profit by Client Billing Structure %.

Client Numbers Chart

Plots Client Numbers by Client Billing Structure %.

Calculation Table

Calculations by Client Billing Structure.

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Billing Model
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