What is value billing?

Value billing is a way of billing a client for services provided. Basically, the amount billed is based on the value of the service (or information) instead of the number of hours spent.

The following illustrates value billing. The owner of a successful company contacts an accounting firm for tax advice. Two tax experts have lunch with the owner and inform her how to process transactions so that she will enjoy tax savings of $40,000. The owner was grateful for the enjoyable lunch and the valuable information. Several days later, she receives a bill for $2,500 and is surprised at the amount. She concludes that the tax experts billed her based on the amount of money they had saved her. In other words, the tax experts had utilized the concept of value billing.