What is Value Billing

Value billing is the way of writing bills by service provider for getting his service providing fees. When service provider provides the service without any written contract with other party who gets the service, service provider has the right to get his consideration on the value of provided services instead of taken time because service provider is professional not labor.



We can understand above concepts with following examples :

1. For example, Mr. A went to Car mechanic for repairing his car. Car mechanic used his talent and repair any part whose current market cost is $ 500 and car mechanic has given the bill of his providing service on the basis of $ 500. His taking fees which has been in the bill is 10% of $ 500. Now, client has to pay $ 50 because if car mechanic does not repair this part, client has to pay $ 1000 for buying new. But client is just taking old part's as value and charging his service fees on this basis.

2. For example, Mr. James is the advocate, ABC company came to him for solving his company. Actually, a debtor is not paying $ 10,000 to company. Company has the proof of giving goods to him on credit. Mr. James take this case. ABC company is agreed to pay 20% on the value of bad debt if company will recover from court on the basis of Mr. James's skill and expertisation in this profession. Finaly, ABC company won the case and got $ 10,000 from court. Mr. James presents the bill off $ 2000 on the basis of value of his providing service. ABC company has paid same.

3. In advertising industry, we see, google is providing adword service. As per this, your ads will show in google search and its partners' sites. For this, you have to pay the bill. In single day, your bill may $ 500 or $ 5,00,000. Now, google has the unlimited capacity to provide service in single day. So, to pay google on the time basis is not valid. So, google will demand the fees on the value of his provided service. So, value billing is better apply in advertising industry services.


Conclusion

Value billing will never be on the time basis or what is the cost of service providing. Sometime, cost of providing service may be more than value of service providing. Still, service provider will have the right of getting fees on the basis of service providing as per value billing. In this case, service provider may suffer the loss. 


Related Resource : Accounting Glossary

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Accounting Education: What is Value Billing
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