Project billing

9 ways to bill your project

Choose the billing method that is fair for your client and represents your actual work.
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What pricing model is a good fit for you?

There are two basic principles when choosing a billing method:

- Get paid for your work accordingly
- Keep your clients happy with a fair deal

You need to pick a method that compliments your style and line of work and makes invoicing as painless as possible for your clients. The correct billing method will get you fair compensation for your work and leave you with a good relationship with your clients.

There are two basic types of rates– fixed and hourly and they both work great in specific situations.

Hourly rates

Project-based hourly rate

Get paid for the exact number of hours worked on a project. This is also known as the time and materials pricing where you can add additional expenses like travel and material costs. You need to track your hours so you know exactly how much time was spent on a project as a whole.

Pros:

  • It’s flexible
  • Get paid for the exact number of hours worked
  • Common in business


Cons:

  • Clients don’t like it – an unexpected cost may surprise them
  • If you are efficient you will get paid less
  • Capps earnings - there is a limit to how much hours you can work in a day
Verdict: Use the hourly rate if you are a freelancer or if you work on a new project that doesn’t have a good time estimation. Hourly rates can also be used for long term projects and clients.

Task-based hourly rate

Set different rates for specific tasks in a project. This is a more detailed hourly billing method that offers more flexibility and is a better representation of your work than the project-based rate. A time tracker is a must to keep track of hours worked on specific tasks.

Pros:

  • Can handle more complex projects
  • Better represents the work put into a project
  • Show clients exact costs per task


Cons:

  • More complex than the project-based rate
  • Harder to keep track of hours on specific tasks without a time tracker
  • May raise additional questions from clients at invoicing
Verdict: Use task-based rates when your work consists of a pool of different tasks that you then mix and match for specific projects. Ideal for freelancers and agencies alike.

Employee-based hourly rate

Assign a specific hourly rate for each of your team members or employees. This is the most straight forward hourly billing for teams, large and small. Employees track time and you bill accordingly.

Pros:

  • Get paid more when experienced employees (they usually cost you more) are working on a project
  • Gives a good idea of your costs per employee
  • Great for larger teams


Cons:

  • More complicated than the project hourly rate
  • Possible competition between employees
  • Encouraging productivity
Verdict: Use when you have a larger team with different employee skill levels working on the same projects.

Daily rate

A daily fee is billed no matter how long the work took, but usually, there is an agreement on how many hours of work need to be in a day. This has the same principles as the hourly rate, so you can simply calculate the daily rate from your hourly rate from the Activity report.

Pros:

  • Easier for some customers to accept daily rates instead of hourly rates
  • Allows a more flexible approach to your work
  • Less complicated


Cons:

  • Not as accurate as hourly rates
  • Not suitable for shorter periods of work
  • May lead to more work hours in a day than you bargained for
Verdict: Daily rates are usually chosen for projects that last a longer period of time. They are less accurate and that may lead to working more hours. Not the ideal hourly rate for those new to freelancing.

Weekly rate

A weekly fee is billed no matter how many hours were actually put into a project. This is a less common option for freelancers and agencies.

Pros:

  • The most flexibility of any flat rate
  • A larger buffer zone for possible extensions or corrections in the project


Cons:

  • You need to have a long-lasting project
  • Difficult to handle multiple projects with this rate
  • Less detailed on how you work for your clients
Verdict: This is almost a hybrid of flexible and fixed rates. It’s suitable for long-lasting projects and customer relations because it involves trust from both sides. It is a great option for teams who work in weekly sprints.

Fixed rates

Fixed project fee

Set a specific fee for your project. You will always get paid that much, no matter the hours you put into the project. Set up a budget to monitor your costs vs fixed billable amount. Compare fixed fee against actual costs and figure out how to improve profitability.

Pros:

  • Predictable – clients love that
  • Encourages efficiency
  • Simple


Cons:

  • Harder to negotiate high fixed prices
  • Needs really good estimations
  • Risk of underselling
Verdict: Use a fixed project fee for shorter projects. You need to be able to estimate exactly how many hours you will put into the project or you will lose money.

Monthly retainer

You set up a monthly budget for a specific project. This is usually the best option when you have a lasting relationship with a customer you trust. The projects should be recurring each month or it should last a longer period of time.

Pros:

  • Predictable and continuous flow of income
  • Build lasting relationships
  • Recurring tasks like meeting go away


Cons:

  • You have a lasting responsibility
  • Client may want to add tasks without changing the fee
  • Working on a recurring project may get boring
Verdict: Great pricing model for stability, but you may lose interest in the long run. Only applicable to clients with whom you have a great relationship.

Fixed task rate

When a task is billed no matter how long it took. The easiest way to implement the fixed task rate is to add a fixed amount in the “expense” field in the task and set fixed tasks as $0 hourly rate in a Task-based hourly fee project.

Pros:

  • More flexible than fixed project rate
  • Still offers predictability for clients


Cons:

  • Need a very accurate estimation for each task
  • Every task is a possible over or undershoot regarding time and money
  • More room for client negotiations
Verdict: This billing rate is suitable when you have a lot of recurring or standard tasks that go with your projects. You need a clear estimation of how the number of hours needed for completing the task for this billing to work for you.

Billable vs Non-billable

Billable vs Non-billable

Non-billable time like breaks or other tasks can be measured by creating a project and setting the billing rate to non-billable. If you still want to include these tasks into reports, set Projects as Task-based rate, and set non-billable tasks to $0. For the most flexibility, you can set specific logs as non-billable.

Verdict: Use a fixed project fee for shorter projects. You need to be able to estimate exactly how many hours you will put into the project or you will lose money.

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