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Doing consulting work? Then I am sure you had those unpleasant discussions about invoices with some of your customers, too. Sometimes your customer’s complaint might be somewhat justified. However, such debates happen even if you and your team delivered great work. In that case, arguing over billed hours is especially frustrating. You might need to yield to your customer’s urgings because of formal mistakes and strike out some billable hours. You lose money because of unnecessary, stupid mistakes.
I have been doing consulting and software development work for more than twenty years. Additionally, I speak about financial aspects of project management with lots of teams through the work we do with our flagship product time cockpit. Based on that experience I want to share some tips that can helped me to reduce discussions over invoices and billable hours.
Be Clear in Your Communication About Prices
Make sure that you and your customer are on the same page regarding charging your team’s service. Here are some examples:
- Point out the hourly rates you are going to charge. Just having them hidden on your webpage or inside your general business terms is not sufficient.
- Find a consent about what you are going to charge upfront. Will your charge every phone call? Do you charge by intervals (e.g. every begun full hour with a minimum of one hour)?
- Reduce complexity of legal documents to a minimum. Make them easy to read. This makes it much more likely that your customer reads them.
- Point out price changes. General statements about index-linked prices are not enough.
If you have any doubts that your customer understood your terms correctly, explicitly ask and offer your help.
Out of the box, time cockpit supports hourly rates per customer that can be overridden per project, task, and even per time sheet record. More sophisticated rating logic can be implemented with time cockpit’s expression and scripting languages.
Don’t be Ungenerous
Your customer had a question that took you a few minutes to answer? Your customer complained about something and it took you a small amount of time to provide a fix? In my experience, being generous in such situations saves you lots of time in the end. Customers will remember your accommodation.
However, it is important that you make sure that your customer is aware of you playing fair. In my company, we track time for such free consulting work, too. We rate those hours with zero. Customers see the uncharged hours on time sheet records we attach to invoices.
In time cockpit, you can distinguish between non-billable hours (not visible to customers) and billable hours with a rating of zero.
Provide Estimations
Before you start any kind of billable work, make sure to provide effort estimations. Don’t start until you have found an agreement about the expected effort. I recommend communicating effort ranges:
- What is the minimum time you think you need to complete the task? You customer has to be aware that it is very unlikely that you finish in less time.
- What is the upper time limit you are very sure you will not exceed even if you have to overcome some difficulties? Your customer has to know that costs might rise up to that level.
If you want to work like that, you have to have good estimation skills. Read more about that topic in our article How Good Are Your Estimation Skills.
In our projects, we consider the upper limit as a cost cap. Our customers can be sure that we never charge more than the agreed maximum. If we exceed that limit, that’s our problem. This cost cap has turned out to be a great advantage in sales, too. Many customers ask for fixed prices. We tell them that fixed prices are suboptimal for them because they would have to pay too much if we manage to finish early. In our model, they only pay the time we really needed but also have a guaranteed cost maximum.
In time cockpit, you can save time and/or monetary budgets per project and task. Out of the box, time cockpit provides budgetary control lists that help to early identify potential budget overruns.
Be Transparent
I have met teams that send invoices with minimal information to customers. Details like hours per task are only provided upon request. Individual time sheet records are not shared with customers at all. I don’t think that this is an efficient approach. You might think that sharing too much information leads to unnecessary discussions. This is not the case in my experience.
I am a strong believer that great projects are built on strong trust relationships between customers and suppliers.
Transparency is a trust-builder. It has an important side effect, too: If your team members know that customers will get their time sheet records, data quality will become better. Have you seen description field in time sheet records like “xxx”, “programming” or “fu…ing around with firewall”? Professional consultants will not enter something like that if their customers will get it to read.
We have written a lot of blog posts on project reporting. Interested? I recommend for instance the articles Black Swans Do Exist and Project Reporting in Agile Projects.
Out of the box, time cockpit can export any list in Excel and PDF. With time cockpit’s reporting engine, you can easily define your own, branded reports that are customer-ready.
Separate Roles for Consulting and Administrative Issues
From personal experience, I know that it is unpleasant to talk about money and prices if you are not used to it. Here are some consequences that should be considered:
- Consultants might avoid talking to customers about prices, estimations, budget, etc. Problems are inevitable.
- Consultants who want to circumvent to argue about billable hours might start to book their work on non-billable projects or tasks.
- Teams with budgetary problems might prolong billing to postpone nasty customer meetings. Things are just getting worse.
I recommend to have dedicated persons for sales- and project management-related tasks. Typical consultants should focus on their work. They need to have somebody to refer to when it comes to discussions about monetary issues. This person should not have to work with the customer on a daily basis.
Time cockpit supports implementing confirmation and approval processes. Read more about it in our article Learn From Best in Class: Confirmation and Approval Processes.
Summary
In my experience, it comes down to two simple rules:
- Communicate clearly
- Agree upfront instead of discussing afterwards
Of course, I know that there are exceptions to the rule. Politics in large enterprises sometimes force us to trick. However, tricks should stay exceptions. In general, building on trust and openness leads to efficiency, better results, and last but not least enjoyment of work.
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