We offer a very wide variety of fee structures and billing arrangements to clients during the sales process. This is so that we can meet the client’s needs optimally and make their lives easy. For example, some clients need fixed costs for services, while others may be paying partially in company stock, or deferred fees. Some deals we make involve future payments contingent on the success of the project.
We are working to simplify our billing structures to help us operate more efficiently and with fewer opportunities to make mistakes with invoices.
The most common scenarios for One-Time projects are:
- Fixed cost, in phases. We create an estimate for the whole project and establish a fixed cost for the first phase. Then, for each subsequent phase, we agree on a fixed cost for just that phase prior to starting the phase.
- Hourly billing with floor and ceiling. We agree on an overall scope but don’t go too nuts to hone every single detail. We provide an estimate and charge hourly. We charge at least some % of the estimate, and at most some other multiple of it. For example, if our estimate is $100k, we might make the floor $80k and the ceiling $120k. This gives the client assurance that the budget will be within a certain amount, while providing the flexibility of an hourly arrangement.
Both fixed cost and hourly arrangements have upsides and downsides. We tend to prefer fixed cost when the scope of each phase of work can be reasonably grasped at the outset. Hourly arrangements offer the client the opportunity to control the final cost by making certain decisions during the process. When working hourly, it is important to contextualize the cost impact of any given choice the client is making. They should feel in control of where the final costs end up.
For ongoing projects, we use:
- Retainers. The client pre-pays for a bundle of services including a certain number of billable hours to be used in a given period (month/quarter/year). We provide a discount in exchange for the consistent work.
- A-la-carte hourly. We maintain a flexible agreement with the client and provide estimates for potential new work. We charge our full hourly rates for a-la-carte work, generally.
As of Q3 2021 our standard hourly rate is $250 USD. Clients may receive discounts on our rates when...
- The project represents a large chunk of hours, and we provide a bulk discount
- The project has an ongoing commitment
- The project is for friends or family
- The project is for a non-profit or organization we wish to support by providing an additional discount
The Sales team and DRI are responsible for setting and managing pricing for clients that is fair, transparent, and clear.
At the start of any project, the primary PM (likely the DRI) will create a Harvest project. The Harvest project must reflect accurately the billing arrangement we have with the client. In cases where we are working from an estimate, ensure that the estimate is entered into Harvest as the primary budget. If we have a fee floor or cap, make sure that is noted in the Harvest project notes.
As you go about your work, the DRI should monitor the project budget constantly. Once a day is great – basically, whenever they are trying to ascertain the status of a project, they should check the budget as well. When they do their weekly check-in with the client, if the project is hourly, they must update them on the status of the budget every week. If the project is fixed-rate, the DRI doesn’t need to keep them in the loop since it doesn’t make a difference for them, but they should update the team internally every week so they understand where we are at.
The DRI is responsible for ensuring that invoices go to the client when triggered by the invoice schedule in the relevant SOW. The DRI should create the invoice in Harvest, ensure that it is accurate and fair, send it to the client’s billing contact, and inform the Director of Operations. The DRI is also responsible to continually monitor invoice status. Our invoices have due dates. If clients are not meeting those due dates we may need to stop work in some cases. It is unwise for us to invest hundreds of hours into a project prior to getting paid (we pay our people right away). So the DRI should continually review the invoice status of projects and make sure that they are being paid in prompt fashion. The DRI is accountable to ensure that we don’t do work unless we receive any upfront payments required.
This is a new methodology that replaces the need for Operations to understand project status fully in order to create invoices. Please over-communicate around invoice status to Operations while we transition to this approach. We need a procedure for creating invoices – Ty is working on that.
Managing Non-USD Currency
Harvest projects do not yet support multiple currencies, which sucks! We primarily work in USD. If we do a project in Euro or CAD, the least confusing way is to enter the correct absolute amounts into Harvest, then make sure that the final invoices reflect the correct currency. Harvest can invoice in any currency.
This means that when you see the budget report and statistics in Harvest, it will show simply with a dollar sign, but when the invoice goes out, it will be in the proper currency.
Note that European accounts should typically be running through our Europe entity, which uses a different invoicing system, not Harvest.
For example, if we are charging 200 euro/hr for a certain project, just enter $200 as the project rate. Don’t convert the rate to actual USD.