Why MyCorbu Needs Custom Billing Rates And How I Plan To Do It
During my career it was unusual if a project didn’t use hourly billing rates for something. Even when our fee was based on a lump sum or a percentage of construction cost, there was usually an additional service that would be invoiced at hourly rates. We also did an amazing amount of work at hourly rates. Usually it was for large repeat clients.
Hourly rates were a solution to several problems:
Our hourly billing rates changed at least once a year to address inflation and increased salaries. The procedure was to change every project’s billing rates as of January 1st. But as time went on there were more and more exceptions. The exceptions made it tricky to keep track of who was paying which rate.
Here are some of the issues we encountered that made different rates desirable.
We solved this multiple rates issue through a feature of Deltek Advantage, our accounting system. You could have many different billing rate groups. Each rate group was given a name, such as 2019STD, 2019ProBono, DiscountedXtraCA. You assigned a rate for each member of the firm. All time charged under that particular billing rate group used the amounts that you set for your personnel.
This method is pretty straightforward, but over time there are some “issues”.
The main issue is that the person choosing the rate isn’t the person who uses the accounting software. So picking a rate has a side task involving someone else who can access the accounting system. That adds a little aggravation to what should be simple. The other issue is that over several years there will be a lot of billing rates, most of which are obsolete. But the billing rates need to be maintained as long as any ‘live’ project still references them. In practice that means any particular billing rate could be around for 7-10 years.
Another method I have experience with is one that eliminates the billing rate group in favor of specifying the individual billing rate for each staff member for each project.
This method is easy to grasp and there aren’t groups of rates to manage. If billing rates need to change, you access the table of rates and edit them. Without the use of groups every project can easily have uniquely customized billing rates. Every new project can have slightly higher rates. This reduces the need to change the rates at all, except for very long-lasting projects.
The issues with this method are accessing benchmark billing rates for everyone. This has to be managed outside the system through a spreadsheet or just a Post-It. The other issue is that there is a lot of clicking and typing required to set up the billing rates. This can become tedious.
The method in MyCorbu will eliminate most of the issues. Here is how it will work.
The advantages are that all the staff members are added for you and you can see what the current default billing rate is for each person.
You will not have to establish the project’s billing rates when you set up the project. Perhaps none of the phases are planned to be billed at hourly rates. But if the occasion occurs later, this routine can be implemented to set billing rates then.
You can try this out using the MyCorbu “Test Drive” account after May 15th.