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Assessing Various Time Billing Arrangements and Time and Attendance Software

Your choice of a time or time billing package should be tailored to your business and the billing, time reporting and fee requirements you must accommodate. Let’s look at the various types of fee systems encountered in business today.

If your enterprise manages fixed fee projects, your hours are typically estimated based on the scope of a project. Based on the detailed work defined with the client, you estimate staffing, hours and equipment to complete the project and quote a fixed price to complete the project. Your total staff component and hours are entered into the time accounting system against the fixed fee and hours estimated in that fee. To track your budget and generate planned revenue you will compare the fixed fee to the hours expended and the phase of the project.

If your billing is based on an hourly fee, each staff member will have an associated hourly fee; possibly more than one fee if you charge employees at different rates for different projects or activities.

Time and Materials projects require the client to pay for the hours worked by your staff at the hourly rate at which the employee is billed. The client pays for ‘materials’ or equipment, licenses, training documentation or other costs to complete the project. If you manage this type of project, you have to capture staff time and integrate hourly billing with your accounting system to capture purchases or expenditures for that project.

If you provide ongoing services, you may bill a standard annual fee or customer support at various levels. While the fee for a ‘Gold’ account may provide unlimited service, the ‘Silver’ account may limit the hours of service above which the client pays an hourly fee. Your time accounting system must allow customer representatives to bill overage time to a client for inclusion in the overall fee.

In a contract with a capped or fixed fee with a ‘ceiling’, the service provider charges over the fixed fee up to a percentage of the total or a specific dollar amount. Reporting, project and time detail captures these amounts for billing and enables alerts to notify the contract manager when the original fee is exceeded. They then contact the client to agree on how to proceed if the cap is exceeded or to let the client know they are not eligible for service or additional hours without a contract addendum.

As you can see, the way in which you budget, manage and charge employee time and track project phases will dictate the time reporting and time billing software you choose.

In general, professional services companies use time billing systems while manufacturing and retail companies often use time and attendance systems. If your business is unique, you may need features from both types of systems. The RFP you produce or the demo you schedule to review the prospective time system should carefully detail requirements for all types of billing and fees and for all types of products or services you offer.

About the Author

Susan Obijiski is a technology professional, consultant, business coach and writer. Her experience includes management consulting, and she has published research for Gartner Group. Susan is a frequent speaker and presenter on a variety of topics including software and technology, business strategy, process improvement and organizational culture change.

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