2 Rules for a Happy Client while Billing Hourly

Some of my projects are a fixed rate and some are hourly. If the scope of the project is small enough to accurately estimate, risks are minimal, and nailing down requirements is practical, I may propose a fixed price. Working on fixed price projects are a piece of cake, I go home, work on it, provide periodic updates via email, phone, or in person. When I finish it I install it and give them a CD with all the binaries, documentation, and source code.

However, I’ve found working on an hourly rate to be a little different than doing all the above while just counting my hours. There is a lot of distrust with hourly professionals which is only compounded with a mysterious process like software development. After all how do they know you aren’t home watching soap operas, working on your own projects, the project of another client, or even sitting on the beach? How can they tell they aren’t being over charged? The problem with trust, is even if you are honest, a false perception can still destroy the relationship.

I know this too well. Once in the late 1990s I was working from home, charging hourly, and I got a call from one of the newer partners of my biggest client (only client at that point). While talking I rebooted to clean out my system* and when the system came back up it played the 20th Century Fox theme, a configuration change I thought was very cool, and he said ‘Are you watching TV?’ I said ‘No. Why?’ … Seriously, I didn’t even making the connection. Two days later I was called in for an unscheduled meeting where my invoices were questioned, I heard a lot of “we’re not accusing your of inflating your hours…”, and the next day, feeling insulted and unappreciated, I resigned. I didn’t make the obvious connection until much later. It doesn’t matter that I was under charging both in terms of my rate and what I charged for, and would never inflate my hours! It doesn’t matter, because the perception was corrupted. It was a tragic misunderstanding since I loved working there and provided a competent, yet naively discounted service.

That’s when I came up with rule # 1
1. Work at the client site when charging hourly.

While following this rule gave my clients assurance that I was actually working, it still left them in the dark as to my effectiveness and what exactly I was doing. I soon realized that working on site isn’t enough. I need to communicate my challenges and accomplishments more effectively as well.

So I came up with rule # 2
2. Provide detailed invoices.

Until this point, my invoices had the typical, single ‘All services rendered’ line item. I changed it to include every single thing I did. I’m not kidding. Here is a sample from an invoice I wrote a couple years ago, after establishing this rule:

App F – Investigate & Fix bad XXXXX data

App A – Altered data tables to use the datetime data type for the create_dt & update_dt fields. This is needed to have a granular time for list updates. Communication /w Coder X and answering his questions. Conversation with Coder X about Stored Procedures. Discussions with Coder X about the stored procedures. Generating Business objects.

Feature X – Add Save & Save to Profile to the IFeatureX specification. Alter the Feature X specification document to include autosuggest searching ability in the IFeatureX interface. Reviewed Coder Xs progress.

Planning – Discussions with Manger Y about the purchase of App R, project status, and got permission to take the API documentation for App R off-site for review.

Website – Added new user.

Notice how it’s written for the target audience (a non-programmer, IT manager in this instance)? Notice all the detail? Notice I explained why I was changing the data types? Notice the descriptive verbiage (investigated, fixed, altered, reviewed, etc…)? Notice how even something as basic as adding a new user to the website, a 5 minute task is included? Notice I confirmed my permission to take confidential documentation off premises?

There is some terminology which might be unfamiliar to my client, but these terms were introduced to the client before hand, so they understood every thing said on that invoice when it showed up in their inbox.

All this detail may seem like overkill, but it gives the client a level of transparency into the mystical world of software development. It provides a record of activities, allowing the client to feel in control, knowing the priority decisions they made are being acted upon as agreed. It reveals a shadow of tangible evidence on an outwardly invisible service. But most of all, it gives the client comfort and I believe raises the level of trust.

I should also point out, the invoice sample above is not based on a 50-60hr work week, but from a week where I put in 14 billable hours. A 50-60hr work week would usually be 500 words or more.

… hey! Don’t freak out, you can write a detailed invoice without spending your weekend on the first draft. Here’s a brief list of things you can do to reduce the time you spend writing monster invoices:

  1. Maintain a detailed time log filled out as you do things. This takes discipline, but almost no time.
  2. Make detailed source control comments and do a report at the end of the time period.
  3. Make detailed bug tracker notes and list all the bugs/tasks/tickets you worked on during the time period. You can just list the bug ids, but I usually write something like ‘Investigated and resolved ticket # N – User receives 404 error when clicking customer link’.

The key to any of these is to write with your client as your intended audience, this way you just cut and paste into your invoice.

More than a decade after reluctantly getting into consulting, I’ve realized that Perceived value is directly related to the quantity and quality of communication with the client. An invoice can be a key communication device with your client and a powerful marketing tool if you make the effort.

*It was Windows 95 after all. At that point I was rebooting 10 times a day at least.

Copyright © John MacIntyre 2009, All rights reserved
WARNING – All source code is written to demonstrate the current concept. It may be unsafe and not exactly optimal.

One Response to “2 Rules for a Happy Client while Billing Hourly”

  1. preet says:

    We interesting and I totally agree with the idea of detail. I currently work in the legal industry and billing detail is absolutely the most important thing that you can provide a client with.

    I wish I’d learned that years ago when I started freelancing.

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