Money Strategy #9: Billing MethodNovember 26, 2008
This article is part of a series of eleven short articles on managing money. It is aimed at freelancers and independent contractors. Before you read this article, make sure you have read the disclaimers etc. in the introductory article about my money management rules.
Strategy #9: Decide on a billing method
As a freelancer, there are two main ways to bill clients for work done:
- by the project, or
- by the hour.
Most of the companies I work with want me available to do whatever they throw my way that’s within my skills and available time. As a result, everything I do is by the hour. If I had to quote by the project, I’d spend much of my day updating quotes, chasing up sign-offs for scope changes etc.
To keep the accounting easy, my hourly rate for a client is the same no matter what sort of work I’m doing for them; for example, creating a website, editing a newsletter, writing an installation guide.
Periodically, I increase my rate for new clients though existing clients tend to remain on their original rate for some time.
I log my time in 15 minute blocks and provide the client with a detailed invoice that shows how long I spent on a task. Detailed invoices reduce the likelihood of a dispute over an invoice.
Here’s an example of a detailed invoice:
- The Rules
- Strategy #1: Get professional advice
- Strategy #2: Keep your money separate
- Strategy #3: Invoice regularly
- Strategy #4: Pay your bills on time
- Strategy #5: Pay yourself
- Strategy #6: Set aside your tax obligations
- Strategy #7: Use accounting software of some sort
- Strategy #8: Regularly keep track of your position
- Strategy #9: Decide on a billing method (this article)
- Strategy #10: Manage any surplus funds