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Billing Types Explained
Understanding how you bill your clients is fundamental to tracking project profitability. MyProjectBudget supports two billing models: Fixed Price and Time & Materials.
Fixed Price
In a Fixed Price contract, you agree to deliver a defined scope of work for a set price. The client pays based on deliverables or milestones, regardless of how many hours your team spends.
When to Use
- Scope is well-defined and unlikely to change
- Client wants cost certainty
- You can accurately estimate effort
- Deliverables are clearly specified
Key Considerations
- Scope creep erodes your margin
- Underestimation risk is on you
- Change orders needed for new work
- Requires strong scope management
How It Works in MyProjectBudget
Revenue comes from Deliverables. Create deliverables with amounts and mark them as invoiced when you bill the client.
Cost is calculated from team hours × cost rates. Track time to understand your true margin on fixed-price work.
Time & Materials (T&M)
In a Time & Materials contract, the client pays for actual hours worked at agreed-upon billing rates, plus any materials or expenses. Revenue scales directly with effort.
When to Use
- Scope is uncertain or evolving
- Discovery or exploratory work
- Ongoing support or maintenance
- Client wants flexibility
Key Considerations
- Clients may push for caps or not-to-exceed
- Requires transparent time tracking
- Revenue depends on utilization
- Rate negotiations are critical
How It Works in MyProjectBudget
Revenue = Hours × Bill Rate. Planned revenue comes from forecasts; actual revenue comes from approved timesheets.
Cost = Hours × Cost Rate. The difference between bill rate and cost rate is your gross margin per hour.
Side-by-Side Comparison
| Aspect | Fixed Price | Time & Materials |
|---|---|---|
| Revenue Source | Deliverables / Milestones | Hours × Bill Rate |
| Cost Source | Hours × Cost Rate | Hours × Cost Rate |
| Risk Bearer | You (the provider) | Client |
| Scope Flexibility | Low (change orders needed) | High |
| Margin Protection | Depends on estimation accuracy | Built into hourly rate spread |