more-arw search

Q&A Forum

Should I show overbudget amount on fixed fee invoice?

If I go over budget on a fixed fee project for a client, should I show the cost overrun on the invoice as a discount so that the client sees the extra work that went into the project they are essentially getting for free? Would a client perceive this as additional value or would a client just think we are not very good at developing budgets? Any thoughts or examples of best practices are greatly appreciated.

Answers

Ken Stumder
Title: Finance Director / Controller
Company: Ken Stumder, CPA
(Finance Director / Controller, Ken Stumder, CPA) |

I suppose it depends on whether the cost overruns can be demonstrated to be related to incorrect scoping (not yours) or additional requests by the client, whether the work is recurring, what the agreement provides for, etc. Also, depends on what the norm is in your industry.

An over-simplified response perhaps but if the agreement doesn't have any provision for recovery of the overruns I don't know that there is added benefit to highlighting it on an invoice vs. doing a more general post-mortem on the project which might help the client understand how you would price it differently in the future.

Interested in what others have say on the topic.

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

Fixed fee is fixed fee. Invoice the fixed fee. One way you can do this is you can accompany the invoice with a scope of work you did (that shows the costs you incurred).

Let me turn it around.... if you overestimated and profited handsomely, would you show it on the invoice?

Steve Breitman
Title: President/CEO
Company: Mindful Business Solutions
(President/CEO, Mindful Business Solutions) |

I agree with Emerson that a fixed fee is a fixed fee. In my opinion, showing the overage on the invoice would be like complaining that the job didn't turn out as planned. That would not help your relationship with your client.

I think the more important thing, is that you determine why there was a cost overrun. If you underestimated the cost then you'll need to improve your estimating process. If you just spent more than the budget, you'll want to improve your project management skills. If you provided services outside the scope of service you'll want to improve your system for identifying when this is about to happen and creating a change order for the additional cost.

Topic Expert
Alan Hart
Title: Consultant
Company: Pacific Shine Group
(Consultant, Pacific Shine Group) |

Unless you have a cost plus contract there is no reason to disclose the actual project cost. This is the same as not disclosing the cost of a product you sell to your customer where the invoice only shows items sold, quantities and prices. As others have commented here, use this as a learning opportunity to see what went wrong and how you can improve in areas that need improving.

2239 views
Topics
Products and Companies

Get Free Membership

By signing up, you will receive emails from Proformative regarding Proformative programs, events, community news and activity. You can withdraw your consent at any time. Contact Us.

Business Exchange

Browse the Business Exchange to find information, resources and peer reviews to help you select the right solution for your business.

Learn more

Contribute to Community

If you’re interested in learning more about contributing to your Proformative community, we have many ways for you to get involved. Please email content@proformative.com to learn more about becoming a speaker or contributing to the blogs/Q&A Forum.