Including Extra Work as 100% Discounted Hours

Question

I just completed a project and ended up going about 20 hours over on a 39 hour project.

I allowed some scope creep because my contract was not that bulletproof and I didn't feel it was worth the hassle.

I saw a suggestion to include the hours but discount them at 100%. Has anyone used this technique before?

Possible benefits: client sees how much work was put into the project and does not develop unrealistic expectations. Also leaves more proper records when referencing back.

Possible downsides: client may think you are trying to guilt them into paying for the extra hours. Client may see it as unprofessional because you were unable to provide a good estimate.

I have learned to better estimate and prevent scope creep for the future, but what are your guys thoughts on this technique given my situation? Thanks.

Answer 1

I always include every discount on any invoice. Even if the discount amounts to 100%.

Why? Well...

1. The client see the added value they are receiving.
2. If I should have trouble collecting the amount due, there's a written record of the discount provided. And that discount can be rescinded if payment is not made. So if collections becomes necessary, I can go after the non-discounted amount.

If you do not provide a written record of the discount you've extended, then it amounts to your word against theirs. So keep written records of everything.

I actually indicate on the invoice all discounts are valid for 30 days to encourage payment.

Answer 2

This depends how you invoice.

If I let myself be persuaded in giving a fixed quote, I don´t even show any hour to the client. He just gets function X: Price $ 1,000 (Internally I calculate my hourly rate and add a risk-margin X to it)

If I am paid by the hour an have to give an estimate, I make sure I communicate this as estimate and deliver a time-sheet to prove my efforts. I make sure to keep my client updated regularly, especially if I realize I need more time. If I then decide to stick to my original estimate in the invoice for some reason, he already know my real effort from the time-sheet.

One exception: If I spend time researching or fixing something stupid that I really blame on myself, I may hide it entirely from the client and book this on myself as educational spending.

You could deliver the invoice with just the 39 hours, but add a time sheet where your real effort is visible. Then have a chat with the client where you tell him that it took you longer but you wanted to stay true to your word so you only invoiced the original amount. In my experience he will appreciate the gesture as it shows honesty and reliability, even when the consequences are not favorable for you. You build trust by showing how you cope with difficulties, not by hiding them.

Answer 3

I have grappled with this problem as well. If this is a client that you will get additional work from, even perhaps of the same parameters as the first job, you almost have to make them aware of those extra hours, even if you don’t charge them this time ... for the simple reason you don’t want to have to continually give the client those extra hours free of charge.

Depending on how well versed and familiar the person you are dealing with is, let that guide and determine the content and extensiveness of your explanation. This has never been a negative for me and it does exactly what Daniel said, it builds trust.

But I too do what Daniel and Doug do - just estimates whenever possible Doing this weeds out the clients you didn’t really want anyway. That inflexibility may be due to multiple reasons, from individual personality to fixed budget parameters, but it has been my experience at the end of day the “why” doesn’t matter. As hard as it can be to turn down work ... in the long run it is most definitely to your benefit. If they are inflexible re: a hard and fast quote, that will carry over into other elements of that client relationship. When a quote is requested I never ask what they want, I give them just what Doug said: an estimate. I wait for them to insist on a fixed price. So initially don’t offer it, ever.

But what must also be said: from the POV of a creative freelancer since 16 years ... part of my job as a freelancer is educating my clients regarding the unknown elements of that process. When they are requesting a fixed quote is when that education starts.

Also, I have found the range of accuracy is in direct relation to complexity of the project ... the smaller, more simplistic the project, the more accurate my time estimates are.

So if you really want a project and it is very complex, with unknown factors - being aware of those factors - allow for extra time because it is always better coming in under then over budget for both you and the client. There have been times I have literally doubled my estimated hours for a quote because there were so many unknowns.

Always with first time clients, they themselves are an unknown, so you always want to add extra time to first time client projects. The unknown ranging from how well they have it together to even how clear and defined it is that the client wants ... all these can change the time investment on your end.

But allowing for that extra time, even if you go over, you aren’t loosing all of those hours so maybe 3-5 instead of 20.

Answer 4

I stopped giving fixed-bids on projects many years ago and am happy with the results. I explain to the clients that I will give them an estimated plan with line items and best estimates for each item. I also explain to the client that I cannot foresee problems that may crop up during implementation.

Furthermore, I provide brief status reports (informally via email) on Fridays. Should a complication begin to arise I will discuss it in the status email so they are aware that additional effort may be required.

Good clients will understand and usually work with you. Clients who insist on fixed-bids usually are more difficult to work with and do not understand that certain things (software) cannot be accurately estimated.

For me, the quality of my clientele increased as the fixed-bidders dropped off.