How to notify a client of costs that increase beyond the estimate

Question

Let's say I'm making a website for a client. We sit down and scope it out, try and define everything in the project. The total comes to $1000. I work on the site for a week or two, but there is some unseen complication that makes the work more involved.

In theory, since the client has agreed to pay the hourly rate to finish the project, I could just send the bill and force her to pay it. But this seems likely to create bitterness and mistrust in the future, as well as being awkward.

How might the way of dealing with it be different if the full costs are $1100, $2000 or $10,000?

Should one give regular updates as to the progress and current costs? Is it ok to tell the client when it goes over the estimate or should it be in advance? What if the work cannot be completed in cost and the client refuses to pay any more?

Answer 1

In my experience clients appreciate transparent and frequent updates about the project. I use a simple template that I send out weekly or biweekly that includes updates on planning and budget estimate.

Either way, it's always best to inform the client as soon as possible when you will be going over estimate or budget. As long as you can explain why this should never be an issue in Time & Material project (an hour work is an hour invoiced), although it is up to the client to decide whether or not he wants to continue.

This is also the main difference between Time and Material projects and Fixed Price project: With T&M projects the client knows he will pay for time spent and nothing more. If it takes longer than expected it will be more costly. Fixed price means the risk is with the freelancer: if all works out great and it takes less time than expected that's sweet for the freelancer, if it takes longer that's the freelancer's problem.

Answer 2

Generally speaking, one should always notify the client whenever costs might escalate.

What the best course of action is in this specific case, depends on what the 'unseen complication' is.

If it is something that the non-expert client reasonably could expect you as a professional to have foreseen and you want a continuing relationship with the client, one could argue that you do not charge fully for the fix and see it as an investment. If the fix is trivial, I would probably do it for free without ever mentioning it.

However, if the 'unforeseen complication' is the inevitable 'scope creep', then you should explain to the client why this goes beyond the contract and suggest alternative solutions; the first being you charging fully for time spent and the other being down-scaling the project but still delivering a usable product.

Clients obviously value their money, but they typically value honesty more - especially when they feel at the mercy of the IT-supplier.

Answer 3

Definitely give updates on progress and cost. My approach for increase in cost is to take care of it upon intake of the project. I include this in the proposal:

The agreed fees are our best estimate given the information provided. If additional is forth coming, the project specifications change, or scheduling changes, cost and expense estimates may change. Any modifications of fees due to the change of scope of the project will be submitted in writing and approved by (client name here).

This way we've talked about it and everyone involved is aware of the possibility of a cost increase.