A time and material contract is an efficient and effective means of charging for services with many variables. From software development to marketing, construction, and more, specific industries require flexibility in their work.
But any business familiar with regular time and material tracking knows it isn’t always easy. Ensuring employees track their time and expenses while executing their job efficiently often feels like chasing cats.
So how do you make this necessary task easier? We’ve put together a guide to nailing down your process in a way that offers accurate tracking without slowing down your workday.
For those unfamiliar with time and material contracts, this precise pricing method provides flexibility in a service’s delivery while charging the customer or client for the exact services rendered.
Many buyers like this form of contract because it offers transparency over what they are paying for and the ability to scale up or down in their budget if specific needs arise.
This contract form is common in many industries, including construction, contracting, web design, software development, and marketing. Perfect for both projects and subscription services, it has one challenge: ensuring the appropriate information is tracked for proper billing.
Time and materials tracking is a simple task, but challenges arise when a team’s process doesn’t accommodate easy reporting. If your business leans upon a time and materials contract, make sure you’re implementing the best practices possible for accurate billing.
Like all good businesses, it’s crucial to have a well-defined process for everything from producing a contract to executing your services. Below, we’ve put together three tips that will set you up for success and help you avoid frustrating mistakes and poor tracking habits.
How a service is executed starts with the details outlined in the contract. Every time and materials contract should include four details:
Your labor rate is the established hourly rate for your service. Your material markup percentage is the total percent of the material’s cost that you tack onto the price. Both of these are necessary for a time and materials contract.
Depending on the terms of the agreement, your client may also have a defined budget cap, or your business has a maximum number of labor hours. Both of these are useful in defining the project’s parameters.
But why would a company limit the number of hours worked? Isn’t that losing revenue?
Having a cap on your maximum number of labor hours can help you manage a healthy revenue. By placing your parameters on the services provided, you prevent your contract from straying too far out of its scope.
Your contract sets up the expectation and the process for your service, so make sure you take the time to make sure it’s clear. Even with the flexibility of this kind of contract, clear phases, expectations, and deadlines are essential.
If you create a clearly defined process in your contract, it will be easier to execute by your team.
Once your contract is signed, you should already have a straightforward process for executing the agreed-upon service. This includes a clear expectation for when and how your hours and materials are tracked.
It’s always best to track hours and material expenses as soon as possible. The longer you or your employees wait to record this information, the more significant your risk for error grows.
Many companies make it a standard to track your hours and materials upon completing each task, session, or job. However, some common challenges come with this task, including:
It’s best to refrain from using a highly manual process to avoid these problems. The more automated you make your information tracking, the better.
Most companies use some kind of software to record and process time and materials contracts. While tracking information is easy for employees who work in an office setting, what if you’re out in the field?
Jotting the details down on paper to be inputted into your tracking system later sounds like a good idea. Yet loose paper and even notebooks are easy to lose in transit or when you’re on the move.
Plus, it can be easy to forget to input or record this information during a busy workday despite its essential role in getting paid. So how can companies mediate this process to ensure information is recorded correctly without impacting employee efficiency?
The best solution is to use time and material contract tracking software that works both on a desktop and a mobile device. There are a ton of options on the market, but they are far from equal. To find the correct application for your business, you’ll need to do your research.
The purpose of this software is to make life easier. Thus, it should smoothly integrate into your current process. Aim for a solution that has an easy-to-use interface with an input process that is quick and automatic.
You don’t want your employees spending too much time clicking buttons and trying to navigate a complicated dashboard. Instead, the software or app should be designed to minimize errors and speed up the reporting process.
The best time and material contract tracking software is the kind that speaks to your other systems, such as bookkeeping, accounting, or payroll programs. Don’t be afraid to ask questions regarding compatibility or specific scenarios unique to your business as you explore your options.
Make time and material contract tracking easy no matter where you or your employers are working. Whether you’re in the office or on the go, our cloud-based solution makes tracking, reporting, and approving hours and expenses easy.