Question

Topic: Other

How To Bill Internal Clients?

Posted by Anonymous on 9/15/2009 at 5:01 PM ET 250 Points
My MarComm department bills our internal clients (mktg mgrs) for the work we (coordinators, designers, copywriters) perform. At the beginning of the year, budget is pitched from the MarComm team to the client groups and we bill to recover the dollars.

Currently we track time spent on work in 15 minute increments and bill hourly. We are looking to simplify our model. In a nutshell, we need to be able to pitch the overhead budget out to clients and then recover it by the end of the year. Any thoughts on this?

Thank you,
Jeff
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  • Posted on 9/15/2009 at 5:52 PM Accepted
    A comment...

    What you are describing is "Profit Center Accounting". I would be curious as to how long you have been doing it this way.

    USUALLY, after all the data have been collected over a given period... The data is used by management to determine whether to completely outsource a department or not.

    Back to the question. If you try to simply allot time, you'll be getting all kinds of flack from your "clients" as to what was "billable" or not.

    IMHO, you're probably doing it as simply as possible without running into the law of diminishing returns.
  • Posted on 9/16/2009 at 12:42 PM Accepted
    You are having the same problem that plagues anyone who bills by the hour (or by the day). It's a terrible way to live ... and serves nobody well. It motivates the service provider (that's you) to be inefficient, and it keeps the client's attention on the meter that's ticking away their money. Why would they spend your time and their money giving you the information you need to do the job right?

    What a terrible way to live!

    You need to change the thinking to a retainer-type arrangement, in which each internal group commits to a fixed percentage of your cost, and then you "bill them" a pre-agreed amount every month/quarter. You can stop trying to track your time on a minute-by-minute basis, and they can feel comfortable giving you all the input you need without worrying about the cost.

    If you want a more detailed discussion of the different billing options, you might want to pick up a copy of Rasputin For Hire. On pages 93-96 there's a complete discussion of pricing and billing approaches.

    The book is available through major bookstores in the United States and through Amazon.com. It's also available directly from the publisher. If you order that way, you also get an immediate download of the special report, Experienced Consultants Talk About Consulting. It is essentially a round table discussion with five top experts from here on the Know-How Exchange, sharing their experiences and offering advice on a range of topics facing marketers and marketing service providers.
  • Posted on 9/21/2009 at 1:12 PM Author
    Thank you for your feedback! It has been very useful in providing my team with some direction and first steps to creating efficiency in our process.

    Jeff
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