Specify Billing and Cost Rates

Your progress:

What will you learn in this lesson?

After completing this lesson, you’ll be able to:
  • Explain how to set up billing and cost rates.

Things you need to know:

Billing Rate: Hourly or daily rate the customer pays for your product or service.

Cost Rate: Hourly or daily rate the company pays its employees or contractors to provide the product or service to a customer.

Let’s set the scene.

  Layne needs to determine the billing and cost rates she will use for the website build project so she can track revenue and costs for the project.

What Billing and Cost Rates do I choose?

Before entering the actual daily or hourly rate you are charging your customer, you must first determine the type of billing rate you are going to use. Will it be a standard rate across the entire project, will the rate vary depending on who is doing the work, or will the rate depend on the skill required to do the work?

Likewise, before entering the actual daily or hourly rate you are paying your employee or contractor, you must first determine the type of cost rate you are going to use. Do you pay your team members a standard rate, will the rate vary depending on who is doing the work, or is the rate determined by the skill required to do the work?

In Mission Control, there are three billing and cost rate options to choose from: standard, role-based or skill-based. Let’s have a look at the difference.

Standard

Let’s imagine Layne has agreed to charge Grommets Inc. the same daily rate for all work done on the website build. In this case, she would select Standard as the Billing Rate. If Layne hired three people to work on the project and they are all charging her the same daily rate, she would select Standard as the Cost Rate.

When the Billing and Cost Rates are defined as Standard, the actual rates are entered on the Project Detail page. In this example, Layne would complete the following fields:

  • Billable Day Rate (currency) – the amount she is charging Grommets Inc. per day
  • Cost Day Rate (currency) – the amount her team members are costing per day
  • Hours per Day (number) – the number of hours per day

Note: Hours per Day is set as standard hours per day on the Control Pad of the Console. Setting the Hours per Day is therefore optional on each project. It would only need to be changed if the team is working a different number of hours than the default.


Then, the following calculations are done and displayed on the Project Detail page:

  • Billable Hourly Rate (formula) – Billable Day Rate divided by the Hours per Day
  • Cost Hourly Rate (formula) – Cost Day Rate divided by the Hours per Day

Set up standard billing and cost rates 

  1. Navigate to the Project.
  2. Click Edit.
  3. Click the drop-down for Billing Rate and select “Standard”.
  4. Click the drop-down for Cost Rate and select “Standard”.
  5. Type in the values for Billable Day Rate and Cost Day Rate.
  6. Type in the Hours per Day.
  7. Click Save.
  8. Notice the Billing Hourly Rate and Cost Hourly Rate now have a value.

    Specify Billing Rate, Cost Rate, Billable Day Rate, Cost Day Rate, Hours Per Day

Note: when a Billing Rate of Standard is selected, if no Billable Day Rate is populated on the Project, the invoice will be issued with an amount of $0.00.  


Role-based 

What if Layne has agreed with Grommets Inc. that the daily rate she is charging them for herself as Project Manager is higher than the rate for Kelly as Web Designer? As the rate varies based on the Role, Layne would select Role-based as the Billing Rate. If Layne’s salary is higher than Kelly’s salary, the cost per person is different based on the Role and Layne would select Role-based as the Cost Rate.

When the Billing and Cost Rates are defined as Role-Based, the actual rates are entered on the Role record. In this example, Layne would complete the following fields on her own and Kelly’s Role record:

  • Billable Hourly Rate (currency) – the amount she is charging Grommets Inc. per hour
  • Cost Hourly Rate (currency) – the amount her team members are costing per hour

Once a Billable Hourly Rate and Cost Hourly Rate have been set on a Role record, for all Projects that are using Role-based as the billing or cost rate, the rates found on the Role record of the Action Owner will be used to calculate the financials of that Action.

Imagine if the next project we do is for a Non-Profit organization called VolunteersRUs and Layne offers Kelly as the Web Designer at a discounted rate. Is it possible to override the Role’s Billable Hourly Rate and Cost Hourly Rate for a particular Project? Yes! You can use the Manage Rates button to define a new Billable Hourly Rate and/or Cost Hourly Rate for each Role. These new rates will only apply to the VolunteersRUs Project. Now that’s a great feature, don’t you agree?

Set up role-based billing and cost rates 

  1. Navigate to the Project.
  2. Click Edit.
  3. Click the drop-down for Billing Rate and select “Role-based”.
  4. Click the drop-down for Cost Rate and select “Role-based”.
  5. Click Save.
  6. Navigate to the Role.
  7. Click Edit.
  8. Enter the Billable Hourly Rate and Cost Hourly Rate.
  9. Click Save.

Specify Billable Hourly Rate and Cost Hourly Rate on the Role record


Note: once a Billable Hourly Rate and Cost Hourly Rate have been set on a Role record, for Projects that are using Role-based as the billing or cost rate, these rates will be used. Unless you override them using the Manage Rates feature as per below. 


Use the Manage Rates feature

To use this feature, you need to set the rates after creating the Project and Milestone, but prior to creating any Actions. Here are the steps:

  1. Navigate to the Project Detail page
  2. Click the Manage Rates button
  3. Add the required Roles
  4. Specify the Billable Hourly Rate and Cost Hourly Rate for each Role
  5. Click Save Rates.

Skill-based

Let’s imagine Layne has assigned Kelly as the Web Designer on the Grommets Inc. website project, but Kelly is also going to be the System Tester. Grommets Inc. are willing to pay $500 per day for the Web Designer but only $300 per day for the System Tester, however, Layne is going to use Kelly for both. As we are using the same Role, but the rate will vary based on what they are doing, Layne will select Skill-based as the Billing Rate.

In Kelly’s contract, Aprika Creative Solutions are paying Kelly a lower rate for when he works on a project as a System Tester compared to when he is working as a Web Designer. Thus, as the rate varies depending on what skills Kelly is bringing to the project, Layne will select Skill-based as the Cost Rate.

When the Billing and Cost Rates are defined as Skill-based, the actual rates are entered on the Skill Assignment record belonging to the Action Owner (a Role) who will be asked to perform that skill. In our example, the following records would exist:

Project Manager (Skill) > assigned to (Skill Assignment) > Layne (Role)
Web Designer (Skill) > assigned to (Skill Assignment) > Kelly (Role)
System Tester (Skill) > assigned to (Skill Assignment) > Kelly (Role)

Layne would complete the following fields on the Skill Assignment record:

  • Billable Hourly Rate (currency) – the amount she is charging Grommets Inc. per day.
  • Cost Hourly Rate (currency) – the amount her team members are costing per day.

When Billing or Cost Rates for a Project is defined as Skill-based:

  • If no hourly rate set on the Skill Assignment, the hourly rate set in Manage Rates will be used
  • If no hourly rate set in Manage Rates, the hourly rate set on the Role will be used
  • If no hourly rates set on the Project, the rates will be set to $0.00

Set up skill-based billing and cost rates 

  1. Navigate to the Project.
  2. Click Edit.
  3. Click the drop-down for Billing Rate and select “Skill-based”.
  4. Click the drop-down for Cost Rate and select “Skill-based”.
  5. Click Save.
  6. Navigate to the Role.
  7. Use the RELATED tab to view the Skill Assignments for the Role.
  8. For each Skill Assignment, confirm Billable Hourly Rate and Cost Hourly Rate are set.

Specify Billable Hourly Rate and Cost Hourly Rate on the Skill Assignment record


Note: Skills themselves do not have a Billable Hourly Rate or Cost Hourly Rate. Skill Assignments are where these rates are defined. No skills to assign?  Review creating skills in the Create a Role lesson.


Before we move on…

It is important to note that you can select a different type of Billing Rate to the Cost Rate. For example, Billing Rate can be Role-based and Cost Rate can be Standard, and vice versa. Let’s recap the different options.

Billing Rate
invoice client
Cost Rate
pay team member
Standard Uses the Billable Hourly Rate defined on the Project Uses the Cost Hourly Rate defined on the Project
Role-based Uses the Billable Hourly Rate defined on the Role record Uses the Cost Hourly Rate defined on the Role record
Skill-based Uses the Billable Hourly Rate defined on the Skill Assignment record Uses the Cost Hourly Rate defined on the Skill Assignment record

Layne has selected billing and cost rates for the website build project and is now ready to start assigning actions to her team.

Ready to move on? Take the quiz below.