T&M billing with fixed project overhead & profit

[ArtG]

In the online version of Lesson 43 - Project Billing, under Time and Materials Billing the following is stated:

Time and materials bills use the actual cost of work to calculate billing amounts. You can cover overhead and profit with a 'management fee', or with markup and billing rates that are higher than actual costs.


What is and how do you set up a "management fee"? Management fee is not listed in the site index.

In my T&M estimate I've added overhead and profit as fixed amounts, but do not see them in my T&M billing to select to be billed. I set this up following the below guidelines:

Overhead & Profit in Estimates

Using Line Items

If you prefer to use a fixed amount rather than a percentage for "soft costs", enter hard costs and then follow these steps:

Click in the bottom row, and press the Return key (Mac) or middle Enter key (Windows) to add a new row.
Enter Overhead, Profit, Contingency or Soft Cost in the Cost Area column.
Type a brief description into the Cost Item column.
Enter the cost into the Unit Cost column.
Repeat steps 1 to 4 to add other "soft costs" to the estimate.


How do I get the fixed overhead and profit to show up in the T&M billing?

Thanks,

Arthur

[Casey McD]

To add a "management fee":

1. Choose Payment Terms from the Options menu, and choose Projects from the submenu.
2. Double-click an existing terms, or click New to create a new one.
3. Fill in the T&M markup or fee at the bottom part of that screen.
4. Click OK, then click Close.

Now apply it to the project:

1. Choose Projects from the Accounts menu.
2. Select the T&M project.
3. Click the More Info button.
4. Fill in the Payment Terms field.
5. Click OK.

I'll make sure we get more links to this in the Site Index. Thanks for the heads up!

[ArtG]

Tried entering a fixed $ management fee to the payment terms and applied it to my T&M project. Created a T&M billing for the project, but no pro-rated portion (actually no portion) of it is added to the invoice/billing.

I've also tried entering it as a soft cost with a fixed amount in the estimate so it would show as a job cost (my preferred way), but don't seem to be able to bill for it. How is this option billed?

With both options I'm following directions as indicated below from the Web site:

"Time and Materials Billing Options

Some project billing options are used for Time and Materials billing only. They do not apply to other billing types.

Use Multiple Markups-- Turn on the checkbox to use different markup percentages for equipment, labor, materials, subcontractors and other costs. Turn it off to use the same percentage for all costs.
Management Fee-- Choose the type of additional markup or management fee that you add to each bill. If you choose a percentage, it will automatically be added to each of your time and materials bills. If you choose a dollar amount, a pro-rated portion of it will be added to each invoice, based on the original contract amount. NOTE-- If you charge your full fee at the end of the project, or want to itemize it as a job cost, enter the fee as a soft cost instead, and don't use a management fee."



Also the site index is good as far as it goes, any chance of adding a search feature so terms like "management fee" could be searched? It would reduce the need to try to link so many terms.

Arthur

[Casey McD]

It looks like we don't have any code that handles a fixed-price "management fee" for T&M.

Moreover, I don't think we CAN do it as a pro-rated amount! To ge that we'd have to multiply the fee by the current costs to total costs ratio, but we don't know what total project costs will be in advance.

I think we will need to change the manual to match practical reality, and probably just remove that "fixed dollar" option from Project Payment Terms, unless we can find a good way to make it work.

If you are billing a fixed dollar management fee rather than a percentage, follow these steps:

1. Choose Billing Records from the Bank menu.
2. Click the New button.
3. Enter Project as an Account Type, and the T&M project into Account.
4. For Billed Item, enter Misc Charge.
5. Type in the amount of fee you are billing right now.

[ArtG]

Pro-rated doesn't matter, only mentioned that because the online manual does. Of course there are the Estimated Project Costs known in advance to use to pro-rated......... but let's not go there.

So even if I list fixed overhead and profit in my T&M estimate as soft costs there is no way to bill that cost other than the Misc Charge in Billing Records? And enter a description of what it is in the comments area so the client knows what it is?

I'm striking out on this issue. :-(

Arthur

[Casey McD]

You can't bill directly for "soft costs" from an Estimate, when you do T&M work, simply because T&M is based on actual costs. It's part of the definition of T&M!

So to cover overhead & profit, you have several options, all doable in Goldenseal:

1. You can add a "markup" or "management fee" as a percentage, which you set up in Project Payment Terms. You can use a % of all costs, or separate % for equipment, labor, materials and other costs.

2. You can increase the billing rate for equipment, labor or subs, which you do in Billing Rates.

3. You can bill directly for "project overhead" costs, by job costing them to that project. They'll then show up as line items in the T&M billing.

4. If you charge a fixed $$ amount for your markup, you'd do it via a separate Billing Record for the project.

This link (http://www.turtlesoft.com/Business-Software-Topics/Project-Management-Topics/Time-and-Materials-Markup.htm) has more info.

If none of those cover your situation, we'd need to know more details of what you want!

We are investigating now whether to manage billing for a fixed-price markup, that would be similar to the way we handle retainage. However I don't think it would end up being any easier that way, as opposed to just having you create a separate Billing Record for the markup/management fee. I think most people do a % markup, since it's easier to figure, and increases if the project scope increases.