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Billable hours are not just a matter of revenue to me. They are a matter of ethics. There are too many horror stories out there of professionals over-billing clients for their services and padding their pockets with extra cash. Often, people are very attuned to this possibility in the legal community. According to an article on hg.org: “two-thirds of lawyers admit that “bill padding” occurs at their firms, one-third of lawyers openly double-bill clients, and more than half of all lawyers perform work not because the client or case demands it, but because the lawyer needs to bill more hours.” This is scary, and it is the type of thing that makes people distrust people in professional services industries.
Overbilling is not unique to legal practices. A quick Internet search on the topic reveals cases in consulting, accounting, and home improvement contractors, to name a few. In any case, where people are being paid based on billable hours, there is always a risk. In a particularly high-profile example, IT services company Infosys was involved in an overbilling case with Apple. Internal audits revealed that Apple received inflated invoices for several months. Though the total amount of the overbilling was apparently not large, the case demonstrates that any company is susceptible to falling into the overbilling trap.
There are several ways that clients can be overbilled by a contractor. Here are 5 things to watch out for when working in a billable hours situation.
Churning: One way that hours get inflated is that unnecessary activities are performed for the client to run up the bill.
Template Recycling: This is prevalent in custom software development. The contractor uses a base template for a project, but bills you as if they created everything from scratch.
Expert Mode: Clients get billed as if the principal or partner is working on the project when in reality it is an assistant or other person who is paid a much lower rate.
Expense Accounts: Clients can be rung up for copying, long-distance phone calls, shipping fees, etc. Billing expenses is fine. That said, expenses should not be a profit center. It is the digital age, these charges are cheap now, and the client should not pay crazy rates for them.
Double Billing: Very hard to detect, but it happens. A contractor bills two different clients for the same hour of work. Sometimes, a piece of software, maybe a patch, applies to multiple customers. However, billing multiple customers the full rate for it is just morally wrong.
I hate keeping up with time. I have always found it to be a painful process to manage. When I started consulting, I knew this would be an issue. We integrated time tracking into our ERP system, Prophet 21, to be able to provide a description and time spent for each time entry.
It is very easy for us to run a report with a down-to-the-minute accounting of time spent on a project and what percent of completion we are at, if it was a quoted project. I am happy to provide these details at any point.
I think that it is best to be transparent about pricing and try to take the variable cost out of the equation if possible. The consultant and the client must have a relationship built on trust. Playing games with hours is at best unethical, and is the quickest way to erode trust with the client.
Truthfully, there is always a possibility that we may not be a good fit for you. Atlas Precision works with companies to solve operational problems. We also help with implementing technology and developing customized software solutions in pursuit of helping our clients. If your business challenges do not fall into one of these categories, we might not be the best choice for a consultant. There are other considerations you make want to think about as well:
We are happy to come onsite to help a client, and many times an on-site visit is needed. This is particularly true if we are going to be working with several of your team members to lead a particular initiative. It is also true when you are hiring us for a leadership role. That said, we find that we are more effective when we are working from our office. Once we have a clear understanding of what needs to be done, we want to focus on that and get it accomplished. This helps our clients get a rapid time to value in most cases. We also feel it is important to balance between interacting directly with your team and being disruptive to the organization. We are accustomed to having regularly scheduled calls or video conferences to monitor progress and report back to the client.
Full-time on-site consultants do have some advantages. The feedback loop is very immediate and there are opportunities to observe things that may otherwise get missed. The ability to be there all week every week also gives the consultant the ability to immerse themselves in the client’s corporate culture. If you feel strongly that the consultant needs to spend most of their time at your site regardless of the nature of the project, then we may not be a good fit for you.
Our approach is to travel when we need to, but make the most of the time.
Our approach to solving operational problems is to triage critical issues and prioritize the remaining issues based on the impact to the bottom line. We apply Lean principles to identify sources of waste. Then we implement forward-facing KPIs to measure and monitor progress toward goals. If your organization is already successfully doing these things, then your company might not be a good fit for what we do. Additionally, if you have a different approach in mind that you would like to see followed, then it would probably be best to find a consultant that specializes in that approach.
Our primary platforms for web-based development are C# .NET, HTML, PHP, and JavaScript. We also have extensive experience with SQL Server and MySQL. These will be our go-to technologies for your project. In a corporate environment, we would deploy these in a Windows Server environment. This is required when we need to connect to a Microsoft SQL Server database. These are well-known platforms, and we can quickly leverage our experience with them to get applications up and running.
When choosing a consultant, it is important to select someone who has the right skill set. Ideally, they will also have similar core values. Hopefully, you have a feel for whether or not we check those boxes. Certainly, you have also been doing similar research on other consultants.
You have no doubt compared our prices, service offering, and values to other companies. Your decision should be based on who you think is the best match. Based on what you have read, do you feel we are the best option for you?
I have been asked in the past by clients if I would be willing to agree to refrain working for the client’s competitors. This has typically happened prior to beginning an engagement, when the client is interviewing me as a potential consultant. Atlas Precision is the in business of helping companies get better at what they do. We really like working with companies that share our values. I personally put a high value on the level of trust between myself and the client.
Part of this relationship of trust requires me to exercise a high level of discretion in business dealings. To back this up, we have clear language in our engagement agreements around the subject of non-disclosure. This is part of the foundation of who we are. We believe that these principles help put our clients’ minds at ease about our dealings with other clients, especially those who might be in the same industry.
I would not presume to ask a client not to do business with another consultant, and in return, I would ask the same of our clients. I do not see it as a conflict of interest to work with two clients in the same industry segment. Chances are, there are different problems in each business that need attention. We would never disclose to one client that we had done work for a competitor. It is important for us to have the self-awareness to recognize that a client sells the same service or product of a previous client. This assures that we will not make even a vague reference about having worked for another company that works with the same products.
Of course, I understand that this could be potentially unsettling for a potential client. There could certainly be cases where a client cannot accept the possibility that Atlas Precision may be contacted by a competitor to perform services. In those cases, we would be happy to recommend another consultant, thought I make no guarantees about this subject on another consultant’s behalf.
Honestly, it does not make sense to me to constrain a company’s ability to improve. If a consultant is the best fit, their client list should have no bearing on the decision to hire. That is of course only my opinion. We recognize that not everyone will share this view, and respect your choice to work with someone else.
Finally, if you interview us, you might ask the question: “Have you ever worked for one of my competitors?” I give you that answer now. “I am sorry, but I would not answer that question for your competitor, nor would I answer it for you. We respect every client’s right to privacy equally.”
We strive to meet client expectations in all cases. However, we realize that there are times when the client feels it is better to go a different direction. Our standard engagement agreement has specific language that covers breach of contract. In those cases, we ask that we be granted 30 days to cure the breach.
For all other instances, the client only needs to notify us that they wish to terminate the agreement. When that happens, Atlas Precision will do the following:
I don’t believe it does the client or us any good to continue a business relationship that is not working for both parties. Additionally, it is not productive to weaponize a contract and try to wield power with it. We want our clients to be happy. If that means terminating the contract and working with someone else, we are OK with that. We want to support clients. The best way to do that is to make sure they are getting the services that they want and need.
Finally, we also recognize that it is our responsibility to terminate the agreement when we feel that we cannot meet client expectations. In the spirit of our core values, it is up to us to be proactive and speak to our clients with candor. This is especially true when things are not going well, and a course correction is needed. We prefer not sever a contract if we feel that the client’s needs can still be met. That said, we also know our limits, and in the event we feel the need to step aside, we will do our best to match the client with another consultant who can give them the assistance they need.
All agreements can be found on our website, under documents.
Client confidentiality is a major concern for us. We understand and respect a client’s right to privacy and confidentiality. Our standard engagement agreement includes language that assures client confidentiality. You can view a sample agreement here. For your convenience, you will find the sections dealing with confidentiality and conflicts of interest below.
Except as required in the performance of its obligations under this Agreement or with the prior written authorization of the Client, Consultant (including for purposes hereof, its employees, agents, representatives, consultants and contractors) shall not directly or indirectly use, disclose, disseminate or otherwise reveal any confidential information, including but not limited to information regarding Client’s personnel, and shall maintain confidential information in confidence perpetually.
Upon termination or expiration of this Agreement for any reason whatsoever, Client and Consultant shall return to the other all documents, records, notebooks, computer files, and similar repositories or materials containing confidential information of the other party and such other party’s affiliates, including any and all copies thereof.
The Consultant represents and warrants to the Client that he/she is under no contractual or other restrictions or obligations which are inconsistent with the execution of this Agreement, or which will interfere with the performance of his/her duties or provision of services hereunder. Consultant represents and warrants that the execution and performance of this Agreement will not violate any policies or procedures of any other person or entity for which he/she performs services concurrently with those performed herein.
The terms of this Agreement are confidential and no press release or other written or oral disclosure of any nature regarding the terms of this Agreement shall be made by either party without the other party’s prior written approval; however, approval for such disclosure shall be deemed given to the extent such disclosure is required to comply with governmental rules or a valid court order.
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