Guide · Billing

Time and materials, fixed fee or progress billing: which should you choose?

The billing method should reflect the risk accepted, the ability to measure work and the way the client receives value.

Direct answer

Use time and materials when scope can change and the client agrees to pay for resources consumed. Use a fixed fee when the outcome and scope are sufficiently defined. Use progress billing when value is delivered through measurable phases. One contract can combine these methods, but every line needs a rule, evidence and an owner.

Project manager matching completed model stages with the selected billing method — The billing method should follow the reality of the project: time spent, a defined deliverable or objectively measured progress.

Ask the right decision question

Decision matrix for engineering and IT services firms
Method	Prefer it when	Main risk	Control
Time and materials	The requirement evolves and time units are verifiable	Unapproved time or exceeded cap	Approved time sheets, cap and rates
Fixed fee	Deliverables, scope and assumptions are defined	Effort overrun and free additional work	Budget, work to complete, changes and margin
Progress	Phases or milestones represent delivered value	Subjective percentage or billing ahead	Completion criteria and project-manager approval

Bill time and materials without late disputes

The contract states the unit, rates, profiles, rechargeable expenses, cap and approval path. Obtain time approval at a frequency suited to the project. Monthly approval on billing day leaves too little time to correct an incomplete narrative or out-of-scope activity.

Example: 12 consultant days at €850 and three project-manager days at €1,050 produce €13,350 excluding tax. Reconcile submitted, approved and billed days. Qualify any variance instead of silently deleting it.

Protect fixed-fee margin

A fixed fee transfers part of the productivity risk to the supplier. Break it into work packages with hours or cost budget, owner, date, assumptions and work to complete. Margin identified after delivery is too late: forecast margin at completion whenever work to complete changes.

Forecast margin at completion = contract price − actual cost − estimated cost to complete.

New requests follow a separate path: qualify, estimate, approve, contract change or order, then bill. The additional work guide describes this process.

Measure defensible progress

Do not confuse hours consumed with technical progress. A phase can have consumed 70% of its budget but be only 50% complete. Define the method: accepted milestones, delivered units or an estimate of work performed approved by the responsible manager. For a €100,000 contract at 45% completion, with €30,000 already billed, the progress invoice is €15,000 excluding tax before retention or other contractual rules.

Entering the percentage to bill for a phase in Tempolia — The proposed percentage remains subject to review before the invoice is prepared and approved.

Handle payments on account, work to complete and changes

A payment on account supports cash flow; on its own, it does not measure progress.
Work to complete is a revised operational estimate, not the mechanical balance of the budget.
A contract change preserves the link between request, price, timing and responsibility.
A draft invoice remains separate from the issued invoice and reviewable before approval.