Define Effective Billing Rate

Your effective billing rate is how much you make per hour, even when you’re not working. Average all your revenue over all your hours, and you have the amount you’re effectively getting. Watch the video below and comment on it.

Define Effective Billing Rate: The billing rate you are actually getting when all working hours are included in the calculation of revenue divided by hours.

Here’s the deal… consultants usually can’t bill for every hour they work. They perform in-house tasks. They attend company meetings. They have admin overhead. Those are usually not billable activities, so you don’t get paid for them. You only get paid for the billable activities. So divide your total revenue by your total (billable and non-billable) hours and you have your effective billing rate.


Here’s an example: Say you worked 40 hours and charged $100 per hour. All the hours were billable. Your total revenue for the week is $4,000 and your effective billing rate is $100 per hour. Nice!

But what if only 30 of those hours were billable? The other 10 were admin. Your total revenue is now $3,000. $3,000 divided by 40 (total hours) is only $75 per hour.

Your effective billing rate includes admin and other non-billable time.

Fixed Bid Contract, Fixed Price Contract

Fixed-price contracts can be beneficial to both consultants and clients. Both parties know exactly what they’re getting. Scroll down for the video.

Define Fixed-bid contract: An employment deal where the price is agreed up before the work begins, and cannot change.

Most fixed-bid or fixed-price contracts are paid on milestones. Clients usually agree to pay in three installments: 1/3 up front, 1/3 at beta, and 1/3 at completion. But milestones can be anywhere in the middle for any reason. The contract total will always be the fixed agreed-upon price.

Why are fixed-price contracts good for clients?

The most obvious reason is that fixed-price contracts can never run away into huge cost overruns. The supplier will never get more than agreed.

Why are fixed-price contracts good for consultants and suppliers?

The supplier has fewer incentives to accept a deal like this, but there are some upsides. One is that the deal cannot be canceled partway, leaving the consulting party without revenue. Another is that the deliverables are tightly fixed, and scope creep is less likely to occur.

Have you tried the invoice milestones on Standard Time®. Good news, you can do it today. Just download a plug in your milestones. Then run a client invoice for each payment milestone.

Define Consulting Utilization Rate

I’m scheduled for 40 hours this week, but I’ll probably work closer to 90. If those are billable hours, then that over 200% utilization! Awesome! Unsustainable, but awesome.

Define Consulting Utilization Rate: The percentage of scheduled hours spent on client billable work.

A 200% utilization rate is pretty amazing, and also completely unsustainable over the long run. That is why Standard Time® forces you to choose a date range when examining the utilization rates. It’s not going to be the same for every week, or every month, or even for ever year. It changes all the time, depending on how much time you spend on client jobs.

How to calculate utilization rate: Divide client billable hours by scheduled hours. The results is a percentage of utilization.

Employee utilization is also closely connected to effective billing rates. If you are scheduled for 40 hours, but only work 20, then your billable amount must be spread over the full 40. In that case, it’s 50% of what you got. In other words, for every scheduled hour, you got only 50% of your total billable rate.

How to calculate effective billing rate: Multiple total client revenue by utilization percentage.

Crazy stuff? Don’t worry; there’s a simple report in ST that calculates all this. Just click it and go. But you may not want to know the results. Just kidding… you’ll be just fine, and probably happy that you knew.

Define Comp Time, and Time Off in Lieu

Honey, you have to work again? Yes, but I get all those comp time hours. We’ll take a nice vacation to the south of France. (Hint, hint) That pretty-much sums up compensatory time, or time off in lieu.

Define Compensatory Time: Employee time off given in exchange for overtime.

Getting comp time always feels good. It’s like a free holiday. Of course everyone is expected to work a little extra from time to time. So that’s only natural. But getting a three-day weekend is golden!

But what software are you using to keep track of this? Let’s say you have fifty employees. Each one gets comp time at least twice a year. That’s one hundred special-case time off situations you have to juggle. How do you handle that? Is there some software to do it? Or do you use a spreadsheet?

Did you know that your project tracking app has it? Yep, ST can track PTO and comp time. Watch the video below, and then click the link at the end. You will like this almost as much as a three-day weekend.  :)

Define Invoice Milestone

Invoice Milestone: what is that? This video helps to explain that question. It’s actually a pretty simple concept. You sign a contract where the client pays you at agreed-upon intervals. Those intervals are called milestones. That is the only time you can bill the client.

Define Invoice Milestone: A date when a client has authorized a certain billable amount to be invoiced.

You agree to a fixed bid for a project and the dates when you’re allowed to bill the client. The client knows what to expect, and you know when you’ll be paid, and both parties know the exact amount it will be. Often the terms of these fixed-price contracts are one-third up front, one-third in the middle, and one-third at the end.  These kinds of deals are signed all the time. So Standard Time® supports them with invoice milestones.

You set up the invoice milestones for a project in advanced. You determine exactly how much each milestone is to be charged. And then you get email notifications when they are coming due.

Sometimes invoice milestones are a percentage of the total. Other times, they are fixed amount. And finally, they are sometimes just a date range that includes all the time and materials for the job.

Watch the video and give this a try on your next project.

Define Task Finish Date

Isn’t it crazy how nobody on your project team expects your project and task finish dates to ever come to pass? We put them out there like hazy mirages you never seems to reach. And then those dates come and go without the task being completed, and everybody forgets. Oops, we missed that date. Does that annoy you? Or aren’t you OCD enough?

Define Task Finish Date: A date for the completion of a task or project, usually  computed from a starting date and calendar days.

What’s weird is that project completion dates in the future never seem quite real. You throw them out there, and so far into the future that nobody can quite grasp the possible conditions of the project in that distant time. It’s like it’s unreal. But everyone agrees… yeah… we’ll definitely be done by then. That’s definitely enough time to get this thing done.

Problem is, there are either not enough steps to get you to completion, or little accountability to those steps. You just trust that this “sufficiently distant date” is so far out that you must be able to complete the project by then. How could you not finish by then? Missing a date like that would be inconceivable!

And yet we miss them every time. And forget we missed them.  Jeeeez, we’re dumb…

Define Finish To Start Link

Sometimes you cannot start one task until another is complete. Try to build a bridge without the abutments. You’ll have Galloping Gertie on your hands.

Define Finish to Start Link: A project task link relationship where one task cannot start until the previous task finishes.

Actually, Galloping Gertie was not caused by missing abutments. It was caused by resonating flutter from high winds. Sort of like swinging higher and higher in a playground swing set. Eventually bad things happen.

(see video below)

But abutments is a good example for link relationships, even if it doesn’t apply to Gertie. Sometimes you just have to finish up one thing before you can start another. That’s a “finish to start” task relationship. It turns out there are four type of task relationships.

  1. Finish to Start (FS)
  2. Start to Start (SS)
  3. Finish to Finish (FF)
  4. Start to Finish (SF)

In each of these cases, you’re linking either the finish or start of one task to the finish or start of another. If you think about it, you can imagine crazy cases where each one of these link relationships naturally occurs. Projects have all sorts of relationships you have to model in software so your project works.

Define Project Portfolio

When you’re starting to think about managing projects as groups, then you might be ready for project portfolios. Of course, you’ll always manage individual projects, but do you also want to manage groups of them?

Define Project Portfolio: A collection of projects managed as a single entity.

For example: in Standard Time® you can view revenue charts for an entire project portfolio. For the sake of this chart, you don’t care how much revenue a single project brings in. You care about an entire collection of projects. How much does the entire collection bring in?

Another example might be finding the effective billing rate for an entire project portfolio. In other words, how much are we making per hour on this entire portfolio of projects? We care about individual projects, of course. But we’re interested in comparing one portfolio against another. Which portfolio has the highest effective billing rate?

Watch the fanciful little video below, and then try this for yourself. It will take some time. You will need multiple projects to be able to call it a portfolio. One project doesn’t make a portfolio. So you’ll need to assign tasks to resources and track some time for multiple projects before you can really start seeing value. This is a high-level management technique.

Define Resource Allocation

In project management, resources almost always refer to employees.  I.e. human resources. And allocation almost always refers to scheduling tasks they will work on.  Hmmm, is that all there is to it? (watch the video below)

Define Resource Allocation: Using people and objects in projects on a shared or recurring basis.

So no… employees are not the only resources you can allocate to your project. Got a tractor? Using it for landscaping? Then it is a shareable resource that you must schedule use for. In other words, only one landscaper crew can use it at any given time. It can’t be used by two crews at the same time, right? After all, it’s just one tractor. If two crews need tractors at the same time, then you need two tractors.

And no… scheduling tasks is not all there is to allocation. But yes, scheduling shareable resources is often necessary, as described above. Consider a load of manure, used by those landscaping crews above. You’ll have to split that bad-boy load up. You can’t have all the crews fighting for their “fair share” of the poo, can you? So you allocate a percentage to each crew. You guys get a little poo, and you other guys get some too.

That’s resource allocation.

Consider this video for an overview of resource allocation:

Now consider what the snarky little Kat has to say about resource allocation.

Define Project Resource

When you come in to work and find that you’re assigned to 14 new projects, it’s time for an employee availability chart.

Define Project Resource: a person or shared object committed to a project, such that it cannot be used on another project at the same time.

And… what’s an employee availability chart?

It’s a chart that shows bars for each week, telling how many hours an employee has available to them. On an empty week, you’d see a 40-hour bar. On a booked week, you’d see no bar. Or, on a partially booked week you might see a short bar.

Bars on the employee availability chart are based on project and task assignments. You may be assigned 25% of your daily hours on a certain project, and 75% on another. These would total up to 100% of your daily hours. Or, you might be assigned to certain tasks that fill up your day.

Before assigning resources to projects, it might be good to check their availability; they might be assigned to other projects that you didn’t know about.

To be fair, project resources can be more than just people. They can be equipment that is assigned to a project so that nobody else can use them at the same time. Any shared item or person can be a resource.