Time and Materials Markup

How do I handle markup on Time & Materials projects?

Goldenseal project billing software gives you several ways to cover overhead and profit on "cost plus" projects. There are four ways to add markup to the actual costs, in your time & materials project bills. They let you cover your overhead expenses, and get some profit. You might say these are the "plus" in your "cost plus" billing!

Use any combination of the following:

Percentage Markup-- Project Payment Terms

You can set up Project Payment Terms that add a general markup or "management fee" to your T&M project billing. To do that, follow these steps:

  1. Choose Payment Terms from the Options menu, and choose Projects from the submenu.
  2. Double-click on an existing set of terms, or click the New button to create a new set of terms.
  3. Enter basic info for the Project Payment Terms-- such as late charges, and billing frequency.
  4. Enter the Time & Materials Billing Options. You can charge the same percentage markup for all items, or you can turn on the Use Multiple Markups checkbox, and enter different markups for each type of cost.
  5. Click OK.

After you have set up the T&M payment terms, assign them to your project. To do that, follow these steps:

  1. Choose Projects from the Accounts menu.
  2. Locate your T&M project.
  3. Double-click on the More Info button.
  4. Enter the terms into the Payment Terms field.
  5. Click OK.

Billing Rates

For equipment, labor and subcontractor costs, you can add markup in the amount that you bill per hour or day. It can be a replacement for the "management fee" in the payment terms, or an addition to it.

To add markup for labor hours, follow these steps:

  1. Choose Billing Rates from the Options menu, and choose Labor from the submenu.
  2. Double-click on an existing rate, or click the New button to create a new billing rate.
  3. To include markup in your labor billing, you can use a fixed Dollar Rate for the billing that is higher than your labor costs, or you can add a percentage to the wage rate, or the net labor cost including burden.
  4. After you have set up the billing rate, click OK.

After you have set up the billing rate, assign it to the labor hours on the project. To do that, follow these steps:

  1. Choose Labor Hours from the Costs menu.
  2. Click the New button.
  3. Enter the employee doing the work, and the number of hours.
  4. Click on the Job Type popup field, and choose Projects.
  5. Click on the Job clairvoyant field, and enter the T&M project.
  6. Hit the More Info button, and fill in the T&M Billing Rate.
  7. Click OK.
  8. Hit the Enter key to save the record.
  9. The hours will be included as a line item in the next T&M billing.

Line Item Costs

If your contract allows it, you may be able to bill for some overhead costs as actual costs, when working on a Time & Materials project. For example, any of the following might be considered as billable "project overhead":

  • Time spent on blueprints and plans
  • Printing costs for blueprints and plans
  • Time spent preparing estimates for the work
  • Time spent meeting with the clients
  • Time spent ordering materials for the project
  • Time spent writing payroll for the project

HINT-- Your T&M contracts should probably specify exactly what types of overhead expenses can be billed, and which are covered by the markup.

To include labor as billable project overhead, follow these steps:

  1. Choose Labor Hours from the Costs menu.
  2. Click the New button.
  3. Enter the employee doing the work, and the number of hours.
  4. Click on the Job Type popup field, and choose Projects.
  5. Click on the Job clairvoyant field, and enter the T&M project.
  6. Hit the Enter key to save the record.
  7. The hours will be included as a line item in the next T&M billing.

Fixed Charge

If you charge a fixed-price markup, management fee, or overhead allowance that is not based on actual work costs, follow these steps:

  1. Choose Billing Records from the Bank menu.
  2. Click the New button.
  3. Enter Project into the Account Type popup field.
  4. Enter the T&M project into the Account clairvoyant field.
  5. Enter Misc. Charge into the Billing Type popup field.
  6. Enter the amount of the charge into the Gross Price field.
  7. Hit the Enter key to save the record.

You can then print the Billing Record and submit it to the client. Use the Deposit Funds command to credit the payment, along with payments for the regular T&M bill.

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