Do It By The Hour

Managing Cost Plus Billing For Subcontractors

Cost plus is a standard method of billing used by everyone from small businesses to NASA contractors.

It allows you to charge your customer what you paid your subcontractor plus a markup, which is your profit.

While that seems simple on the surface, coordinating invoices, shifting costs and many other factors make this a challenging endeavor.

The best practice is to use a billing system has built in support for the different cost plus factors and, ideally, have it integrated into your project management and task software.

Flexible Service Configuration

When setting up the services that you offer to your customers, you may have several options that you offer, including fixed price, hourly and discounts.

However, when you're hiring subcontractors, you need to match the way you handle pricing to their methods. If you bill your customers a fixed price and your contractor bills hourly, you could very easily end up owing far more to them than what you charged your customer.

Guaranteed Profitiability

The smart way to ensure you make a profit is to match the billing type of your contractor before applying your markup.

If you're being charged hourly, set your service to hourly billing. You can then add a fixed amount or percentage of the hourly rate and make money for every hour.

A fixed charge can be handled the same way, with your service set to fixed price billing. Again, add a fixed amount or percentage of the contractor's rate.

Pricing And Markup Types

A messy workspace leads to a messy mind, so we provide structure that scales with your complexity.

  • Fixed Amount: The charge is the same no matter how long it takes.
  • Hourly: The hourly rate will be applied to the number of hours spent on each task.
  • Fixed Markup: A specific amount will be added to your price no matter what the contractor charges you.
  • Percentage Markup: A percentage of what the contracter charges will be added to your price.

Automated Invoicing

In addition to controlling markups and profit margins, a good cost plus system help avoiding the problems with invoicing.

By definition, if your price is a based on what your contractor charges you, then you have to wait for the final invoice to be sure you price correctly.

Our cost plus invoicing uses your billable tasks to generate accurate subcontractor payouts. You know exactly what their invoice is, and what your profit will be.

Pro Tip

Pairing fixed and hourly pricing is little more than gambling. No matter which of you is billing hourly, you're vulnerable to cost overruns and losing money. The point of cost plus is minimizing risk. That's why companies use it.

The Professional Way To Manage Subcontracting

When you do away with spreadsheets, waiting for invoices and keeping track of complex jobs across a collection of apps, your business runs faster and your financials are more reliable.

Using software with cost plus billing included as a core feature allows you to operate like a pro, and profit accordingly.

Want To Learn More?

If you'd like to see the benefits of a fully integrated system in your own environment, you can use all of our features for 30 days with no credit card required. You can even use Stripe to get paid.

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