Starting a new UX project is an exciting moment for both the client and the contractor. As a result, a product or service is to be created that will bring a lot of satisfaction and benefits to both parties. When the expectations are clarified and the way to meet them is set, the issue of settlements – both their amount and the method and date of their transfer remains. Which billing model will work best?
Fixed Price only for small projects
Usually, the first form of billing that questions arise is Fixed Price – the total price for the project. There is nothing strange about it. The client’s perspective prompts him to eliminate the unknowns, which is why there is a need to define the budget in advance and place it in the company’s cashflow.
Simple projects are easy to grasp in the financial framework, therefore, after reading the specification of requirements and clarifying the required amount of work, this value can be accurately captured and a contract can be prepared based on it. It is just as easy for the client to bear the cost in this case, payable at the end of the project. Examples of projects where settlement in this form is most often used are e.g. UX audits .
In the case of slightly larger projects, such as designing a simple ux website , the billing may be based on a similar model. However, here you must take into account the need to pay a deposit, payable before the start of the project.
Larger design, “light” cost
The situation becomes more complicated in the case of larger projects that are expected to last several months, such as intranet systems, web and mobile applications. The method of payment provided for at the end of the project may have undesirable consequences for both parties: on the one hand, the client’s budget will be heavily burdened with a high payment, which (if the funds have not been allocated to finance the project) may have a negative impact on the financial liquidity of his company. The financial liquidity of the contractor may also be significantly disturbed, especially if the project is extended.
Therefore, subscription payments are an effective solution, especially in the case of the last type of projects. There are several advantages of this solution:
- They make it possible to evenly distribute the financial burden over time – monthly payments are “easy to digest” and do not generate an excessive burden after the project is completed.
- Payments can be made for the hours actually worked and thus for the value delivered.
The contract may include several options here, which the parties can agree on: Maximum number of hours per month – in the case of a smaller number of hours actually worked, the invoice will of course be correspondingly smaller.
- Hours range – then the contract stipulates that the number of hours will not be less than x hours and not more than y hours.
- Fixed number of hours.
It is important to specify in the contract what will happen when the maximum number of hours is reached or when the contractor is, for example, 80% closer to it. The client can then decide how many additional hours the contractor can dedicate in a given month if required by urgent circumstances.
There is also one point to keep in mind – it is a question of the morale of the team working on a given project. When the parties have agreed on a certain amount and the project time is extended, there may be a situation where increasing frustration on the part of the contractor translates into the results of the work or the quality of communication. This is an undesirable situation, so it is worth counteracting it, for example by arranging monthly settlements.
Of course, the model of such settlement, however convenient for the contractor, must protect the interests of the client. A question arises about the relationship between the budget, time and expected results. There may be a concern whether the project will be excessively extended due to flexible settlement. This issue, like the previous ones, should be regulated by a well-written contract specifying the total duration of the project. It is necessary here to precisely define the scope of work, stages and contractual deadlines. The workshops that should be conducted before the start of the relevant part of the project will help to clarify them.
When working with a user experience agency, it is worth settling in the subscription model, because it is a convenient form of billing, having a positive impact on the customer’s cashflow and the value provided. It should be remembered that all the rules must be well known to both parties, clearly defined after the workshops and written in the contract.