Set up rate cards and caps, and catch allocated people who are not billing.
On a time and materials engagement the client carries scope risk, which makes the model feel safe. The margin risk moves somewhere less obvious: people who are allocated to the engagement and are not billing to it.
A rate card. What each role or person bills at on this engagement. Rates typically vary by role, sometimes by seniority, and often differ from your standard rates because of what was negotiated.
Set rates per engagement rather than relying on firm-wide defaults. Client-specific rates are the norm, and a firm-wide default silently applied to a client who negotiated something else produces invoices you have to walk back.
Cost rates on the people. Bill rate without cost rate gives you revenue, not margin. Both are needed before any number in the P&L means anything.
A cap, if there is one. Most time and materials work in practice has a ceiling. Record it, because an uncapped engagement gives you no threshold to measure against.
The gap between allocated hours and billed hours.
This is the time and materials margin leak, and it is invisible on a resource plan. Four engineers allocated full-time to a paying client looks like a healthy, fully utilized project. If two of them spent the first eight working days waiting on client credentials, you paid for roughly 120 hours you cannot invoice, and nothing in the allocation view says so.
The causes repeat across firms and across industries:
None of these are your team underperforming. All of them are billable time that quietly became unbillable.
Catching it is most of the value, because the fix is usually a conversation rather than a system change.
Do not allocate before access is confirmed. The most expensive week on a time and materials engagement is week one, when everyone is assigned and nobody can work.
Make the delay visible to the client while it is happening. A client who sees that four engineers idled for eight days waiting on their IT department will usually accept the invoice, or move faster next time. A client who never hears about it will do neither.
Track the reason, not just the gap. If access delays cost you a week on five consecutive engagements, that is not five incidents. That is a broken onboarding process, and it is fixable.
Annual increases, role changes, and renegotiations all arrive mid-flight. Cost rates rise every year; bill rates on a long-running account do not, unless somebody raises them.
Put a rate review on the calendar for every engagement running longer than twelve months. A client you have served for four years is often being billed at year-one rates against year-four salaries, and nobody notices because no single month looks wrong.
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