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• ... money ... company ... Alysia and mleinback, I agree that the term COST is confusing and has multiple derivations depending on who wants to know. However,
Message 1 of 7 , Dec 3 3:31 PM
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--- In BillQuick@yahoogroups.com, "Alysia" <allyalexmch@...> wrote:
>
> For what it is worth, I have always used "Expenses" as my actual
money
> lost (using your example the \$100 that my sick employee is paid)
> and "Cost" would be the cost to the company ("the \$800 that the
company
>
> It is all very confusing termanology though, as there can be many
> interpretations.
>
> Alysia
>

Alysia and mleinback,

I agree that the term "COST" is confusing and has multiple
derivations depending on who wants to know.

However, when it comes to the calculating cost to the job it is safe
to use the bill rate rather than the pay rate. If you really want to
get accurate, you could use the pay rate + benefits + overhead cost
instead of the bill rate. That is painfull to calculate and in most
cases unnecessary to calculate per job basis.

Here is something to consider. When you ask your project manager to
prepare an estimate for a job, do you multiply hours by cost rate or
bill rate? Bill rate I hope.

Estimate for Job Number 1234:
Design 10 hours @ \$100 = \$1,000
Drafting 30 hours @ 50 = 1,500
TOTAL Fee = \$2,500

If you use cost rate to measure each line item, what you have
essentially done is given them lot more hours to finish the task than
it was budgeted for. To hold them to the 10 hour and 30 hour
commitment, you have to use the bill rate of \$100 and \$50 for your
designer and drafts person.

Shafat
• Shafat: Maybe the real issue of cost-rate versus billing-rate lies in the type of contract that we have with a client. If I have an hourly agreement, then it
Message 1 of 7 , Dec 4 11:56 AM
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Shafat:

Maybe the real issue of cost-rate versus billing-rate lies in the
type of contract that we have with a client.

If I have an hourly agreement, then it make perfectly good sense to
budget using an hourly rate. In this case, however, it becomes
EXTREMELY critical that the billing rate has been accurately
established.....that means that I have already determined the hourly
COST (there's that word again)for each employee. It also means that
I will have gone thru that "painful" process, as you described it,
of determining the ACTUAL hourly cost which necessariy includes "pay
rate + benefits + overhead cost".......this is my BREAKEVEN RATE for
that employee. To that rate, I now apply an amount representing
profit which gives me the true, and profitable, billing rate. BQ's
video from a previous newsletter does a great job of explaining this.

For lump sum projects, however, it is a different animal. You posed
estimate for a job, do you multiply hours by cost rate or bill
rate?" The real answer is, "it depends". When I am negotiating a
fee with a client, I MUST know what my COST is for a given scope of
work and I must know what PROFIT I have in the proposal. So, in this
case, all I really want from my PM is an estimate of hours for each
staff member who will participate. I'll do my own math depending on
the circumstances.

There may be certain circumstances, on a lump-sum project, where I
will initially anticipate a higher profit when negotiating with the
client. When the client presses me for a lower fee, I MUST know the
absolute lowest figure that I can stand..........which
is "breakeven" or the COST of doing the job. Armed with this
information, I can safely lower my fee and accept less profit if I
am so inclined. But at the very least, I KNOW what sort of profit
to which I am agreeing. Of course, I can adjust the fee by revising
the scope, but that's another topic altogether.......... If all I
have is a figure based on the formula: estimated hours x hourly
billing rate = contract amount, and I agree to lower the fee by
\$1,000, how do I know how much profit I'm giving away? I don't have
a clue. On the other hand, if I know that the anticipated profit is
\$8,000, maybe I can live with it. If the profit is actually \$900, I
would be better off passing on the project.

Now.......aside from all of these issues.........What I really need
is for the accounting software to give the option......can BQ do
this? Will it allow me to estimate and budget for a project using a
cost rate as opposed to a bill rate? At this point, the reports do
not seem to provide this info.

In my original post, I asked you to comment on the use of Cost Rate
in a future version of BQ as was suggested to me by BQ Tech
Suppport. My question: "I see that the "Budget-Cost Comparison"
report actually utilizes COST rates for the staff in the "Spent"
columns (both hours & dollars), but nothing appears in the Budget
(dollar) column. The Budget Comparison report is populated with data
in all fields (including Budget columns), but the "Spent" column
uses Billing Rates. Thus, it is necessary for me to generate both
reports and then manually do the math to compare the budget with
our cost-to-date. I understand from BQE Tech. Support that this will
be corrected in an upcoming release......can you comment?"

Thanks,
Mike

--- In BillQuick@yahoogroups.com, "Shafat Qazi" <Shafat@...> wrote:
>
> --- In BillQuick@yahoogroups.com, "Alysia" <allyalexmch@> wrote:
> >
> > For what it is worth, I have always used "Expenses" as my actual
> money
> > lost (using your example the \$100 that my sick employee is paid)
> > and "Cost" would be the cost to the company ("the \$800 that the
> company
> >
> > It is all very confusing termanology though, as there can be
many
> > interpretations.
> >
> > Alysia
> >
>
> Alysia and mleinback,
>
> I agree that the term "COST" is confusing and has multiple
> derivations depending on who wants to know.
>
> However, when it comes to the calculating cost to the job it is
safe
> to use the bill rate rather than the pay rate. If you really want
to
> get accurate, you could use the pay rate + benefits + overhead
cost
> instead of the bill rate. That is painfull to calculate and in
most
> cases unnecessary to calculate per job basis.
>
> Here is something to consider. When you ask your project manager
to
> prepare an estimate for a job, do you multiply hours by cost rate
or
> bill rate? Bill rate I hope.
>
> Estimate for Job Number 1234:
> Design 10 hours @ \$100 = \$1,000
> Drafting 30 hours @ 50 = 1,500
> TOTAL Fee = \$2,500
>
> If you use cost rate to measure each line item, what you have
> essentially done is given them lot more hours to finish the task
than
> it was budgeted for. To hold them to the 10 hour and 30 hour
> commitment, you have to use the bill rate of \$100 and \$50 for your
> designer and drafts person.
>
>
> Shafat
>
• mleinback, I can confirm that we are adding a feature in BillQuick 2009 where you can budget by cost and then have the budget comparison by cost show budgeted
Message 1 of 7 , Dec 4 12:30 PM
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mleinback,

I can confirm that we are adding a feature in BillQuick 2009 where
you can budget by cost and then have the budget comparison by cost
show budgeted cost amounts and compare it with spent cost amount.

I do truly appreciate your excellent feedback and it is users like
yourself that have made BillQuick a true customer driven innovation.

Shafat

--- In BillQuick@yahoogroups.com, "mleinback" <mleinback@...> wrote:
>
> Shafat:
>
> Maybe the real issue of cost-rate versus billing-rate lies in the
> type of contract that we have with a client.
>
> If I have an hourly agreement, then it make perfectly good sense to
> budget using an hourly rate. In this case, however, it becomes
> EXTREMELY critical that the billing rate has been accurately
> established.....that means that I have already determined the
hourly
> COST (there's that word again)for each employee. It also means
that
> I will have gone thru that "painful" process, as you described it,
> of determining the ACTUAL hourly cost which necessariy
includes "pay
> rate + benefits + overhead cost".......this is my BREAKEVEN RATE
for
> that employee. To that rate, I now apply an amount representing
> profit which gives me the true, and profitable, billing rate. BQ's
> video from a previous newsletter does a great job of explaining
this.
>
> For lump sum projects, however, it is a different animal. You posed
> the question, "When you ask your project manager to prepare an
> estimate for a job, do you multiply hours by cost rate or bill
> rate?" The real answer is, "it depends". When I am negotiating a
> fee with a client, I MUST know what my COST is for a given scope of
> work and I must know what PROFIT I have in the proposal. So, in
this
> case, all I really want from my PM is an estimate of hours for each
> staff member who will participate. I'll do my own math depending on
> the circumstances.
>
> There may be certain circumstances, on a lump-sum project, where I
> will initially anticipate a higher profit when negotiating with the
> client. When the client presses me for a lower fee, I MUST know
the
> absolute lowest figure that I can stand..........which
> is "breakeven" or the COST of doing the job. Armed with this
> information, I can safely lower my fee and accept less profit if I
> am so inclined. But at the very least, I KNOW what sort of profit
> to which I am agreeing. Of course, I can adjust the fee by
revising
> the scope, but that's another topic altogether.......... If all I
> have is a figure based on the formula: estimated hours x hourly
> billing rate = contract amount, and I agree to lower the fee by
> \$1,000, how do I know how much profit I'm giving away? I don't have
> a clue. On the other hand, if I know that the anticipated profit
is
> \$8,000, maybe I can live with it. If the profit is actually \$900,
I
> would be better off passing on the project.
>
> Now.......aside from all of these issues.........What I really need
> is for the accounting software to give the option......can BQ do
> this? Will it allow me to estimate and budget for a project using
a
> cost rate as opposed to a bill rate? At this point, the reports do
> not seem to provide this info.
>
> In my original post, I asked you to comment on the use of Cost Rate
> in a future version of BQ as was suggested to me by BQ Tech
> Suppport. My question: "I see that the "Budget-Cost Comparison"
> report actually utilizes COST rates for the staff in the "Spent"
> columns (both hours & dollars), but nothing appears in the Budget
> (dollar) column. The Budget Comparison report is populated with
data
> in all fields (including Budget columns), but the "Spent" column
> uses Billing Rates. Thus, it is necessary for me to generate both
> reports and then manually do the math to compare the budget with
> our cost-to-date. I understand from BQE Tech. Support that this
will
> be corrected in an upcoming release......can you comment?"
>
> Thanks,
> Mike
>
>
> --- In BillQuick@yahoogroups.com, "Shafat Qazi" <Shafat@> wrote:
> >
> > --- In BillQuick@yahoogroups.com, "Alysia" <allyalexmch@> wrote:
> > >
> > > For what it is worth, I have always used "Expenses" as my
actual
> > money
> > > lost (using your example the \$100 that my sick employee is
paid)
> > > and "Cost" would be the cost to the company ("the \$800 that the
> > company
> > > should have made)
> > >
> > > It is all very confusing termanology though, as there can be
> many
> > > interpretations.
> > >
> > > Alysia
> > >
> >
> > Alysia and mleinback,
> >
> > I agree that the term "COST" is confusing and has multiple
> > derivations depending on who wants to know.
> >
> > However, when it comes to the calculating cost to the job it is
> safe
> > to use the bill rate rather than the pay rate. If you really want
> to
> > get accurate, you could use the pay rate + benefits + overhead
> cost
> > instead of the bill rate. That is painfull to calculate and in
> most
> > cases unnecessary to calculate per job basis.
> >
> > Here is something to consider. When you ask your project manager
> to
> > prepare an estimate for a job, do you multiply hours by cost rate
> or
> > bill rate? Bill rate I hope.
> >
> > Estimate for Job Number 1234:
> > Design 10 hours @ \$100 = \$1,000
> > Drafting 30 hours @ 50 = 1,500
> > TOTAL Fee = \$2,500
> >
> > If you use cost rate to measure each line item, what you have
> > essentially done is given them lot more hours to finish the task
> than
> > it was budgeted for. To hold them to the 10 hour and 30 hour
> > commitment, you have to use the bill rate of \$100 and \$50 for
your
> > designer and drafts person.
> >
> >
> > Shafat
> >
>
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