Working as a freelancer is lucrative in many cases: Normally, the fees are significantly higher than those of a permanent employee. But regardless of whether the client asks or whether you reconsider your cost and administration situation – often the question arises whether you as a freelancer should now bill on an hourly basis or better on a project basis. A review of the advantages and disadvantages of each billing method:
Billing by the hour
With hourly billing, you are paid for the exact amount of time you put into the project. There can be advantages and disadvantages to this. The good thing is that with an hourly rate, the simple formula applies: the more you work, the higher the return. So if, contrary to expectations, you have to work longer on a task or you are given an additional task just before the deadline – all this is rewarded in monetary terms and makes any overtime a little more bearable.
On the other hand, this form of accounting has one or two imponderables: If you are unable to work on your project, you will not receive a salary for this time. Most likely, you will not work the usual 40 hours/week in 48 weeks/year. Vacation, holidays and sick days also need to be considered. And honestly, one of the best things about being a freelancer is the flexibility to go to the movies in the middle of the day. Even if you’re sure to make up the hours elsewhere. It’s always best to build some sort of buffer into your hourly rate for those times. That way you can bridge such lean periods better.
Another disadvantage of this billing method is that you don’t get paid for the difficulty or complexity of your tasks, but for the sheer number of hours. Whether you spend an hour on a presentation or on a difficult programming code, with a fixed hourly rate the financial outcome is the same
Invoicing according to project
This is where project-based billing comes in. Depending on the estimated time, logistical and cognitive effort, you set a price for the entire project. This minimizes the risk to a certain extent. Because with this option, the focus is not on the sheer number of hours, but on the actual added value that you offer the client as a freelancer. Here, your experience and expertise are even more in focus.
However, it is also the former that you particularly need if you want billing on a project basis. Because a calculation from the above factors requires a lot of self-reflection and a good vision. So this method is more suitable for more experienced freelancers. It becomes difficult when unplanned, but urgent and night-shift-suspicious tasks arrive shortly before the deadline.
The advantages of one option are usually the disadvantages of the other, and vice versa. The best thing to do is to decide what you feel more comfortable with and communicate that to the project providers. Most of you are familiar with both billing methods. It only becomes unpleasant when it comes to discussing the price itself – but we have the right answer for that too.
