Summary
Expect to learn about what is involved in creating an engagement letter for non-hourly billing models, highlighting the need to clearly define the scope, break it down into stages, set boundaries, incorporate clauses for project completion and potential delays.
3 Key Takeaways from this Video
- Unique considerations for engagement letters: When transitioning from hourly billing to non-hourly models, there are important differences and nuances to consider in the engagement letter, such as clearly defining the scope, breaking it down into stages, and setting boundaries.
- Clear communication of project details: In the engagement letter, it is crucial to outline key steps, timelines, and potential scope change triggers, providing a comprehensive understanding of the project for both parties involved.
- Incorporating safeguards and flexibility: The engagement letter should include clauses for project completion, proportional billing for unfinished work, and provisions for potential delays or changes in scope, ensuring both parties are protected and prepared for various scenarios.
Transcript
0:06 A question that I get asked quite often is the engagement letter any different from what I'm used to when I bill by the hour.
0:15 And the answer is actually there are quite a few differences and nuances to think about in the engagement letter. So if you think about engagement letter where you're primarily billing by the hour, it looks something like this is my hourly rate or how many hours I'm going to spend.
0:30 And this is my projected bill and you have to pay disbursements, but that might be a typical engagement letter and you might say if you don't pay on time or within 30 days interest is going to be charged.
0:42 Well, some of that stuff is still applicable when you're using a non hourly billing model. But there are some things that are really important.
0:49 I think when you're laying out what you're going to do the scope, you really have to be fairly exhaustive, break it down into stages of the project.
1:00 Put in the key steps that are in each of those phases and be prepared to put boundaries around what you're going to do.
1:09 And as an example, one of, you know, one of it might be this provides for X turns of an agreement.
1:15 In other words, you get to make your comments, I'll then make those changes and you get final sign off. And so you need to do more of that than you normally do if you're just billing by the hour.
1:27 Another, you might use how long is this going to take? It's going to close on this date, the projected date, and if it doesn't, then that's an avenue to open up changes scope.
1:38 So there's a lot of boundaries to create and you get better and better at that the more you do. You also need to think about a couple of other things like what happens if the project doesn't complete.
1:48 If you're in an hourly model, you just bill by the hour. But if, in this case, you need to build in a clause that says something like it's proportionate to the amount of work that was done.
1:58 And we often like to use amounts for each of the stages, not as the price, but the allocation of the price is there in case the project doesn't finish.
2:10 Because projects can carry on, and this would be pretty common in either situation, but you want to make sure you provide for interim billing as well just in case the project gets delayed.
2:20 At AltFee, we recognize the importance of the engagement letter. And so now what we've done is we've tied a description of services feature to the app so that you can easily transport the information and the scoping to the description of services in the engagement letter.