Deciding whether to settle for an hourly or daily rate as a self-employed person is important for every creative or craftsman. Whether you start looking for work or go for contracts, hiring agents and recruitment firms will ask one question “what is your contract rate?”
Both variants have their pros and cons, which is why each is suitable for a range of purposes. What are the main differences between them and which tool or timesheet app can be used to create a great online invoice? Read on, my friend!
Smaller projects often pay by the hourly rate. If the effort is not really significant and is therefore manageable, the hourly rate is preferred. A major advantage is that the amount may look low at first. The psychological effect on the client cannot be understated. While an hourly rate of $63 is just as tempting as a daily rate of $504. Also, you can precisely account for the services provided.
However, you should note that the services must also be clearly documented– whether you create online invoice or do the work manually. Register the time taken for each job and the services offered should be disaggregated. This is important if one should need to provide the invoice in court, among other things.
This is not a downside as with the right program or timesheet app, a detailed hourly report can be created automatically. However, the potential risk to the hourly rate and the precise breakdown may be that the contractor does not pay up billing the 5-minute work time for certain services.
In addition, a detailed hourly report should be rendered to the client on a weekly basis for long-term projects. If there are no issues after a week, the contractor is okay with the arrangements. If the contractor is not very happy with this approach, the work can be paused for clarification – an excellent solution that minimizes losses.
The daily rate has its share of benefits when compared to the hourly rate or time sheet results as the contractor can count more flexibly. It does not matter whether you work six hours today and ten hours tomorrow at the daily rate. Nobody has to justify why he/she did not spend the entire day working on a certain project. Unlike the hourly rate, the evidence does not have to be accurate to the minute with the daily rate.
If you wish to create online invoice, there are ways to do it more clearly and easily. For the psychological effect on the billing and fees, the daily rate could be advantageous. Really, what difference does it make if 144 hours are charged or 18 days? For extensions, it also sounds clearer and better – needing 3 days instead of 24 hours.
So if you do not wish to keep a precise timesheet, which is relatively pricey especially for longer and more extensive projects, go for the daily rate.
The fixed or flat fee may sound practical at first. Both the client and the contractor know what they are getting into. The only problem this poses would be that the contractor gets additional work – such as corrections or add-ons as it can be disadvantageous for the contractor.
Buffers are more difficult to calculate and it is, therefore, vital that incalculated services are charged separately in advance. This can also be done on a timesheet or for a fixed price.
Hourly rate, daily rate, flat rates – which is the best?
Both the principal and contractor have one goal in mind: the lowest possible risk. However, the goals are in the way.
The client wants to pay as little as possible while the contractor does not want to offer services without getting paid.
The following overview helps with making the right choice:
- Hourly rate: Flexible, detailed and exact – but the timesheet should be set up and submitted weekly. The customer can rarely realistically tell the effort in advance. The contractor will not continue working if unpaid and if necessary, can stop working promptly.
- Daily rate: This method of fee calculation is more flexible and easier for customers to estimate in advance. Also, extensions are more manageable. In addition, the contractor can easily install a buffer, for example, if designs or other corrections are needed. However, less detailed information is available in case of a dispute. The remedy in this case can be to create online invoices and thus collect detailed evidence using a timesheet app.
- Flat fee or fixed price: This is mostly safe for the customer as the services and fees are fixed. It may take a little longer and needs more effort than calculated, but the contractor stands a chance to lose out and do unpaid work. To be safe, the contractor should have an accurate listing of services to be rendered from the beginning and any other work should be billed separately.
Create online invoice – resources
To create online invoice in the easiest manner, use a suitable timesheet app or tool such as Zistemo. Instead of maintaining a manual timesheet, the system automatically turns time entries into PDF invoices.
The timesheet app, Zistemo, offers greater securities as the individual positions are noted down directly and the work performance is easier to prove. In case a dispute arises about the timesheet, the benefits and demands can be enforced with more ease.