If you are an engineering, architectural, or any professional services firm that works for federal or state agencies, you might have to use Cost Plus contracts. Cost Plus billing adds a profit margin or management fee to the bill amount. You can set special bill rates in the fee schedules for the direct costs and set the fixed fee or percentage on the Projects screen. You can manually override it with a different amount on the Invoices screen, upon which BQE CORE then re-calculates the net bill amount. However, if you change the net bill manually, it does not change the fixed fee.
Let us see how a Cost Plus invoice is created and how it is different from a standard fixed fee invoice. You can watch this video or read the below article;
- First, you need to create a project with a contract type as Cost+ Fixed Fee or Cost + Percentage.
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Cost + Fixed Fee contract can be used when you want to bill direct costs—time and expenses (if expenses are a part of contract)—plus a fixed fee or profit to the client. The total fixed fee is set in the Projects screen. CORE adds a portion of the fixed fee to the net bill before generating the invoice. CORE also tracks the fixed fee portion to ensure you do not over-bill.
Fixed Fee Amount = Billable Amount x (Fixed Fee / Contract Amount)
Net Bill = Service Amount + Service Tax + Expense Amount + Expense Tax + Fixed Fee – Discount – Retainer Applied
Example: If the Contract Amount = $1000, Fixed Fee Amount = $1000, value of billable time and expenses = $500
Fixed Fee = 500 x (1000/1000) = $500
- Cost + Percentage contract can be used when you want to bill direct costs—time and expenses (if expenses are a part of contract)—plus a percentage of the costs or profit to the client. The total fixed fee percentage is set in the Projects screen. CORE adds the profit percentage to the net bill before generating the invoice until the project is complete.
Fixed Fee Amount = Billable Amount x Fixed Fee %
Net Bill = Service Amount + Service Tax + Expense Amount + Expense Tax + Fixed Fee – Discount – Retainer Applied
Example: If Contract Amount = $1000, Fixed Fee % = 15, value of billable time and expenses = $500
Fixed Fee = 500 x (15/100) = $75
2. Second, add time and expense entries to the Cost Plus project. Although there is no significant difference in how the Cost Plus invoices look compared to a standard fixed fee invoice, it is important to note that the Extra flag, which normally changes how these time entries are displayed on a standard fixed fees invoice template, does not change anything on a Cost Plus invoice template. Do note that you might need to use a Joint Invoice template in case of phased projects.
3. Creating and previewing a Cost Plus invoice is no different from any other standard batch invoice method. However, you might notice that the Net Bill does not equal the sum of Billable Services and Billable Expenses.
In the above example we have $5000 of services + the 15% fee defined in the project, for an additional $750 + $50 of expenses = $5,000 + $750 + $50 = $5800
Here is the final Cost Plus invoice:
You should take note of a few things in this invoice:
- In the Professional Service section, we see various time entries, and unlike the standard hourly invoice which displays hours, bill rate, and bill amount, we see hours, cost rate, and cost amount in this invoice.
- Direct Labor Subtotal = Total Cost Amount for all the billable services on the invoice
- Direct Labor Total= Total Billable Amount of all the billable services on the invoice
- Overhead = Direct Labor Total - Direct Labor Subtotal (overhead amount is the difference between the total billable amount of all services and total cost amount for all billable services, also expressed as a percentage)
- Fixed Fee = The additional percentage or flat fee used in the project. In the above example, it is 15%, which is calculated as $5,000 + 15% = $5,750
- Any additional expenses are added to get a grand total.