Using Trending Bill Rates For Budget Planning In OpenAir

Trending bill rates will provide you with valuable information for budget planning. NetSuite OpenAir has all the key information required to report on bill rates by project and trend bill rates over time by a variety of cross-sections.  Using NetSuite OpenAir to provide bill rate trends versus using spreadsheets or other tools is worthwhile and will help you improve the value of your system overall.

Bill rate trends can not only help you with budget planning but can also give you the insight to see how you compare to market standards, if you are leaving money on the table or if you may be losing business to competition over price.   You can also look at the trends by service offering type or contract type if you have configured this type of data tracking on projects.

Top Step’s recommendation for bill rate trending is to set up reports and chart views by contract type: hourly contracts, fixed-fee contracts, and overall performance for an overall company or entity view.

Consider all hours worked on the contract, billable and non-billable, to compute an effective bill rate.  We have often seen organizations use just billable hours or focus on the definition of a workweek as the limit for effort on a project, which skews the effective bill rate.

Trending bill rates provides input to capacity planning and is a good analysis tool to compare year over year budgets.  By trending bill rates by type of offering or engagement, you will have essential data to determine if bill rate increases are warranted.

How To Trend Bill Rates In OpenAir

To trend bill rates, first, you must define a custom calculation for real-time bill rate reporting by period.   Typically bill rate calculations are defined as invoiced totals by total hours. One thing to keep in mind is the type of invoice total being used for trending – using the Total Invoiced value will skew bill rate calculations if expenses are also billed to the customer.

The recommended calculation for bill rate analysis is:

Invoices Fees / Timesheet Approved Hours

Timesheet approved hours are important rather than using timesheet all hours since only approved hours may be considered for time billing.  Although fixed fee projects do not have this dependency, using a consistent equation across all types of contracts will ensure consistency across reports.

To break bill rates into ‘types’ such as hourly or fixed fee, it is recommended to introduce a custom field on projects to identify the type of contract funding the customer project.  By using report filters on custom calculations, you are able to create a Fixed Fee Bill Rate value and an Hourly Bill Rate value. For an Overall Bill Rate value, simply calculate the bill rate without any contract type filters.

Prepaid projects pose a unique challenge in this approach, as they will inflate the bill rate when including the total prepaid amount.  It is recommended these contract types either replace the invoiced amounts with revenue earned amounts for the calculation or be excluded from bill rate trending until the project is closed.

The following four reports are recommended for trending bill rates:

1.     In Progress Hourly bill rate trending  – filtered by active project stages (excluding completed project)

2.     In Progress Fixed Fee bill rate trending  – filtered by active project stages (excluding completed project)

3.     In Progress Overall bill rate trending   – filtered by active project stages (excluding completed project)

4.     Completed Overall bill rate trending

Dashboard charts can be created to compare trending across the In Progress reports and a single dashboard chart for completed project bill rates.

A word of caution

Prepaid contracts are typically recognized as earned revenue on an hourly basis. This would be the one exception to the custom calculations and require a contract type of Prepaid to be used to segregate projects of this type for earning.  If you are not doing revenue recognition in NetSuite OpenAir but have prepaid contracts, your alternate approach is to not include these projects in the reporting analysis until they are complete.