The rising gasoline prices in the U.S. is causing some consultants to think about how to account for these costs in their billing. Let us know if and how you're accounting for the high cost of fuel.
As with any business, consultants must charge their clients in one form or another for costs incurred during the course of performing their work if they want to make money in their profession. Generally, we either include these expenses explicitly on our invoice, or we include them in our usual rate. Part of the art of billing and collections is in deciding which goes where.
When a particular expense is extraordinary and not a part of the usual conduct of business, we tend to bill for it separately. Thus, we often expect reimbursement for travel expenses when that involves air fare and a hotel stay, but we might consider the price of driving across town to be our responsibility.
However, the recent rise in the price of gasoline might be changing some of that. According to nationalgasaverage.com, prices in the United States are about a dollar a gallon higher than they were a year ago, and the general trend is still upwards. At around $3.50 a gallon on average, a 20-mile drive isn't going to break the bank, but a 100-mile drive could take a significant chunk out of what you charge for a short client visit. In a high-traffic metropolitan area like New York City, even a drive across town could get expensive.
TechRepublic member Bob Eisenhardt (reisen55) says that he's considering how to build this added expense into his fee structure for clients who reside at marginally remote distances. He's also concentrating on locating new work that's closer to home, and doing more work via remote connection.
I can think of a number of ways to account for these costs in your billing. You could:
- Raise your rates across the board. This has the advantage of simplicity, but unfairly penalizes your local clients.
- Add a "trip charge" to your invoice. This is more fair, but complicates your invoicing. And by complicates, I don't mean that it's more difficult for you. Rather, it gives the client something to question and resent.
- Charge a different rate for on-site vs. remote consulting. This is almost as complex as the trip charge option, but less equitable because a longer visit pays more for the same travel overhead (assuming you're billing hourly).
- Charge a different rate to each client based on their distance. This has the advantage of a simple bill, but it unfairly penalizes clients when you don't have to go on-site.
Someone will undoubtedly ask, "What's the problem with charging some customers more than you need to?" It isn't a problem, unless it makes you less competitive than you need to be. That will depend on your specific market.