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Historically, Charge Out Rates (COR) have been used to calculate the fee chargeable for a piece of work based on hours worked on a job at a fixed rate per hour.

The rates themselves were usually calculated as approximately three times the cost of an individual’s time. For example, a clerk paid £12 per hour would have a nominal COR of £36 per hour.

The idea was that one-third of fees produced in this way would cover salaries, one-third overheads and one-third profits.

In reality this broad-brush approach had to be flexed to accommodate time lost attending to non-chargeable activity and variations in the efficiency of staff.

Very often, when bills are prepared using CORs, time is written off to reflect these inefficiencies.

As practitioners started to consider the value of the work they produced, rather than the fee cost dictated by CORs, an increasing number of firms abandoned time sheets and started to quote for work on a fixed fee basis.

To do this, practitioners were obliged to consider the clients’ appreciation of value.

There are still practices that determine fees based on chargeable hours committed to a job and there are others that fix fees in advance based on market conditions and their ability to communicate the value of work undertaken.

Which is the best method?

Ultimately, practice profitability is the judge and client satisfaction the jury. Whichever process generates the most profits and manages to toe that finest of lines between satisfying clients that what they are charged equals the value they attach to the work done or leaves them feeling overcharged is the name of the game.

Without a doubt, those practitioners that have abandoned timesheets will not miss the daily time-sheet chores or explaining why a job has taken twice as long as budgeted to complete.

Source: New feed