Fixed Fee vs. Time and Materials: Margin Visibility by Engagement Type
The two billing models fail in opposite ways: T&M leaks at the invoice, fixed fee leaks in delivery. A brief on instrumenting each one so margin is visible while it can still be saved.
What you'll learn
- Where each model hides its losses
- The instrumentation each model needs
- Budget burn tracking on fixed-fee work
- Choosing the model per engagement, not per firm
T&M tells you about margin problems at billing time. Fixed fee tells you at the end, unless you build the instruments to hear it earlier.
What's inside
Neither billing model is safer. They are differently dangerous. Time and materials leaks at the invoice, one discounted or unbilled hour at a time. Fixed fee leaks in delivery, silently, until the budget is gone and the work is not.
The firms that run both models well do not have a favourite. They have instruments for each.
- 1
How T&M leaks
Hours worked but never entered, the quietest write-off there is
- 2
How fixed fee leaks
Scope creep absorbed without a change conversation
- 3
Instrumenting each model
T&M needs invoice-side controls: timesheet completeness enforced weekly, rate cards with a real override approval, and realization reported per project so quiet discounting has a name.
- 4
Choose per engagement
Well-understood, repeatable work suits fixed fee: your actuals database makes the estimate an underwriting decision. Ambiguous, discovery-heavy work suits T&M or a hybrid with a scoped discovery phase.
Keep exploring Professional Services.
Have questions about ERP, integrations, or which solution is right for you?
Our team is here to help. Tell us about your operation and we'll map out a clear path forward.