Is a cost blowout redeemable?

November 13, 2016

Is a cost blowout redeemable?

You are sitting at your desk, looking at a printout of time spent on your campaign. You and your team had discussed the number of hours that would be required, and everyone was happy. You were confident that your quoting was accurate, and your client gave their approval to proceed.

It's time to invoice the campaign and the summary shows a blowout in web development time – 15 hours over-budget! You scratch your head to figure out what went wrong, and what you are going to do to recover the additional costs. Can you invoice your client for the over-run of time? 

Right about now you feel yourself going into panic-mode, and a slew of questions start rushing through your head. These questions will need to be answered before you can decide what to do next. 

Why is there a cost blowout?

This is your chance to go back over all the time entries to assess the work completed, and then talk with your team. Questions for your team could include:

  • Was any additional work completed that you didn't know about? If so, who requested the additional work and why were you not informed?
  • Did the team encounter difficulties? If so, what were they, and why didn't they flag them with you?
  • Did the team accidentally (or on purpose) record internal errors/fixes as "chargeable" in their time sheets?
  • Was the original time estimate wrong?
  • Was the brief misunderstood or unclear? 

 Why are you surprised? 

As an account manager, your job involves keeping a tight handle on time and cost-tracking for projects. This is especially important for projects with a web development or creative design component, as both areas are notorious for time over-runs if not monitored vigorously. In this case, a 15 hour time over-run should have been red-flagged long before the completion of the project. 

Is the additional work chargeable to your client? 

This will depend on if the over-run was a result of work requested by your client (over and above the quote supplied). If so, then you have grounds for talking with your client about the cost of the work. However (and it's a BIG "however"), this conversation should have taken place as soon as the request was made, rather than after the work was completed. 

Somewhere along the way there has been a communication breakdown - especially if your client has by-passed you and gone straight to your creatives or developers to request the work. This is a great example of why it can be extremely dangerous (to both process and profitability) for your clients to dialogue directly with creatives and developers, and so a reminder about your agency processes (with both your client and your internal team) would probably be a good idea. 

If the additional time taken was due to internal issues (e.g. lack of skills or knowledge; slow execution; poor processes; errors; inaccurate time estimation), then you will not be able to on-charge that to your client. The project over-run will mean that the gross profit for your job will be affected, and further chats with your team will be required. 

Is the cost blowout redeemable?

Probably not (sorry), and your agency will have to absorb that "bottom line hit". The good that you can pull out of a situation like this is an expensive (and potentially embarrassing) learning experience. 

This may be your opportunity to change inefficient agency processes (internal or external), or re-jig the way that you work. As long as you can learn a good lesson (and hopefully not repeat it again) then you will have managed to salvage some sort of positive out of a negative situation.

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