What model of settlement with UX agency should you choose?

Apr 1, 2019 • This article was originally posted on overlap.studio/pl

Starting a new UX project is an exciting moment for both the client and the contractor. As a result, a product or service is to be created that will bring a lot of satisfaction and benefits to both parties. When the expectations are clarified and the path to meet them is set, there remains the issue of settlements - both their amount and the manner and date of transfer. Which billing model will work best?

Fixed Price only for small projects

Usually, the first form of settlement for which questions arise is Fixed Price - the total price for the project. This is not surprising. The client's perspective leads him to eliminate unknowns, which is why there is a need to determine the budget in advance and place it in the company's cashflow.

Simple projects are easy to grasp into a financial framework, so after reading the specification of requirements and clarifying the amount of work required, this value can be accurately captured and a contract based on it. In this case, it is equally easy for the customer to pay the cost, payable at the end of the project. Examples of projects where settlement in this form is most often used are, for example, UX audits.

For slightly larger projects, such as UX Design of a simple website, billing can be based on a similar model. However, it is necessary to pay a down payment, payable before the start of the project.

Larger project, "light" cost

The situation becomes more complicated in the case of larger projects that are to last for several months, e.g. on intranet systems, web or mobile applications. The method of payment envisaged at the end of the project may have undesirable consequences for both parties: on the one hand, the client's budget will be heavily charged with a high payment, which (unless funds have been allocated to finance the project) may negatively affect the financial liquidity of his company. The contractor's financial liquidity may also be seriously disturbed, especially if the project is prolonged.

Therefore, subscription payments are an effective solution, especially for the last type of projects. There are several advantages of this solution:
• They allow you to evenly distribute the financial burden over time - monthly payments are "easily digestible", do not generate excessive burden after the end of the project.
• Payments can be made for hours actually worked, and thus for the value supplied.

The contract may provide for several options here that the parties can arrange: Maximum number of hours per month — in the case of fewer hours actually worked, the invoice will of course be correspondingly smaller.
• Hour range — then the contract contains a provision stating that the number of hours will be not less than x hours and not more than y hours.
• A fixed number of hours.

It is important to specify in the contract what will happen when the maximum number of hours is reached or when the contractor approaches it, e.g. 80%. The client can then decide how many hours of work the contractor may additionally devote in a given month, if required by the urgent situation.

There is also an issue to keep in mind - it is a matter of the morale of the team working on a given project. When the parties have agreed on a certain amount and the project time is extended, there may be a situation in which the growing frustration on the part of the contractor will translate into the results of work or the quality of communication. This is an undesirable situation, which is why it is worth counteracting it, e.g. by making monthly payments.

Of course, such a settlement model, however convenient for the contractor, must safeguard the client's interests. A question arises about the relation between the budget, time and the expected results of works. There may be a concern whether, due to flexible accounting, the project will not extend excessively over time. This issue, like the previous one, should be regulated by a well-written agreement specifying the total duration of the project. It is necessary here to specify the scope of work, stages and contractual deadlines. Clarifications that will be carried out before the start of the relevant part of the project will help.

To sum it up

When working with the user experience agency, it is worth settling in a subscription model, because it is a convenient form of billing, which has a positive impact on the client's cashflow and the value delivered. It should be remembered that all rules must be well known to both parties, clearly specified after the workshops and written down in the contract.