Project-based invoicing: managing costs and margins effectively

The challenges of project-based invoicing

Project invoicing differs radically from traditional fixed-price or hourly invoicing. A project often involves several contributors, variable costs that are difficult to anticipate and a duration spread over several weeks or months.

Without rigorous tracking, the risks are real: unbilled budget overruns, project margins that silently melt away, tensions with the client over deliverables or deadlines. An unrecorded hour here, a forgotten expense there, and profitability evaporates.

Agencies, consultants and freelancers managing several projects simultaneously are particularly exposed. Each project becomes a mini-business that must be managed financially. Mastering cost tracking from the start means preserving your margins and your client relationship.

Defining the scope and provisional budget

Every profitable project begins with precise scoping. Clearly define the expected deliverables, the necessary resources (internal hours, subcontracting, expenses) and set a provisional client budget validated in writing.

The detailed quotation is your best ally: it establishes the contractual foundations and limits misunderstandings. The more precise it is, the fewer unpleasant surprises you'll have along the way.

Worked example: Website redesign project

• UI/UX design: 25 hours at 90 CHF/h = 2,250 CHF
• Development: 40 hours at 100 CHF/h = 4,000 CHF
• Expenses (hosting, licences): 300 CHF
• Total invoiced excl. VAT: 6,550 CHF

This provisional budget becomes your reference for managing profitability.

Calculating the actual cost of a project

Knowing the invoiced amount isn't enough. To measure a project's actual profitability, you must calculate its complete cost price.

This actual cost comprises three main categories:

• The time spent by you and your team, valued at an internal hourly rate
• External charges: subcontracting, licences, third-party services
• Direct expenses: travel, printing, project-specific purchases

Every franc spent or hour invested reduces your margin. It's by precisely tracking these three components that you'll know whether your project is profitable or not.

Time spent and internal hourly rate

Time is your main resource. To value it correctly, define an internal hourly rate that covers your fixed charges, operating costs and target margin.

This rate isn't necessarily what you invoice the client: it's your hourly cost price. It allows you to measure how much each hour worked actually "costs" your business.

Example: You set an internal rate of 80 CHF/h. If you spend 50 hours on a project, the internal cost in time is 4,000 CHF.

Track your hours daily with a timesheet or project management tool. The more precise your tracking, the more reliable your margin calculations will be.

To go further on calculating your rate, consult our guide on how to calculate and set your freelance rates.

External charges and subcontracting

Not all projects are carried out internally. As soon as you use a subcontractor, purchase a licence or use a paid external service, these costs must be integrated into your profitability calculation.

Example:

• External graphic designer: 1,200 CHF
• Temporary software licence: 150 CHF
• Cloud hosting service: 80 CHF

Total external charges: 1,430 CHF

These amounts directly reduce your gross margin. Remember to anticipate them in your quotation and document them as you go.

Direct project expenses

Direct expenses are often underestimated, but they accumulate quickly: travel to the client, meals, accommodation, printing, specific equipment purchases.

Example:

• Client travel (train + taxi): 180 CHF
• Printing mockups: 60 CHF
• Photography equipment: 100 CHF

Total direct expenses: 340 CHF

Keep all receipts and note these expenses as you go. Some can be recharged to the client, others are at your expense: clarify this from the quotation stage.

Margin calculation model: complete worked example

Let's take a fictitious project to illustrate the complete calculation of project margin.

Project: Visual identity redesign

Budget invoiced to client (excl. VAT): 8,500 CHF

Actual costs:

• Internal time: 50h × 80 CHF/h = 4,000 CHF
• External graphic designer: 1,200 CHF
• Licences and tools: 150 CHF
• Travel and printing expenses: 240 CHF

Total actual costs: 5,590 CHF

Gross margin: 8,500 − 5,590 = 2,910 CHF

Margin rate: (2,910 / 8,500) × 100 = 34.2%

A margin rate of 34% is acceptable for a service project. Below 20-25%, profitability becomes fragile. Above 40%, you're in a comfortable zone, provided your estimates are realistic.

This type of calculation must be done during and after each project to adjust your practices.

Tracking progress and anticipating overruns

A project well-scoped at the start can drift along the way. Real-time tracking is essential to compare your provisional budget with actual costs incurred.

Set up a simple dashboard: hours spent vs hours budgeted, expenses incurred vs expenses forecast. As soon as a significant variance appears, ask the right questions: poorly defined scope? Client request out of scope? Initial underestimation?

Scope creep is the number one enemy of your margins. The earlier you detect an overrun, the more you can react: renegotiate, invoice an amendment, adjust deliverables.

Use a daily timesheet and centralise your data. Project tracking software coupled with your invoicing saves you valuable time. Discover how to optimise project tracking and invoicing.

Invoicing in several stages: deposits and milestones

Invoicing the entirety of a project upon delivery exposes your cash flow and increases the risk of non-payment. The solution: invoice in several stages according to progress.

A typical structure:

• 30% deposit at start, to secure commitment
• 40% at mid-point, upon validation of a key milestone (mockups, prototype, phase 1)
• 30% upon final delivery

This split improves your cash flow, reduces financial risk and structures the client relationship. Each payment validates a stage, which limits disputes at project end.

Deposit invoicing must comply with Swiss rules regarding VAT and mandatory information. To learn everything on the subject, consult our complete guide on how to invoice deposits.

Managing unforeseen events and additional requests

Projects that unfold exactly as planned are rare. A client requests an additional feature, a deliverable evolves, a technical issue arises.

These change requests (modification requests) must be handled rigorously:

• Validate in writing that the request falls outside the initial scope
• Quote the additional cost (hours, resources, deadlines)
• Issue an amendment or supplementary invoice before starting

Never work "on trust" hoping to regularise later. Transparency protects your margin and preserves the client relationship. A well-informed client accepts a supplement more readily than a client surprised at project end.

Document every exchange and validation. It's your best insurance in case of dispute.

Analysing profitability after the project

Once the project is delivered and invoiced, don't immediately move on to the next one. Take time to conduct a complete profitability review.

Compare your initial forecasts with actual figures:

• Estimated hours vs hours actually spent
• Provisional budget vs actual costs
• Target margin vs final margin

Identify variances and their causes: time underestimation? Poorly defined scope? Unforeseen expenses? Unbilled client requests?

This post-project analysis is a goldmine for improving your future estimates, adjusting your processes and avoiding repeating the same mistakes. Capitalise on each experience to refine your quoting and management method.

A simple Excel spreadsheet or a tab in your management tool is enough to keep track of these reviews.

Best practices for optimising your margins

To maximise your project profitability, here are the essential practices to adopt:

• Scope the perimeter precisely from the start, with a detailed and validated quotation
• Track your hours daily, not at the end of the week or month
• Invoice deposits to secure your cash flow
• Anticipate a safety margin of 10 to 15% in your estimates
• Use project tracking software integrated with your invoicing to centralise data
• Communicate regularly with the client on progress and any adjustments

BePaid centralises invoice creation and payment tracking, allowing you to manage your projects without juggling between several tools. If you're still using Excel, discover why switch to dedicated software.

Project-based invoicing requires a clear view of your actual costs: time spent, external charges, direct expenses. Without this rigorous tracking, it's impossible to calculate your margins precisely or identify projects that weigh on your profitability.

The steps are simple: define a provisional budget, track progress in real time, invoice by milestones to secure your cash flow, and analyse final profitability. Each project then becomes a learning source to refine your future estimates and optimise your margins.

BePaid supports you in this approach with invoicing tools compliant with Swiss standards, automated payment tracking and reminders that save you time. Invoice your deposits in a few clicks and keep control over your projects. Test free of charge up to 10 invoices to see how to simplify your daily management.