Why we cap the hours and tell you at 80%

Fractional finance work is usually sold one of two ways. Hourly billing is honest about effort, but it leaves the owner guessing what next month’s invoice will be. A flat monthly fee fixes the invoice, but it hides a question neither side likes to ask: what happens when the work grows?

We price by revenue band, and every band includes a fixed number of controller hours. This piece explains why, and walks through the rules with a worked month.

The flat-fee problem, from both sides

From the firm’s side, an unlimited flat fee is a slow leak. A client adds a second entity, a new lender wants a covenant pack, the bookkeeper leaves and the reconciliations fall behind. Each request is reasonable. Together they can double the work for the same fee. Firms respond in one of two ways: they quietly do less, or they send a surprise invoice for “out-of-scope work”. Neither is good for the client.

From the owner’s side, an hourly bill has the opposite problem. You never know what a question will cost, so you stop asking questions. The controller you hired to be available becomes someone you ration.

An included-hours cap sits between the two. The fee is fixed, and it buys a known amount of time every month. When the work runs toward the limit, you find out early, in writing, and you decide what happens next.

The rules

These are the six rules, word for word as they appear on our pricing page:

1. Hours are logged per client per task and shown on a monthly usage statement delivered with your financial package.
2. At 80% of included hours we tell you in writing what is consuming the time, and offer to defer it, add an add-on, or bill the overage.
3. Overage is billed at $225/hr in 15-minute increments with the following invoice. Nothing is ever billed without notice first.
4. Two consecutive months over cap moves you to the next band with 15 days notice, or you reduce scope instead.
5. Bands are reviewed annually at renewal against trailing-twelve-month revenue.
6. Unused hours do not roll over. The fee buys availability and outcomes, not a bank of time.

In practice, three of those do most of the work: the usage statement, the notice at 80%, and “nothing is ever billed without notice first”.

What the usage statement shows

Every time anyone on our side works on your books, the time is logged against your account and a task: reconciliation, close and reporting, payables and receivables, meetings, ad-hoc questions. At month end those entries become your usage statement, which arrives with your financial package. You can see it any time in the client portal.

The point is not to itemise your invoice. The fee is the fee. The point is that you can see what the hours are going to, so a conversation about scope starts from facts.

A worked month

Take a construction subcontractor on band B with the WIP schedule add-on. Band B includes 15 hours a month; the add-on adds 4. The cap is 19 hours for a fee of $4,250 a month.

The 80% threshold on 19 hours is 15.2 hours. The demo client in our portal, Harbor & Pine Builders (a fictional company we use to show how the portal works), is a good illustration. In April its time reached 15.5 hours, 81.6% of the cap. That triggered the written notice.

The notice says three things: how many hours have been used, what they went to, and the options. In April the extra time was going to close and reporting. The choices on the table were:

• Defer. Move a piece of non-urgent work, such as a budget review, into the next month.
• Add an add-on. If the extra work is going to recur, add the add-on that covers it and its hours.
• Bill the overage. Keep going this month and pay for the time over the cap.

What one month over the cap costs

Suppose a month runs over anyway. In June the same demo client used 20.5 hours, 107.9% of its 19-hour cap: 1.5 hours over. Overage is billed at $225/hr in 15-minute increments, so 1.5 hours is 6 quarter-hour increments, and the overage line on the next invoice is $337.50.

That figure was on the usage statement, the notice had already gone out, and the client confirmed the overage before it was invoiced. Nobody was surprised by it.

When the cap is simply too small

One month over is usually a busy month. Two in a row is usually a sign the band no longer fits. Rule four covers that: after two consecutive months over the cap, you move to the next band on the notice period set out in the rule, or you and we agree to reduce scope instead. Either way, it is a decision you make with the numbers in front of you.

Why unused hours do not roll over

It is a fair question. The answer is in rule six: the fee buys availability and outcomes, not a bank of time. Your close still happens on its date in a quiet month, and the capacity to answer your questions is reserved whether or not you use it. Rolling hours forward would turn a predictable fee into a balance to be managed, which is the problem the cap exists to solve.

The short version

You pay one number a month. You can see where the hours go. You hear from us at 80%, in writing, with options. And nothing is billed that you have not seen first.