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The Perils of Block Billing

The Perils of Block Billing

Simply put, “block billing” is the practice of billing a large block of time—often several hours at once—and lumping many tasks into one item description. It’s the equivalent of entering multiple items on a single line on a receipt, but only giving one unit price.

This practice is acceptable for turnkey service packages or informal projects where convenience is the primary factor. But for lengthy and complex projects that span more than a few weeks, block billing carries some pretty big negatives:

You Can’t Measure Project Performance

Most project management tools that track hourly costs get their figures from what team members punch in. Those tools also use that same information to track task progress, employee performance, and populate reports—all of which are essential for keeping everyone up to date.

So if a team member lumps all of his tasks into one block and logs that in, he’s essentially misreporting his tasks. Timeline estimates, and resource reports are all going to be inaccurate because the system won’t be able to parse the blocked items out into individual entries.

Inaccurate Accounting

The problem with combining many tasks into one item description is that you (or the client) can never be sure that you tracked everything (unless you keep a separate list, in which case, why are you block billing in the first place?). For all you know, you may be overcharging your client for the time worked, or undercharging and hurting your company’s bottom line.

This inaccurate accounting also makes it difficult to track and predict project costs, and may cause problems managing the project budget.

Poor Customer Service

Put simply, anything that makes life unnecessarily difficult or unfair for the customer is poor customer service. This includes murky billing practices like block billing, as well as the lack of transparency in project tasks and reporting that block billing encourages.

The customer may not mind the practice of block billing—or even notice. But do you want to wait until you encounter a customer who does before you start correcting bad habits? Customers are investing a huge amount of risk and resources in project managers and PMOs, and it is part of our responsibility to be worthy of that trust.

Image credit, Flickr, Soheil Koushan

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