Last week, we took a look at how much should photographers charge per hour. The next step is to explore how to actually invoice photography clients.
In this article, I will explain three billing methods commonly used in the photography industry: Time Plus Cost, Lump Sum and Upset Limit – and discuss the advantages and disadvantages of each.
It might not seem important at first, but how you invoice photography clients can have a big impact on the success of a job, and your profit margin.
Know Your Hourly Rate – Time Is Money!
Before we get started, you have to know how much your time is worth.
In the article “How Much Should Photographers Charge Per Hour”, we calculated that good practice for photographers is to bill clients at minimum three to four times what they expect to take home as pay, per hour.
For example, if you would like to earn $60,000 per year (or $30 per hour) take home pay, you would bill your photography clients at minimum $90 to $120 per hour.
If you would like some tips on how to specifically calculate your hourly rate – click here.
A number of readers rightly pointed out that charging clients per hour may not be the best business practice for photographers – but it is still necessary to know what your time is worth before you decide how you will invoice your clients.
Billing for Usage or Products
Another important point to make is that billing for usage (licensing) or products (prints, photobooks, etc.) is not usually included or mixed with billing for time.
Photography invoices are usually split into two components – the cost do the work (take the photos) and the cost to use the work (licensing or products).
In some circumstances, such as with stock photography, the photographer covers the cost to do the work and only charges usage, but in most cases photographers should be paid by clients to both create photography and to use photography.
In this article, we are going to concentrate on how to invoice photography clients for your time – we’ll get into licensing and product sales another time.
Photography Billing Method 1:
Time Plus Cost
Time plus cost billing is exactly what it sounds like – you bill your photography clients for the time it takes you to do a job, plus the direct costs that you incur to complete the work.
Your direct costs do not normally include your cost to do business (your overhead), this is included in your hourly rate (see an example of calculating overhead here).
Direct costs are things like travel (mileage, transit, parking, accommodation), rentals of specialized equipment (lenses, bodies, grip – but not usually equipment that you own) and the costs of subcontractors (models, makeup artists, stylists, retouchers, caterers etc.).
It is important to note that it is common practice for a photographer to also charge markup on top of their direct costs. Markup is charged on top of direct costs to cover the time and effort it takes to arrange and coordinate goods and services that are a direct cost to your business, and to also pay for accounting costs.
For example, if it takes 30 minutes of emailing to book a model, the markup on top of the model’s total cost should cover those 30 minutes.
A markup of 15% to 30% would be typical for most cases, although you should use a markup rate that on average covers your time and effort for all of the direct costs associated with a job. Don’t use different markup rates for different items (unless you really want to confuse your clients).
For example, a markup of %15 on a $1000 catering bill probably covers your time to coordinate the catering and manage the accounting, while a %15 markup on a $100 makeup artist bill probably doesn’t cover your time to book and schedule the makeup artist, along with paying their invoice, filing the invoice and recording the cost in your book keeping ledger.
Advantages of Time Plus Cost Billing For Photographers
Time plus cost billing is useful for open ended projects, or projects that contain a lot of unknowns – jobs where it is difficult to estimate a specific amount of time to complete the work. With time plus cost billing, you don’t have to worry that you under-quoted a job – you will be paid for exactly how much time you spend on it and the costs you incur. Time plus cost billing also has the potential to be very profitable when extra work is required that was not originally anticipated.
Disadvantages of Time Plus Cost Billing For Photographers
Clients may use time plus cost billing as leverage to negotiate discounts. If a client knows exactly how much time you spend and what your costs are, they will often ask photographers to remove certain aspects of the work to save money, which becomes very tedious very quickly.
Time plus cost billing is also often a source of contention after the completion of the work. Clients may ask you to remove the time you spent at lunch, in the bathroom or other tasks that they do not deem part of the job they should be paying for.
Or, if you go over budget, clients will get the impression (rightly or wrongly) that you were wasting time and therefore must not have know what you were doing.
Photography Billing Method 2:
A lump sum is a single price for a defined task, or a group of tasks. A lump sum price can also include a photographer’s direct costs (but direct costs can also be billed separately).
It is important to note that you don’t have to bill an entire job for one big lump sum price. You can itemize your work and bill individual lump sum payments to specific tasks.
Advantages of Lump Sum Billing For Photographers
Lump sum billing is best suited for photography jobs that have a very well defined scope that is well understood by everyone involved. For example, a quote to go and photograph a corporate portrait on location could easily be quoted and billed as a lump sum photography job.
Lump sum billing also gives photographers an incentive to improve their efficiency, as they are paid the same to complete a task in one hour that has four hours budgeted to complete.
Disadvantages of Lump Sum Billing For Photographers
Lump sum billing can be a major problem for photography jobs that are susceptible to scope creep, or jobs that do not have well defined requirements. For example, if you bid a job to photograph a yoga studio and budget four hours in your lump sum price, but when you get there, your client was under the assumption that you were also going to photograph portraits of all their instructors, which takes you another few hours – you just blew your budget and cut your profit margin in half.
In commercial photography, a lot of times the person you book the job with is not the person on location during the shoot, which can also lead to money conflicts if a photographer is billing a lump sum price.
Finally, if a photographer is dealing with circumstances that they did not anticipate in their original lump sum price, such as the wrong weather, no-show subcontractors, gear malfunctions etc., they risk spending an exorbitant amount of time to deliver the promised photography, time that they will not be paid for.
It is important to note that if you do invoice your photography clients using a lump sum price, or a number of lump sum items, and the scope of work changes – you can then charge the extra work at a time plus cost basis.
Extras can be very profitable, especially if you quote a high hourly rate.
However, it is critical to always reach an agreement with your client so that they know extra work will indeed cost them extra money – before you do the work. And never just add extra charges to your invoice and send it to your client without letting them know that you will be billing extra – that is a sure way to never get re-hired.
Photography Billing Method 3:
Upset limit billing is basically billing on a time plus cost basis, up to a predefined lump sum upset limit. There is usually also an upset limit to the cost of expenses that can be billed.
An example of an upset limit billing structure would be to charge $100 per hour for photography on location up to a maximum (the upset limit) of $400, or four hours. If it takes the photographer more than four hours to complete the work, the maximum they can charge is still $400.
Advantages of Upset Limit Billing For Photographers
Some public sector clients may require billing on an upset limit basis. But other than that, I can’t think of any reason why any photographer would agree to invoice on an upset limit basis.
Disadvantages of Upset Limit Billing For Photographers
Billing photography clients on an upset limit basis has all of the disadvantages of both billing at time plus cost and billing at a lump sum.
If a photographer is efficient and a job goes well, they make less money because they complete the work faster than anticipated. If a photographer does a thorough job under difficult circumstances that drastically increase the amount of work originally anticipated, they make less money because they can only charge up to the upset limit.
If a client insists on upset limit billing, they’re mainly interested in cost, not the quality of work.
My Preferred Photography Billing Method
How you bill photography clients depends a lot on the client and the scope of work. Some clients insist on a lump sum quote, while others are OK with time plus cost.
My preferred photography billing method is to bill with an itemized list of lump sum items, a detailed estimate of costs and markup, and usage rates (licensing) also detailed out.
If I do have to invoice by the hour, I make it clear that there is a minimum charge (such as a half day or a full day) that includes a minimum number of hours to make the job worth my time.
However you decide to bill your photography clients, it is important to provide them with a detailed invoice, so they can see exactly where their money is going – but at the same time, you have to generalize enough that they can’t easily ask you to take things out to save money.
Here is a sample invoice using my preferred billing method.
How Do You Bill Photography Clients For Your Time?
Do you use one of the billing methods described here – or do you prefer a different method? How have you run into problems with photography clients because of billing. Have you had clients request wacky billing methods (like bartering)?
Leave a comment below and let us know!