Deposit Fee or Flat Fee?

There are many ways to charge fees to recover the costs of providing services.  The only requirement is that you broadly don’t charge more than the cost of those services.  So, which method should you use?  Like most things in life, there is no absolute right answer.  There are pro’s and con’s to each method.

Flat Fees

Pro’s

-          Flat fees are simple.  The applicant knows what they are going to pay, and your agency knows what to charge.

-          There is no need for staff to track time and invoice for that time.

-          There is no need to monitor individual projects to determine if additional funds are needed and make any refunds at the end of the project.

Con’s

-          Not every project is the same.  A flat fee is based on an average and some projects may take less staff time, and some projects may take a lot more time.

Deposit Fees

Pro’s

-          Every project pays for the time that is actually spent on that project.

Con’s

-          Staff must track their time accurately.  If staff are not accustomed to tracking their time, it is easy for time spent not to be recorded.  This needs to be monitored for each project.

-          Every project needs to be monitored to determine if additional funds are needed and make refunds at the end of the project.

-          The applicant doesn’t know at the start of the process how much it will cost them.

So, what should you do?

Think of the time spent on various projects as a bell curve.  The extreme low and high times are on the ends and the typical time is in the middle.  If most of the projects are close to the middle then the bell curve is steeper, and if the times are more evenly spread out along the spectrum, then the bell curve is flatter.

If it is a steep bell curve, that is telling us that there is a solid average that accounts for the vast majority of projects.  That means that a flat fee would account for the vast majority of projects.  If it is a flatter bell curve, that is telling us that there is not typical average that accounts for the vast majority of projects.  A deposit that tracks and bills for the time actually spent would be fairer for this type of service.

Each service should really be looked at independently with the above bell curves taken into consideration.

There is, of course, a third path that is a combination of these two methods.  Charge a flat fee that involves a typical number of reviews.  Then charge actual costs when it goes beyond that number of reviews.  This puts the applicant on notice at the beginning that they can control the amount of their fee, while also limiting staff tracking their time for only those few projects that go beyond the typical.