Notes on the money side of firms that sell their team’s time. https://ceed.so/blog 2026-09-11T17:30:00-07:00 © 2026 YSecurity, LLC d/b/a Ceed https://ceed.so/blog/scope-creep-and-the-agreement 2026-09-11T09:30:00-07:00 2026-09-11T17:30:00-07:00 Jon McLachlanhttps://ceed.so/about

A 40-hour retainer that delivered 47, only 32 of them in the statement of work. What scope creep looks like inside a firm that sells time, where the agreement goes after it is signed, whether retainer hours roll over, and how a firm makes the agreement hold at the hour.

<p>Scope creep is work delivered beyond what the agreement priced, without a matching change to the price. A statement of work is the document that was supposed to prevent it: the deliverables, the hours or the fee, the assumptions, the rules for changing any of them. A change order, or change notice, is how the rules get changed. Every firm that sells time has all three. The problem is where they live. The statement of work is a PDF in a folder, the change order is a template nobody has opened since the onboarding, and the rules are in the owner’s memory, which is where the client’s small request lands on a Thursday afternoon.</p><p>She has signed a hundred of these. The fractional CFO whose retainer says twenty hours and whose September said twenty-nine. The security boutique operator whose penetration test grew a second environment halfway through. The agency principal whose “one more revision” is on its fourth round. She wrote a good agreement. It is just not in the room when the hour is worked.</p><h2 id="forty-seven-hours">Forty hours sold. Forty-seven delivered.</h2><p>In May 2026 an agency owner in r/agency described a client whose retainer margin had come in at 18 to 22 percent. The owner’s first instinct was to raise rates. Six months later the firm had lost 30 percent of its clients and the rest were grumbling at every change order. The poster’s diagnosis, which the thread’s 71 comments largely accepted: “below 25 percent retainer margin is rarely a pricing problem, it’s a discovery problem.” Then the example. A retainer of 40 hours a month at €4,500, priced at 75 percent billable, so 30 billable hours expected. Month three, actual delivery 47 hours. “of those 47, only 32 were in the SOW. other 15 were small stuff. quick fixes, small changes, while you’re in there can you also do X. margin collapsed from projected 28 percent to actual 11 percent.” And the line that matters: “raising rates wouldn’t have fixed it. the 15 hours of out of scope work would still happen.”</p><figure class="figure"><img src="https://ceed.so/assets/blog/scope-creep-and-the-agreement/forty-hours-sold-forty-seven-delivered-thirty-two-in-the-statement-of-work.svg" width="640" height="380" alt="Bar chart of one month on a 40-hour retainer at 4,500 euros: 30 billable hours planned, 47 delivered, of which 32 were in the statement of work and 15 were out of scope. Planned margin 28 percent, actual 11 percent. From an agency owner’s account in r/agency, May 2026."><figcaption>One month on a 40-hour retainer, as described by an agency owner in r/agency, 8 May 2026. Fifteen hours of “while you’re in there” took the margin from 28% to 11%, and a rate rise would not have touched them.</figcaption></figure><p>The numbers around that story are not kind. The Project Management Institute reported in 2018 that 52 percent of projects completed in the previous twelve months had experienced scope creep or uncontrolled changes to scope, up from 43 percent five years earlier. McKinsey and the University of Oxford, studying more than 5,400 large IT projects in 2012, found they ran on average 45 percent over budget and 7 percent over time while delivering 56 percent less value than predicted. Closer to firms of ten, Ignition’s 2025 survey of 273 agency leaders found 57% losing $1,000 to $5,000 a month to unbilled work, 30% losing more than $5,000 a month to scope creep, and 78% saying they rarely or only sometimes charge for out-of-scope work. Its 2022 survey of 506 American accounting firms found 88% had delayed or avoided the awkward conversation, and 43% simply absorbed the work.</p><figure class="figure"><img src="https://ceed.so/assets/blog/scope-creep-and-the-agreement/scope-creep-by-the-numbers-pmi-mckinsey-ignition-2012-2025.svg" width="640" height="410" alt="Six tiles: 52 percent of projects had scope creep, up from 43 percent five years earlier (Project Management Institute, 2018), 45 percent over budget for the average large IT project (McKinsey and Oxford, 2012, 5,400 projects), 57 percent of agencies lose 1,000 to 5,000 dollars a month to unbilled work, 30 percent lose more than 5,000 dollars a month to scope creep, 78 percent rarely or only sometimes charge for out-of-scope work (Ignition, May 2025), and 43 percent of accounting firms absorb out-of-scope work (Ignition, August 2022)."><figcaption>Scope creep by the numbers. Sources: Project Management Institute, Pulse of the Profession 2018, via PM Network, July 2018. McKinsey and the BT Centre for Major Programme Management, University of Oxford, October 2012. Ignition, May 2025, 273 agencies, and August 2022, 506 accounting firms.</figcaption></figure><p>Bent Flyvbjerg has spent a career on the largest version of the problem. His database of more than 16,000 projects in 136 countries produced what he calls the iron law of megaprojects, that they run over budget and over time, over and over again, and his 2023 book with Dan Gardner, How Big Things Get Done, is about the handful that did not. The lesson that survives the trip from a rail tunnel to a forty-hour retainer is his first one: think slow, act fast. The time to decide what is in scope is before the work, when a change costs a conversation, not during it, when a change costs fifteen hours nobody billed.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=goZYw5oAAKk">Watch the recording on YouTube.</a></p><figcaption>Bent Flyvbjerg on Megaprojects. EconTalk with Russ Roberts, 65 min, recorded 25 May 2015 and published on YouTube 31 March 2020. The iron law, and why estimates are wrong in one direction. <a href="https://www.youtube.com/watch?v=goZYw5oAAKk">Watch on YouTube</a>.</figcaption></figure><h2 id="the-change-notice">A change notice, ready to go.</h2><p>The r/consulting thread on scope creep, 128 points, is mostly gallows humor, but the practical replies agree on one thing: the answer to a new request is a document, not a discussion. u/waffles2go2: “SOW is my bible, if you want ARCs we can do that, but if it’s not in scope, and we don’t have the hours? Nope, nope, nope.” u/lawtechie on the request that always comes: “My favorite is when the client will demand something that they wanted but cut out of the SOW to meet budget.” And u/Wheres_my_warg on the method: have a change notice ready to go, greet the request warmly, send the notice the same afternoon with thankful language, and “usually, you get paid for it, or they back off and you at the least have a paper trail.”</p><p>The freelancer who lost $2,300 on a landing page learned the same lesson at retail price. Hired for twenty hours at $100, they said yes to a blog section, a new color scheme and one more copy revision, and delivered forty-three hours for $2,000. The top reply, at 102 points, reframed the request as good news with a condition: “It’s a good sign the client is asking you to do more work. That also means that you should communicate up front that those activities are additional work that will be billed accordingly. Without their written approval you won’t be doing the work.” Another put the client’s side plainly: “Most of the time clients expect that it’s going to cost more, but if you don’t say anything, neither are they.”</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=4FwjP2WT4vI&amp;t=284s">Watch the recording on YouTube.</a></p><figcaption>How to Prevent Scope Creep. Mike Clayton, Online PM Courses, 10 min, published 20 May 2020, 89,000 views. Define the scope, show the documentation, negotiate the change. The player starts at the section on negotiating changes, <a href="https://www.youtube.com/watch?v=4FwjP2WT4vI&amp;t=284s">4:44 on YouTube</a>.</figcaption></figure><p>Michael Janda ran a creative agency for years before selling it, and his eight minutes on charging for changed scope is the agency version of the same method: a detailed agreement, a watch on the hours as they happen, and an addendum for every change, signed before the work.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=iG4e9ece2A8&amp;t=326s">Watch the recording on YouTube.</a></p><figcaption>How to Charge More When Clients Change the Scope. Michael Janda, 8 min, published 7 August 2025. The player starts at the section on addendums, <a href="https://www.youtube.com/watch?v=iG4e9ece2A8&amp;t=326s">5:26 on YouTube</a>.</figcaption></figure><p>Google’s Project Management Certificate teaches the same thing to people who will manage scope from inside a company rather than sell it. Stanton, a program manager at YouTube, tells the story of a project whose scope changed at the last minute and what he did about the people, which is the half of scope creep that no document handles.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=tkrE25qP8G8&amp;t=52s">Watch the recording on YouTube.</a></p><figcaption>Ways to Manage Scope Creep. Grow with Google, from the Google Project Management Certificate, 3 min, published 4 August 2021. The player starts at the section on managing stakeholders, <a href="https://www.youtube.com/watch?v=tkrE25qP8G8&amp;t=52s">0:52 on YouTube</a>.</figcaption></figure><p>Two people who have watched a great deal of scope creep said it shorter, on X. Jonathan Stark, in April 2021:</p><figure class="xq"><blockquote><p>The customer is always right about what they want. They are rarely right about what they ask you to do.</p></blockquote><figcaption><b>@jonathanstark</b> · 28 April 2021 · <a href="https://x.com/jonathanstark/status/1387656350264668163">View on X</a></figcaption></figure><p>And the satirical trade paper Adweak, in a headline from August 2018 that 480 agency people recognized: “Clients Can’t Help But Burst Into Laughter After Agency Explains That Latest Request Is ‘Out Of Scope’.”</p><p>The agency podcasts have covered the same ground for years. Drew McLellan’s Build a Better Agency had Ryan Meo on in September 2021 to talk about <a href="https://agencymanagementinstitute.com/podcasts/ryan-meo/">scaling without scope creep</a>, and Meo’s line has stuck: “The only way to scale a service-based business is by learning how to say ‘no’ appropriately.” Jonathan Stark’s Ditching Hourly spent three minutes in December 2020 on <a href="https://podcasts.apple.com/us/podcast/how-to-avoid-scope-creep-on-a-value-priced-project/id1165456720?i=1000501146288">avoiding scope creep on a value-priced project</a>, and the answer was the one in this post: define the scope by outcome and write the change process into the agreement. Parakeeto’s Agency Profit Podcast went deepest, with Tiffany Kemp, a contracts specialist, on the clauses that hold.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=Ai_RSGlPIMQ">Watch the recording on YouTube.</a></p><figcaption>Avoid Scope Creep. Contract Strategies for Agencies, with Tiffany Kemp. Agency Profit Podcast by Parakeeto, 33 min, published 12 May 2025. <a href="https://www.youtube.com/watch?v=Ai_RSGlPIMQ">Watch on YouTube</a>.</figcaption></figure><h2 id="do-the-hours-roll-over">Do the hours roll over?</h2><p>The retainer is where the agreement is vaguest, because it was sold as availability and is delivered in hours. Google’s own autocomplete for “retainer hours” offers “do retainer hours roll over,” and r/freelance asks it regularly. In 2022 a freelancer on a ten-hour retainer asked what happened to the money in months with less than ten hours of work. The 34-point answer: “Typically, the money is yours, as the point of retainer fees is that the client is paying to reserve your time.” Then the only question that ever settles it: “What does your contract say?”</p><p>In January 2026 a developer proposed moving all their occasional clients onto a five-hour monthly retainer with no rollover, and the replies were unanimous that the no-rollover clause was the whole point. “No rollover is key, otherwise you’ve just made your deadline problems worse,” wrote u/unwavering. u/jfranklynw added the sales language and the trap: pitch it “as priority access to your time rather than a prepaid block of hours,” because when you just say hours do not carry over, “some clients hear ‘I’m paying for nothing in quiet months.’” The overflow question got its answer in a 2021 thread from u/boycottSummer: tell the client when they are close to the end of the retained hours, have an hourly rate that starts after that, and take a deposit for the next block.</p><p>MSPs have the same argument under a different name. Block hours or block money, asked r/msp in 2025. u/Beauregard_Jones was unimpressed by both: “Block hours is just another form of break-fix. They’re paying in advance for your hourly work.” u/CK1026 saw the deeper cost: “If you go back to selling time, you’re not selling the outcome anymore… you’ll have to justify any time you spend.” And u/Joe-notabot asked the question the contract has to answer and usually does not: what happens at the end of the month, do the hours or the money roll over. Even the rounding is a clause. In a 2021 thread on billing increments, one freelancer rounded to fifteen minutes in business hours and sixty after hours, and added the sentence that makes it enforceable: “Both of those intervals are in my contract.”</p><p>The quiet month is the retainer’s other failure. In 2019 a designer on a twenty-hour retainer asked r/freelance what to do about a month with less than twenty hours of work, and the top answer, at 69 points, was the definition: “you are paid to be available for those 20 hours, whether you have the work or not… you would effectively have to say no to other work.” The practical reply came from u/crabthief: “during weekly calls, I make sure to inform the client about the amount of hours left.” That sentence is the whole discipline. The client who knows the count every week never asks where the hours went.</p><p>Some firms are giving up on the model. Two days before this post went up, an agency owner in r/agency was ready to drop the retainer model in favor of a ninety-day handover, and the most useful reply was caution: “retainers get messy… I’d test it on one account before you blow up the model that pays rent.” In r/msp this February, an owner whose client refused to use the services it was paying for heard from a peer who reads that as a signal: when clients start doing the work themselves, it is the first sign they will not renew. A retainer the client is not using is a retainer the client is already re-pricing in their head.</p><figure class="figure"><img src="https://ceed.so/assets/blog/scope-creep-and-the-agreement/retainer-block-hours-block-money-what-rolls-over-and-what-happens-at-the-crossing.svg" width="640" height="400" alt="Three ways a services firm sells a month, compared on four lines: what the client buys, what happens to unused hours, who watches the count during the month, and what happens when the count is crossed. A retainer buys availability, unused time does not roll over unless the contract says, nobody watches until the invoice, and the crossing becomes a conversation later. Block hours buy a prepaid number of hours, rollover is decided per contract, the firm keeps the count, and the crossing becomes a top-up invoice. Block money buys a prepaid balance drawn at the agreed rates, the balance carries, the firm watches the balance, and the crossing becomes a top-up. In every case the agreement decides, and in most firms the agreement is a PDF."><figcaption>Three ways to sell a month. The agreement answers all four questions on the day it is signed. The firm’s tools usually answer none of them on the day the hour is worked.</figcaption></figure><p>The pricing people say the retainer is the most misunderstood contract in professional services. Michael Zipursky, whose Consulting Success firm surveys consultants every year, warns that “without clear boundaries, retainer relationships can quickly turn into unlimited consulting for a fixed fee,” and that “hours-based retainers train the client to watch the clock and roll over unused time, which erodes the relationship.” Taylor Crane of Fractional Jobs, who sizes the standard fractional retainer at $10,000 a month for about ten hours a week, names the retainer’s cost in one line: “There’s a natural incentive for scope creep, which means you’re working for less than you expected.” Dallas Alford, a fractional CFO, gives the fix as contract language: “Document your response times and request types you’ll handle. Also specify extra fees for work outside the retainer scope.” Jonathan Stark’s five minutes on pricing a retainer when the scope is not yet known is the clearest version of the pricing question.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=nGguMmaaWBQ">Watch the recording on YouTube.</a></p><figcaption>Pricing Retainer Fees Without Knowing the Scope. Jonathan Stark, 5 min, published 29 November 2019, 11,000 views. Two ways to structure a retainer when the client cannot tell you what they will need. <a href="https://www.youtube.com/watch?v=nGguMmaaWBQ">Watch on YouTube</a>.</figcaption></figure><p>For the document itself, Mike Clayton’s seven minutes on the statement of work covers the forms most firms never use, including the level-of-effort statement of work, which is the honest name for a retainer.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=1picY6dlLOc&amp;t=270s">Watch the recording on YouTube.</a></p><figcaption>What is a Statement of Work (SOW)? And what are the different types? Mike Clayton, Online PM Courses, 7 min, published 5 October 2022, 30,000 views. The player starts at the level-of-effort form, <a href="https://www.youtube.com/watch?v=1picY6dlLOc&amp;t=270s">4:30 on YouTube</a>.</figcaption></figure><h2 id="after-too-long">Correcting it after too long.</h2><p>The hardest version of the problem is the one that has been allowed for years. In June 2025 someone at a growing MSP asked r/msp how to start charging for work that had been free since the founders’ handshake days, without infuriating clients who had done nothing wrong. The best answer, from u/roll_for_initiative_, was a script: “As we grow and get more into shape with formal processes, we’re looking back and seeing that we’re spending a lot of time on X with you guys. That’s technically not included in our bundled service and it’s weighing your numbers down.” u/Kawasakison asked the first question, “What’s in the contract?” u/TBTSyncro offered the quietest fix: “Document time spent on ‘non-billable’ work, and give them regular reports. Let it be their decision.” And one owner preferred a different conversation entirely: “I’d rather have a conversation of having to go up on rates because of inflation or some other reason than trying to explain your going to start charging for something that’s been free.”</p><p>Thomas Ptacek, who co-founded two security consultancies, described the professional standard in a 2024 Hacker News comment: “When your project blows up, the professional thing to do is to resolve the problem with the client before billing another hour over the SOW.” The alternative, he wrote, is optimistic invoicing, and the other alternative is the one Dillon Towey of Franchise Resource described to Ignition in 2023: a $600-a-month fixed fee sized for six hours that regularly took eight, ten or twelve, and for a long time the firm would “just take it in the shorts.” Nicolaas Spijker of Rock put the whole mechanism in one sentence in April 2026: “Budgets do not go over all at once. They go over in small, invisible increments that add up in month three.”</p><p>David C. Baker and Blair Enns gave an episode of 2Bobs to it in September 2022, under a title we will let them explain. Two lines from it belong in every firm’s onboarding. One: “there is almost always some degree of underpricing and/or over-servicing, which is all tied around scope creep.” And the conclusion: “The firms that are populated with adults who are willing to have difficult conversations are the ones making more money.”</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=DZN65GTC5d0">Watch the recording on YouTube.</a></p><figcaption>Prostitutes and Scope Creep. 2Bobs, David C. Baker and Blair Enns, 31 min, published 28 September 2022. Also on <a href="https://2bobs.com/podcast/prostitutes-and-scope-creep">2bobs.com</a>. <a href="https://www.youtube.com/watch?v=DZN65GTC5d0">Watch on YouTube</a>.</figcaption></figure><p>For accounting firms, where the fixed fee meets the client who keeps a shoebox, the Jason On Firms podcast spent five minutes in August 2026 on the one system its host says stops scope creep.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=K6OEk5pR22c">Watch the recording on YouTube.</a></p><figcaption>This One System Stops Scope Creep in Accounting Firms. Jason On Firms Podcast, 5 min, published 12 August 2026. <a href="https://www.youtube.com/watch?v=K6OEk5pR22c">Watch on YouTube</a>.</figcaption></figure><h2 id="prove-the-hours">Prove the hours.</h2><p>When the agreement has not been in the room, the invoice becomes the first place the client meets the hours, and the client counts. In August 2026 an agency owner asked r/agency whether a client had ever asked them to prove the hours behind an invoice, and then ran about twenty-five private conversations on the question. The summary is the best thing written on the subject this year: “The question is common, real disputes are rare. The trigger is usually a bad surprise somewhere else… It is rarely distrust of you specifically. More detail does not settle it. Hours that map to something the client remembers happening do.” One reply’s example became the thread’s shorthand: “reworked the Q3 plan after your Tuesday call” settles a question that “strategy work, 3 hours” never will. The firms that never get asked, the post concluded, are “the ones whose clients see the work as it happens… When the invoice is the first thing the client has seen since kickoff, the counting starts.”</p><p>u/ThatGuytoDeny165 described the agreement doing its job: “we present a plan before we start with a list of things we are doing… that the client signs off on as the scope of work and how we plan to use their hours. Once they sign that it doesn’t matter.” Shawn Jahromi, who runs a management consulting company, told Clockify in December 2025 how he checks a contractor’s invoice: “we check alignment between story, tickets, and calendar, not minutes.” The hours have to map to events. The agreement has to have been visible while the events happened.</p><p>There is a school that says the whole idea is a mistake. Allen Holub, who teaches agile software development, put it this way in December 2022:</p><figure class="xq"><blockquote><p>“Scope creep” is a waterfall concept. If you’re agile, scope changes continuously…</p></blockquote><figcaption><b>@allenholub</b> · 23 December 2022 · 253 likes · <a href="https://x.com/allenholub/status/1606336440899715075">View on X</a></figcaption></figure><p>He is right about software a company builds for itself and half right about work a firm does for a client. Scope can change every week if the price changes with it. What a firm that sells time cannot survive is scope that changes while the fee stays where the agreement left it, and the agreement is the only thing that connects the two.</p><h2 id="the-books">What the books say.</h2><p>The agreement shelf is older than the pricing shelf, and most of it was written by consultants about consulting.</p><ul class="books"><li><a href="https://www.amazon.com/dp/1394177305">Flawless Consulting</a><span>Peter Block, fourth edition, Wiley, 2023. The contracting conversation, which is where scope is actually decided, and how to have it as an equal.</span></li><li><a href="https://www.amazon.com/dp/0684834316">Managing the Professional Service Firm</a><span>David H. Maister, 1993. Still the book on how a firm of experts makes money, including the arithmetic of the engagement.</span></li><li><a href="https://www.amazon.com/dp/1982157100">The Trusted Advisor</a><span>David H. Maister, Charles H. Green and Robert M. Galford, twentieth anniversary edition, 2021. Why the client who trusts you does not count your hours, and how that trust is earned in the first meeting.</span></li><li><a href="https://www.amazon.com/dp/0593239512">How Big Things Get Done</a><span>Bent Flyvbjerg and Dan Gardner, 2023. Think slow, act fast, from the largest database of project outcomes there is.</span></li><li><a href="https://www.amazon.com/dp/0143118757">Getting to Yes</a><span>Roger Fisher, William Ury and Bruce Patton, revised edition, 2011. The change-order conversation as a negotiation about interests rather than positions.</span></li><li><a href="https://www.amazon.com/dp/0321918681">Burn Your Portfolio</a><span>Michael Janda, 2013. The agency owner from the recording above on the parts of the business that school never taught, contracts included.</span></li><li><a href="https://www.amazon.com/dp/1605440604">The Business of Expertise</a><span>David C. Baker, 2017. Positioning, which is what lets a firm say no to the fifteen hours in the first place.</span></li></ul><h2 id="the-agreement-as-rules">The agreement as rules, not a PDF.</h2><p>We ran a security consultancy on those agreements: caps in a contract, rules in cells, the change order a template we meant to use. The month it failed us is in <a href="https://ceed.so/blog/why-we-built-ceed">The invoice told us last. Why we built Ceed.</a> What we built treats the agreement as the rules the hours are checked against, at the hour, rather than as a document read at the invoice.</p><p>A client’s agreement in Ceed carries the retainer, the budget in hours, the rates by role, the rounding, the discounts and any equity taken as payment. Every hour logged against that client is checked against those rules as it is logged. If an hour would push the client over the budget, Ceed holds it for approval: the hour is saved, marked as held, and put in front of the account leader for a yes or a no that day. Approved, it goes on the invoice at the rate in the agreement, with a name and a date on the approval. Declined, it stays on the record and off the invoice. That is the change notice u/Wheres_my_warg keeps ready to go, produced by the hour itself, on the afternoon the request arrived rather than in month three.</p><figure class="card" aria-label="A held hour, the change order at the hour"><div class="card-top"><span><b>Northwind</b> · September</span><span class="chip">Held</span></div><p class="fig"><b>41.0</b> <span>of 40 h</span></p><div class="meter" data-m="97.6"><i></i><i></i></div><p class="entry">Wed 23 Sep · 1 h · “While you’re in there”, mail rules · Tomás A.</p><p class="status">Held for approval. 1 h over the client’s budget. Out of the statement of work.</p><div class="verbs"><span>Approve</span><span>Decline</span></div></figure><figure class="figure shot"><img src="https://ceed.so/assets/blog/scope-creep-and-the-agreement/the-hold-today-one-hour-held-for-approval-ceed-staging.png" width="1280" height="664" alt="Ceed’s Today page for a demo firm: three items in front of you. Needs you: Tomás Aguilar, one hour held on Acme Co. Acme Co has no delivery score this month. Acme Co’s invoice is ready, $16,000 invoiceable, nothing is billed until you approve it. The open item reads: over booked hours, held for approval, Tomás Aguilar on Acme Co, one hour past their booked hours, recorded and not billed, with a field for the reason and Decline and Approve buttons."><figcaption>The hold, in the product. Ceed’s Today page on staging for a demo account, September 2026: the forty-first hour on a forty-hour agreement, recorded, not billed, waiting for a yes or a no with a reason that goes on the record under the approver’s name.</figcaption></figure><p>The fifteen hours of “while you’re in there” do not disappear from the record and do not slide onto the invoice. They stack up as held hours with names on them, which is exactly the document u/TBTSyncro wanted to hand the client: the non-billable work, itemized, so the client can decide. The client hears about the extra before the invoice, not on it, so the counting never starts. The retainer’s rollover rule, whichever one the contract chose, is a rule the budget follows rather than a question for the end of the month. And because the invoice is computed from the agreement, an approved hour past the budget appears on it as its own line, at the rate the agreement set for that role.</p><figure class="figure shot"><img src="https://ceed.so/assets/blog/scope-creep-and-the-agreement/time-tracking-ledger-forty-one-hours-one-held-ceed-staging.png" width="1280" height="778" alt="Ceed’s time tracking page for the same demo account: Tomás has logged 41.0 hours in September. A ledger of seven entries against Acme Co, dated 1 to 10 September, six approved and the last one, an hour of mail routing rules described as not in the statement of work, marked Held."><figcaption>The ledger the client can be shown. Time tracking on Ceed’s staging environment, September 2026: seven entries, forty approved hours, and the one hour of “while you’re in there” marked held in the same list, with what it was for.</figcaption></figure><p>What Ceed does not do is write the agreement or negotiate the change. The rules are yours, and the yes or the no is a person’s. It also does not show the client the hours as they happen. The account leader sees the held hour, decides, and tells the client the way she would have anyway, except on the day it happened. <a href="https://ceed.so/blog/held-not-hidden">Held. Not hidden.</a> shows what the person who logged the hour sees, <a href="https://ceed.so/blog/the-client-sees-the-fee">They see the fee. You see the hours.</a> is about the private hour budget under a flat retainer, and the pricing side of the 11% margin is in <a href="https://ceed.so/blog/the-rate-that-never-moved">The rate was set on day one. The client grew.</a> Where each tool in the field stands on the crossing is on the <a href="https://ceed.so/compare">comparison page</a>, dated.</p><h2 id="the-show">Three conversations about the document.</h2><p>The firm behind Ceed also hosts <a href="https://ysecurity.io/podcast/">The Security Podcast of Silicon Valley</a>, 103 conversations since 2021 with the people who build and run security. Three of them are about the documents a firm signs and lives by.</p><ul class="show"><li><span class="ep">51</span><div><a href="https://ysecurity.io/podcast/51-tony-thai-founder-and-ceo-of-hyperdraft-revolutionizing-legal/">Tony Thai, founder and CEO of HyperDraft</a><span>August 2024 · From software engineering to law firm work to automating the documents themselves, including the ones that define scope.</span></div></li><li><span class="ep">37</span><div><a href="https://ysecurity.io/podcast/37-founders-guide-to-compliance-the-introduction-soc2-iso-nist-pci/">Founders’ guide to compliance, with Jon McLachlan and Sasha Sinkevich</a><span>February 2024 · SOC 2, ISO, NIST and PCI for founders, which is where half of a security firm’s scope comes from.</span></div></li><li><span class="ep">14</span><div><a href="https://ysecurity.io/podcast/14-biff-clark-cybersecurity-specialist-and-owner-of-coefficient-of/">Biff Clark, owner of Coefficient Technologies</a><span>March 2022 · Fifteen years of running a small security consultancy, agreements included.</span></div></li></ul><p>We are selecting the firms we start with: <a href="https://ceed.so/industries/fractional-cfo">fractional CFO</a>, <a href="https://ceed.so/industries/security">CISO</a>, <a href="https://ceed.so/industries/fractional-executives">CMO and CTO practices</a>, <a href="https://ceed.so/industries/security">security</a> and <a href="https://ceed.so/industries/software">engineering boutiques</a>, <a href="https://ceed.so/industries/consulting">consultancies</a> and <a href="https://ceed.so/industries/agencies">agencies</a> up to fifty people. If your agreements say forty and your months say forty-seven, write to us and say how Ceed would help. A person replies.</p><h2 id="questions">Questions.</h2><div class="faq"><details name="q" open><summary>What is scope creep?</summary><p>Work delivered beyond what the agreement priced, without a matching change to the price. It arrives as small requests, quick fixes and “while you’re in there,” and the Project Management Institute found in 2018 that 52 percent of projects had experienced it in the previous year. The remedy in every practitioner thread is the same: a written scope, a change notice for anything outside it, and a watch on the hours while they happen rather than at the invoice.</p></details><details name="q"><summary>Do unused retainer hours roll over?</summary><p>Only if the contract says so. The usual position, and the one practitioners recommend, is that a retainer buys availability and unused hours do not carry over, because rollover turns a quiet month into a double-sized busy one. Whatever the contract says, the firm needs a running count of the hours against the retainer during the month, and a rule for what happens when the count is crossed. In Ceed the budget follows the agreement’s rule and the hour that crosses it is held for approval.</p></details><details name="q"><summary>What is the difference between block hours and a retainer?</summary><p>A retainer is a recurring fee for availability and a defined scope, usually sized in hours but sold as access. Block hours are a prepaid quantity of hours drawn down as work is done, and block money is a prepaid balance drawn down at the agreed rates. Block hours and block money are hourly billing paid in advance, which is why an MSP owner in r/msp calls them another form of break-fix. All three need the same thing from the firm’s tools: a count kept during the month and a decision at the moment the count is crossed.</p></details><details name="q"><summary>What is a change order?</summary><p>A written amendment to the statement of work that adds, removes or changes deliverables, hours or price, signed by both sides before the changed work is done. Practitioners keep a template ready so that the answer to an out-of-scope request is the document itself, sent the same afternoon. In Ceed the equivalent decision happens at the hour: the hour that would cross the agreement is held, and the account leader approves or declines it that day with a reason on the record.</p></details></div> https://ceed.so/blog/the-rate-that-never-moved 2026-09-03T09:10:00-07:00 2026-09-11T17:30:00-07:00 Jon McLachlanhttps://ceed.so/about

An $1,800 client that doubled. A $1,000 retainer while the client grew tenfold. A contract that said $40 while the invoices said $45 for eighteen months. Undercharging is a number nobody re-read. What the threads say, what the pricing people say, and how a firm sees margin per client before the invoice does.

<p>Undercharging is a rate that no longer covers the cost of delivering the work at the margin the firm needs. The definition is dull and the mechanism is not. A rate is set once, on the day the client signs, when the firm is smallest and the client is most in doubt. The client then grows, or the work does, or the firm’s own costs do, and the rate stays where it was because it lives in a document nobody re-opens. The effective rate, the fee divided by the hours it now takes, falls a little every month, and nothing in the firm is built to notice.</p><p>She has one of these clients. Probably three. The fractional CFO whose first client is now four times the company it was. The security boutique whose oldest retainer predates half the team. The agency principal who knows, without opening the numbers, which logo on the website is costing her money. She is not bad at pricing. She priced correctly, once, and then the world moved.</p><h2 id="the-client-that-doubled">The client that doubled.</h2><p>In June 2026 an MSP owner posted in r/msp that he had lost a client of ten years without a single complaint. The client paid $1,800 a month, had grown from twenty users to forty-five, and had woken the owner at four in the morning more than once. The thread drew 140 points and 197 comments, and the top reply, with 268 points, did not offer condolences. “You were doing all of that for an $1800/month client who has 45 users? You are way better off without them. You should be billing at a minimum 4-5x that per head.”</p><p>The same month, in r/agency, an owner asked whether a $1,000 monthly retainer was too low. The clients they had signed at that rate had grown from $10,000 months to $80,000 and $100,000 months. “You are severely undercharging,” said the first reply, and another, from a business owner who had done exactly this, advised raising the price on new clients first. Nobody had changed. The client had, and the rate had been set for the client that no longer existed.</p><p>When a long-term client told an MSP owner in February 2026 that they could no longer afford the contracted price, the detail that mattered was how it surfaced: the owner had “finally decided to look at one of his invoices (his admin usually does and just pays it).” The most useful reply was not about the client at all. “Look at the gross margin on the account,” wrote u/Revolutionary-Bee353. “If it’s &gt; 60% you should have some room to negotiate.” Everything in that thread turned on a number the owner could not see: what that client, specifically, was worth to the firm after the hours it consumed.</p><p>The correction goes wrong when it arrives as a surprise. In a May 2026 r/agency thread about losing retainer clients without warning, one owner described losing a business-to-business client after raising the monthly retainer 60% at the six-month mark. The client’s objection was the timing more than the number, that “you cannot raise 60% price after 6 month,” and the owner’s reason was the one in every thread here: “we weren’t saving the enough margin on our side.” The rate was wrong on day one and the client was told on day 180. Another reply in the same thread gave the client’s side in a sentence: “clients dont care how many hours you worked they care if their number moved.”</p><p>A bookkeeper’s pricing guide in r/Bookkeeping, 114 points in April 2025, gets at why the first number is so often wrong: “It’s not enough to know the number of accounts and number of transactions. You need to know the COMPOSITION of those transactions.” The rate is set on a count. The work is set by a composition. The two drift apart as the client changes, and nothing in the firm is built to notice.</p><figure class="figure"><img src="https://ceed.so/assets/blog/the-rate-that-never-moved/effective-hourly-rate-falls-as-hours-rise-on-a-fixed-15000-retainer.svg" width="640" height="380" alt="Chart of a $15,000 monthly retainer as the hours it takes rise from 160 to 200 to 240. The effective hourly rate falls from $93.75 to $75.00 to $62.50, crossing the firm’s $75 loaded cost per hour. At 240 hours the month loses $3,000. Worked example from Arron Bennett, Bennett Financials, June 2026."><figcaption>The fee stands still while the hours rise. Arron Bennett’s worked example: a $15,000 retainer that takes 240 hours at a $75 loaded cost is an $18,000 month sold for $15,000. Bennett Financials, 15 June 2026.</figcaption></figure><p>Arron Bennett, who does the books for agencies, described the mechanism in June 2026: “The extra hours get logged under the client, the retainer fee stays fixed, and the effective hourly rate on the account drops month by month.” Rayhaan Moughal of Sidekick Accounting put numbers on the slope in July 2026: ten unbilled hours a month at £50 takes a retainer’s margin from 60% to 52%, twenty takes it to 43%. Promethean Research’s 2026 survey of 119 digital agencies found after-tax margins of 19% for firms under ten people and 9% for firms of twenty-five to forty-nine, and that only 59% tracked margin by project at all. The firm gets bigger, the rate stays put, and the margin goes where nobody is looking.</p><h2 id="the-40-percent-raise">The 40 percent raise.</h2><p>A post in r/smallbusiness this year, with 1,235 points and 217 comments, is from an owner who ran a small marketing firm for three years on rates set when the owner had no experience and needed any client at all. In October the owner did the arithmetic: after the hours, software, taxes and three years without a raise, the business was paying its owner about $14 an hour. The owner emailed all twenty-two clients that rates would rise 40% in January, with three months’ notice. Seven left at once, most of them the ones who haggled over everything. Two negotiated a smaller increase. Thirteen stayed. Monthly revenue rose about 12% and the workload fell by roughly a third, because the clients who left had been the most demanding and the least profitable. “I kept it really simple,” the owner wrote of the email. “No long justification or apology.” The scariest part, the post said, was not the increase but “the 3 months of waiting between sending the email and the new rates kicking in.”</p><figure class="figure"><img src="https://ceed.so/assets/blog/the-rate-that-never-moved/raise-rates-40-percent-lose-7-of-22-clients-revenue-up-12-percent-workload-down-35-percent.svg" width="640" height="340" alt="Before and after a 40 percent rate increase at a small marketing firm: 22 clients became 15 (seven left, two negotiated a smaller rise, thirteen stayed), monthly revenue rose about 12 percent, and workload fell about 35 percent. Reported in r/smallbusiness, February 2026, 1,235 points."><figcaption>One firm’s 40 percent raise, as reported by its owner in r/smallbusiness, 23 February 2026, 1,235 points and 217 comments. Fewer clients, more revenue, a third less work.</figcaption></figure><p>The thread’s 217 comments were mostly people who had done the same and wished they had done it sooner. The top one, at 627 points: “If you’re selling $2 beers, expect a $2 beer crowd.” Another, at 298: “the clients who leave are usually the ones you’re better off without anyway.” McKinsey measured why the arithmetic works so well back in 2003, in a piece that pricing consultants have quoted ever since: for the average company, “a price rise of 1 percent, if volumes remained stable, would generate an 8 percent increase in operating profits,” an effect the authors found nearly 50 percent greater than a 1 percent cut in variable costs and more than three times the effect of 1 percent more volume. A firm that sells time has almost no variable cost to cut. Price is the lever it has.</p><p>Alex Hormozi, who writes about pricing for owners of small companies, compressed the finding into one line in June 2025, and 4,100 people agreed.</p><figure class="xq"><blockquote><p>Until customers tell you your prices are too high, they’re probably too low.</p></blockquote><figcaption><b>@AlexHormozi</b> · 4 June 2025 · 4,114 likes · <a href="https://x.com/AlexHormozi/status/1930268623098261787">View on X</a></figcaption></figure><p>The market moved without asking, too. In February 2022 CNBC reported a survey in which 47% of small businesses said they would have to raise prices because of inflation. Whatever those firms did next, a firm whose rate card still says what it said in 2021 has cut its price in real terms every year since, without deciding to.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=PHh_spidewQ">Watch the recording on YouTube.</a></p><figcaption>47% of small businesses say they will have to raise prices due to inflation. CNBC Television, 31 seconds, published 14 February 2022. <a href="https://www.youtube.com/watch?v=PHh_spidewQ">Watch on YouTube</a>.</figcaption></figure><figure class="vid"><p><a href="https://www.youtube.com/watch?v=gIw-PBNXWgE&amp;t=52s">Watch the recording on YouTube.</a></p><figcaption>How Do I Raise Prices Without Losing Clients? The Futur, Chris Do and Joel Pilger coaching an illustrator through her first raise, 13 min, published 26 August 2018, 416,000 views. The player starts at the section on existing customers, <a href="https://www.youtube.com/watch?v=gIw-PBNXWgE&amp;t=52s">0:52 on YouTube</a>.</figcaption></figure><p>Blair Enns, whose Win Without Pitching Manifesto is the pricing text many agency owners keep on a shelf, is blunter: what you do does not matter to the market if you cannot command a premium for it. Eight minutes of him on the point are below. Alex Hormozi’s <a href="https://www.youtube.com/watch?v=Gy-RmpRif-I">walk-through of the price-rise letter he actually sent to customers</a> is the practical companion.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=sfyHSbfUCrQ">Watch the recording on YouTube.</a></p><figcaption>Why You Must Raise Your Price. Blair Enns with Chris Do, from the Win Without Pitching Manifesto readings on The Futur, 8 min, published 1 April 2021, 39,000 views. <a href="https://www.youtube.com/watch?v=sfyHSbfUCrQ">Watch on YouTube</a>.</figcaption></figure><p>And when the client says the price is too high, Chris Do’s role-play of the conversation has been watched two million times for a reason.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=RFk8ZmIDrFM">Watch the recording on YouTube.</a></p><figcaption>When Client Says Your Price Is Too High. Chris Do, The Futur, 13 min, published 26 December 2019, two million views. <a href="https://www.youtube.com/watch?v=RFk8ZmIDrFM">Watch on YouTube</a>.</figcaption></figure><h2 id="the-invoice-nobody-re-read">The invoice nobody re-read.</h2><p>Sometimes the number that drifts is not the rate but the record of it. A technical writer in r/freelance discovered, on going to raise their rate, that the contract said $40 an hour and the invoices had said $45 for at least eighteen months. The writer had charged $40 for the first few months, then changed it, then “just used the last invoice as the template going forwards. Nobody noticed.” The 266-point thread split on whether to refund the difference, and the most useful comment asked the question that decides it: “Do your invoices show the hourly rate x the hours or are you just sending them a bill for the full amount?”</p><p>The mirror image is in r/msp, where an owner found the firm had been under-billing a client for a long time and asked whether to recoup it. The 52-point answer: “correct the billing for future invoices but consider the past mistakes my mistakes and let it go.” Another owner had eaten eighteen months of it: “we under billed you by x thousand but we will not be billing this, here’s your new msa.” Both firms found the gap the same way, by reading an invoice against a contract, months late, because the invoice was copied from the last one rather than computed from the agreement.</p><p>These are not pricing failures. They are record failures. The rate lived in a PDF, the hours lived in a timesheet, the invoice lived in a template, and the three met once a month in a person who was tired. The month our own spreadsheet did that to us is in <a href="https://ceed.so/blog/why-we-built-ceed">The invoice told us last. Why we built Ceed.</a></p><h2 id="eating-hours">Eating hours is a price cut made by the wrong person.</h2><p>The quietest form of undercharging is the hour that never reaches the invoice. In August 2026 an accountant in r/Accounting asked how common it was to eat hours and said he had eaten close to 200 that year after being “explicitly asked not to bill time.” The top reply, at 236 points, refused: “I bill what I work. Partners have a problem with that? Quit selling an audit that takes 2.5 months as a 6 week audit for 30k.” The reply that explained the damage came from u/Background_Map6056: “eating hours to avoid going over budget is poisoning the data you are trying to collect.” Every eaten hour tells next year’s budget that the work takes less than it does, so next year’s price is set on a lie.</p><p>The people doing the eating know exactly what is happening. In June 2025 an associate in r/Accounting wrote that they had followed the firm’s instruction not to eat hours, recorded thirty extra hours honestly on an engagement that took longer than it was sold for, and were written up for “lack of efficiency and time management.” The thread reached 1,271 points and 225 comments. The top reply, at 1,081 points: “everyone eats hours but tells you not to… timesheets are definitely more art than science.” Another, at 318: “You get yelled at for eating hours, then you get yelled at for billing your actual time. It’s a lose lose.” And the translation, from u/Curveoflife: when they say do not eat your hours, “They mean dont ever mention that you are eating your hours.” A budget maintained that way is not a budget. It is a story the firm tells itself about how long the work takes, and the price is set on the story.</p><p>David C. Baker’s measurement of the same thing across creative firms, 42% of hours captured against the 60% a well run firm captures, is in <a href="https://ceed.so/blog/why-we-built-ceed#missed-not-lost">our first post</a>. Ignition’s 2022 survey of 506 American accounting firms found 43% absorbing out-of-scope work rather than raising it with the client. An eaten hour is a discount, decided by the most junior person in the room, recorded nowhere, and repeated next year because the record says the work was cheap.</p><h2 id="what-the-pricing-people-say">What the pricing people say.</h2><p>The pricing literature for firms like these is large and mostly agrees with itself. Ron Baker has argued for thirty years that professional firms should price the value and abandon the timesheet, and his hour with Chris Do is the best introduction to the argument there is.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=TB54_6bEP-A">Watch the recording on YouTube.</a></p><figcaption>What Makes People Buy? Price &amp; Value Masterclass with Ron Baker. The Futur, 58 min, published 22 September 2022, 442,000 views. Baker on why the hour is the wrong unit and what to price instead. <a href="https://www.youtube.com/watch?v=TB54_6bEP-A">Watch on YouTube</a>.</figcaption></figure><p>Harvard Business Review’s IdeaCast had Rafi Mohammed, founder of the consulting firm Culture of Profit, on the question of when to raise prices and how to be transparent with customers when you do. The player below starts at his section on knowing when to raise them.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=aR-xxF4-vMU&amp;t=1022s">Watch the recording on YouTube.</a></p><figcaption>Pricing Strategies for Uncertain Times. HBR IdeaCast, Harvard Business Review, with Rafi Mohammed, 21 min, first broadcast in July 2020 and published on YouTube 22 February 2023. The player starts at the section on knowing when to raise your prices, <a href="https://www.youtube.com/watch?v=aR-xxF4-vMU&amp;t=1022s">17:02 on YouTube</a>.</figcaption></figure><p>Boston Consulting Group’s pricing practice frames the same move for larger companies as leaving the cost game for the value game, and Rohan Kadakia’s four minutes on it below are the clearest short statement of what changes when a firm stops pricing from its costs.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=XUS4UyvTNt8">Watch the recording on YouTube.</a></p><figcaption>Moving from the Cost Game to the Value Game. Boston Consulting Group, Rohan Kadakia on the Strategic Pricing Hexagon, 4 min, published 20 May 2024. <a href="https://www.youtube.com/watch?v=XUS4UyvTNt8">Watch on YouTube</a>.</figcaption></figure><p>The market has heard all of this and mostly still sells hours. Consulting Success surveyed nearly a thousand consultants for its 2026 fees study: 30% price by project, 29% by the hour, 16% by monthly retainer, 15% by value, and 10% by the day. Seventy-nine percent said they were actively looking to raise their fees, and 39% had never tried value pricing because they did not know how. The Fractional Work Report 2026, from 1,733 fractional executives, found 46% billing primarily on a monthly retainer, and an average rate of $223 an hour. Even the retainers are sized in hours. Blair Enns declared in March 2026 that “labor-based pricing is dead,” and in the same conversation David C. Baker allowed that “selling your time by the hour, I don’t think it’s a sin necessarily. It’s just more the whole system around it that doesn’t allow for you to capture some of the value.” Jonathan Stark, who agrees with Enns, warned in August 2026 that for consultants who switch to fixed fees “the hours almost always sneak back in.”</p><figure class="figure"><img src="https://ceed.so/assets/blog/the-rate-that-never-moved/how-consultants-price-project-hourly-retainer-value-daily-consulting-success-2026.svg" width="640" height="400" alt="Horizontal bars showing how nearly a thousand consultants price: project-based 30 percent, hourly 29 percent, monthly retainer 16 percent, value-based 15 percent, daily rate 10 percent. Below, 79 percent are actively looking to raise their fees and 39 percent have never tried value pricing because they do not know how. Consulting Success, 2026."><figcaption>Five ways to price. Consulting Success, Consulting Fees Study, nearly 1,000 consultants, published 1 May 2026 and updated 7 September 2026. Hourly, daily and the hour-sized retainer between them are more than half.</figcaption></figure><p>David C. Baker and Blair Enns have argued about all of this on their podcast, 2Bobs, for the better part of a decade. Their May 2026 episode on pricing resentment is the one for the owner with a client that outgrew the rate. Resentment, they point out, only arises in existing client relationships, because it is the gap between the value you now deliver and the price you agreed when you did not yet know. One line from the episode, about a deal that had gone wrong for the speaker, is this whole post in one sentence: “I should have structured the deal so that my pay was highest when my value was.”</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=991j7GkAhWc">Watch the recording on YouTube.</a></p><figcaption>Pricing Resentment. 2Bobs, David C. Baker and Blair Enns, 20 min, published 20 May 2026. Also on <a href="https://2bobs.com/podcast/pricing-resentment">2bobs.com</a>. <a href="https://www.youtube.com/watch?v=991j7GkAhWc">Watch on YouTube</a>.</figcaption></figure><p>Their February 2025 episode asks <a href="https://2bobs.com/podcast/who-should-set-prices">who in a firm should set prices</a> at all, and answers against the org chart: “Pricing responsibility should not be tied to title or seniority. It really should be tied to aptitude.” Which is a polite way of saying that the founder who set the day-one rate is not automatically the right person to reset it.</p><p>Jonathan Stark’s position fits in a post on X, and has since 2018.</p><figure class="xq"><blockquote><p>Q: What’s your rate?</p><p>A: I don’t have one.</p><p>Q: So how do you price?</p><p>A: I give you a price.</p></blockquote><figcaption><b>@jonathanstark</b> · 11 October 2018 · <a href="https://x.com/jonathanstark/status/1050603472238796800">View on X</a></figcaption></figure><p>Six months later he added the reason: “Your time is the most valuable thing you have. Stop selling it like it’s sack of onions.” His eleven minutes on the hourly trap are the argument in full. Harvard Business Review had Rafi Mohammed back on the IdeaCast in May 2025 to <a href="https://hbr.org/podcast/2025/05/rethink-your-pricing-strategies-amid-economic-uncertainty">rethink pricing amid economic uncertainty</a>, the follow-up to the episode above, which was first broadcast in July 2020.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=9aHZDLMW4U4">Watch the recording on YouTube.</a></p><figcaption>The Hourly Trap. Jonathan Stark, 11 min, published 10 February 2022. Why the hour caps the income of everyone who sells it. <a href="https://www.youtube.com/watch?v=9aHZDLMW4U4">Watch on YouTube</a>.</figcaption></figure><p>We take the last two seriously. However a firm prices, the hours are its cost. A fee with no hour count under it is a rate nobody can check, and a rate nobody checks is the one in every thread above. The question is not whether to count the hours but who sees the count, and when.</p><h2 id="the-books">What the books say.</h2><p>The shelf for this post is the pricing shelf. Most of these authors appear above, and they disagree with each other less than their titles suggest.</p><ul class="books"><li><a href="https://www.amazon.com/dp/0470584610">Implementing Value Pricing</a><span>Ronald J. Baker, Wiley, 2010. The book-length case against the timesheet, from the accountant who has made it longest.</span></li><li><a href="https://www.amazon.com/dp/1999523504">The Win Without Pitching Manifesto</a><span>Blair Enns, 2010. Twelve proclamations, one of which is We Will Charge More. His fuller pricing text, Pricing Creativity, is sold from his own site, and his newest, <a href="https://www.amazon.com/dp/B0DCCZL2D7">The Four Conversations</a>, is about the four a firm has with a client, the one about the price included.</span></li><li><a href="https://www.amazon.com/dp/B0D91GR548">Hourly Billing Is Nuts</a><span>Jonathan Stark. Short and blunt, and the source of the argument in the two recordings above.</span></li><li><a href="https://www.amazon.com/dp/1119776929">Value-Based Fees</a><span>Alan Weiss, third edition, Wiley, 2021. The consultant’s version, with the scripts for the conversation.</span></li><li><a href="https://www.amazon.com/dp/3319203991">Confessions of the Pricing Man</a><span>Hermann Simon, 2015. The founder of the pricing consultancy Simon-Kucher on how price actually works, including why one percent matters so much.</span></li><li><a href="https://www.amazon.com/dp/0061684325">The 1% Windfall</a><span>Rafi Mohammed, 2010. From the IdeaCast guest above, on the same one percent.</span></li><li><a href="https://www.amazon.com/dp/1119240867">Monetizing Innovation</a><span>Madhavan Ramanujam and Georg Tacke, Wiley, 2016. Price before you build, which for a firm means price before you staff.</span></li><li><a href="https://www.amazon.com/dp/1794390146">The Psychology of Graphic Design Pricing</a><span>Michael Janda, 2019. The agency owner from the recordings in our other posts, on the numbers a creative firm quotes and why.</span></li><li><a href="https://www.amazon.com/dp/1605440604">The Business of Expertise</a><span>David C. Baker, 2017. Why positioning comes before price, from the other half of 2Bobs.</span></li></ul><h2 id="margin-per-client">Margin per client, this morning.</h2><p>We ran a security consultancy for years with the rate in a contract, the hours in a spreadsheet and the margin in nobody’s head, and we built Ceed so that the three numbers live in one place and meet every day instead of once a month.</p><p>The rate lives in the agreement, by role. When the hours are logged against a client, Ceed computes what that client cost and what it earned, and margin per client is visible this morning to the owners and to whoever they name. The account with the 60% margin and the account with the 11% margin are both on one screen, and the conversation about raising the rate starts with the hours in hand rather than with a feeling.</p><figure class="figure shot"><img src="https://ceed.so/assets/blog/the-rate-that-never-moved/agreement-terms-cash-cap-escalator-tier-rate-ceed-staging.png" width="1280" height="331" alt="Ceed’s terms card for a demo account: On-demand security team, contract version one since September 2026, with a cash cap of $16,000 a month, discount none, equity none, escalator per year none, and a Tier 1 rate of $400 an hour, plus buttons to edit the terms, attach paperwork and add a new version."><figcaption>Where the rate lives. The agreement on Ceed’s staging environment for a demo account, September 2026: the monthly cap, the discount, any equity taken as payment, the yearly escalator and the rate by tier, versioned, with the signed paperwork attached to the version. There is a field for the escalator so the rate that never moved has somewhere to move from, and a rate that changes leaves a version behind it.</figcaption></figure><figure class="card" aria-label="Margin per client, the morning after the close"><div class="card-top"><span><b>Margin by client</b> · August 2026</span><span class="chip chip-mid">Closed</span></div><div class="rows"><div class="row"><span>Acme Co · 40 h retainer · 38.5 h logged</span><span>61%</span></div><div class="row"><span>Beacon Ltd · 32 h retainer · 31.0 h logged</span><span>54%</span></div><div class="row"><span>Cobalt Inc · $1,800 flat · 26.5 h logged</span><span>11%</span></div><div class="row row-total"><span>Firm</span><span>47%</span></div></div><p class="card-foot">Computed from the hours and the agreements. The account that pays $1,800 for 26.5 hours is the one to talk to.</p></figure><figure class="figure shot"><img src="https://ceed.so/assets/blog/the-rate-that-never-moved/economics-invoiced-people-cost-cash-margin-ceed-staging.png" width="1280" height="434" alt="Ceed’s Economics page for a demo firm in September 2026. The headline reads: September, invoiced $0, people cost $6,000, cash profit minus $6,000. A note says cash is the only profit and that one client is 100% of the month’s book. Below, the projected month end: invoiced $16,000, people cost $6,000, opex $0, cash margin 62.5%, booked and never extrapolated."><figcaption>The same numbers in the product. Ceed’s Economics view on staging for a demo firm with one client, September 2026: what has been invoiced, what the people cost, and the cash margin the month is heading for, computed from the booked hours and never extrapolated. Cash is the only profit.</figcaption></figure><p>When the hours cross a client’s budget, Ceed holds the hour for approval rather than letting it slide onto the invoice or into the eaten pile. The person who logged it knows at once, the account leader decides that day, and the client hears about the extra before the invoice. That is where the rate conversation actually happens: not in a yearly letter, but in the month the client outgrows the agreement, with the specific hours that prove it. <a href="https://ceed.so/blog/held-not-hidden">Held. Not hidden.</a> shows the hold from the inside, and <a href="https://ceed.so/blog/the-client-sees-the-fee">They see the fee. You see the hours.</a> is about the private hour budget under a flat retainer.</p><p>The invoice is computed from the agreement, so the $40 that became $45 by copy-and-paste cannot happen: the rate on the invoice is the rate in the agreement, or it is an approved change with a name and a date on it. The same hours produce the contractor’s payout statement, so a rate change for the client and a rate change for the person doing the work are one record, not two spreadsheets. And when the month closes, the margin is frozen with it, so the 11% is a fact about August rather than an argument in October. What Ceed does not do is set your prices. Enns, Baker, Stark, Mohammed and Kadakia are better at that than software will be. It shows you, every morning, which clients the prices no longer fit.</p><h2 id="the-show">Three conversations with people who set a price.</h2><p>The firm behind Ceed also hosts <a href="https://ysecurity.io/podcast/">The Security Podcast of Silicon Valley</a>, 102 conversations since 2021 with the people who build and run security. Three of them are with people who have had to put a number on their own work.</p><ul class="show"><li><span class="ep">7</span><div><a href="https://ysecurity.io/podcast/7-michael-brooks-vciso-and-director-of-cyber-risk-services-at/">Michael Brooks, vCISO and Director of Cyber Risk Services at Trava</a><span>August 2021 · The fractional CISO model from someone who runs it, and what a fraction of a CISO is worth.</span></div></li><li><span class="ep">28</span><div><a href="https://ysecurity.io/podcast/28-david-carpe-how-to-network-and-the-myth-of-the-great-silent/">David Carpe on how to network</a><span>May 2023 · Where the clients come from before there is a price to set. Every practice in the threads above was built on referrals.</span></div></li><li><span class="ep">102</span><div><a href="https://ysecurity.io/podcast/102-ciso-does-not-spell-ceo/">Chris Kirschke, founder of Kyberis AI</a><span>August 2026 · Twenty-seven years in security operations, then a venture studio asked him to run a company, revenue included.</span></div></li></ul><p>We are selecting the firms we start with: <a href="https://ceed.so/industries/fractional-cfo">fractional CFO</a>, <a href="https://ceed.so/industries/security">CISO</a>, <a href="https://ceed.so/industries/fractional-executives">CMO and CTO practices</a>, <a href="https://ceed.so/industries/security">security</a> and <a href="https://ceed.so/industries/software">engineering boutiques</a>, <a href="https://ceed.so/industries/consulting">consultancies</a> and <a href="https://ceed.so/industries/agencies">agencies</a> up to fifty people. If you have a client whose rate was set for a company that no longer exists, write to us and say how Ceed would help. A person replies.</p><h2 id="questions">Questions.</h2><div class="faq"><details name="q" open><summary>How do I know if I am undercharging?</summary><p>Divide each client’s monthly fee by the hours that client actually consumed, including the unbilled ones, and compare the result with your loaded cost per hour and the rate you would quote a new client today. If the effective rate is below either, the client has outgrown the agreement. Most firms cannot do this arithmetic because the hours are not recorded per client, which is why the discovery usually happens at the invoice or when the client leaves.</p></details><details name="q"><summary>How do I raise rates with existing clients?</summary><p>The owners who have done it agree on the shape: raise the price on new clients first, give existing clients written notice of two to three months, keep the letter short with no apology, and expect the clients who haggled most to leave. The owner who raised rates 40% in r/smallbusiness lost seven of twenty-two clients and saw revenue rise 12% with a third less work. McKinsey’s classic finding is that a 1 percent price rise, at stable volume, lifts operating profit by about 8 percent.</p></details><details name="q"><summary>What is margin per client?</summary><p>What a client paid in a month, less what the hours logged against that client cost the firm at the loaded rate of the people who worked them, expressed as a share of the fee. Promethean Research found in 2026 that only 59% of digital agencies track margin by project. In Ceed it is computed from the hours and the agreement and visible to the owners the morning after the close, and it is frozen when the month closes.</p></details><details name="q"><summary>How often should a consultancy raise its rates?</summary><p>The pricing writers quoted here converge on once a year at minimum, written into the agreement as an escalator so the rise is a clause rather than a negotiation, plus a re-price whenever the client’s size or the scope changes materially. The owners in the threads who waited three years or ten paid for the wait in margin, and the ones who raised prices with two to three months’ written notice mostly kept the clients worth keeping. Ceed keeps the escalator and the rate by tier on the agreement, versioned, and shows margin per client every morning, so the question comes up when the numbers move rather than when a client leaves.</p></details></div> https://ceed.so/blog/late-paying-clients 2026-08-27T09:10:00-07:00 2026-09-11T17:30:00-07:00 Jon McLachlanhttps://ceed.so/about

The average US small business invoice is paid nine days late and the wait is growing. What late payment looks like inside a firm that sells its team’s time, the four things practitioners agree on, the part of the delay that belongs to the firm, and the stop loss that lives at the hour.

<p>A late payment is an invoice paid after the date the agreement set. That is the whole definition, and it hides the harder half. For a firm that sells time, the money was earned on the day the hour was worked. The invoice for that hour goes out at the end of the month, or a few days into the next one, then waits out its terms, then waits out the client. By the time the cash arrives the firm has carried the hour for two months and paid the person who worked it twice over.</p><p>She knows the feeling. The principal of a fractional CFO practice, the operator of a security boutique, the owner of a twelve-person agency. She did the work, on time, sometimes early. The invoice went out. Then the silence, the polite nudge, the second nudge, the call she rehearses in the car. She is not bad at business. She is waiting on two clocks, and she only ever looks at one of them.</p><h2 id="the-numbers">Nine days late, and the wait is growing.</h2><p>Xero reads the ledgers of its small business customers every quarter. For the March 2026 quarter in the United States, invoices were paid 9.0 days late on average, up from 8.4, and firms waited 28.8 days to be paid, up from 28.3. QuickBooks put a dollar figure on the same picture in January 2025: among 2,487 American small businesses surveyed, those with outstanding invoices were owed more than $17,000 each.</p><p>For agencies, Ignition’s 2025 report on pricing and cash flow, from 273 managers and executives, found that 71% have at least one in every four invoices paid late, 56% say it typically takes two weeks to two months after the due date to get paid, and 84% spend three to ten or more hours a month chasing what they are owed. Sixty-three percent describe their cash flow as unpredictable. The big firms see it from above. PwC’s Working Capital Study for 2025 and 2026, across more than 17,000 companies, shows days sales outstanding rising from 47.3 days in 2015 to 50.0 in 2024, and Deloitte’s 2025 roundup of 2,300 companies records that days sales outstanding “rose as collection pressures persisted.” The clients are paying everyone later, not only you.</p><figure class="figure"><img src="https://ceed.so/assets/blog/late-paying-clients/late-payment-by-the-numbers-xero-quickbooks-ignition-pwc-2025-2026.svg" width="640" height="360" alt="Five tiles of late payment statistics for services firms: invoices paid 9.0 days late and 28.8 days to be paid (Xero, March quarter 2026), more than $17,000 owed per small business with outstanding invoices (QuickBooks, 2025), 71 percent of agencies with at least one in four invoices late and 84 percent spending three to ten or more hours a month chasing (Ignition, 2025), and days sales outstanding rising from 47.3 to 50.0 days between 2015 and 2024 (PwC)."><figcaption>Late payment by the numbers. Sources: Xero Small Business Insights, March quarter 2026. QuickBooks late payments report, January 2025, 2,487 firms. Ignition, 2025 Agency Pricing and Cash Flow Report, 273 respondents. PwC Working Capital Study 25/26, more than 17,000 companies.</figcaption></figure><h2 id="the-thread">The thread with 657 comments.</h2><p>In November 2024 a graphic designer posted in r/smallbusiness that net 30 and net 60 terms were wrecking her cash flow. She delivered on time and then waited two months, and asked how she was supposed to pay contractors and software in the meantime. The thread drew 484 points and 657 comments, and the comments were not sympathy. They were the same four instructions, over and over, from people who had already learned them.</p><p>The top reply, with 606 points, was four words: “Then switch to pay on delivery.” Below it, u/Stabbycrabs83 priced the terms themselves: “Have different pricing for different payment terms. You are charging a premium for that 60 day term right?” u/JeffTS gave the contractor’s version, “50 down, 50 before handing off deliverables,” and u/2buffalonickels described what a small firm actually did: “For many longstanding customers we’ve gone down to a net 10 or 15 because they were stringing us out 45-60. I’ve changed a lot of my billing practices to weekly instead of monthly.” One designer put it flatly: “In a creative business, I learned early on to never ever offer those payment terms.”</p><p>X says it shorter. A designer’s post from June 2023 has been liked 1,400 times and seen by nearly half a million people, and it is one sentence long.</p><figure class="xq"><blockquote><p>Net 30 is crazy but net 60 is insane…</p></blockquote><figcaption><b>@itscloudnai</b> · 28 June 2023 · 1,420 likes · <a href="https://x.com/itscloudnai/status/1674147281422131210">View on X</a></figcaption></figure><p>Nick Huber, who runs a self-storage business and writes about small business to a large audience, had the sharpest version of who pays late, in September 2023. It was liked 2,400 times.</p><figure class="xq"><blockquote><p>$100 customer: Can you come early? I have a little extra I need you to do as well. Can you stay longer? This didn’t work out as well as I expected I need to talk about the bill. Can you call me please right away?</p><p>$10,000 customer: Send invoice. Thx.</p></blockquote><figcaption><b>@sweatystartup, Nick Huber</b> · 3 September 2023 · 2,437 likes · <a href="https://x.com/sweatystartup/status/1698313894425403863">View on X</a></figcaption></figure><p>Blake Emal had said the same thing with three price points the year before: the $100 client needs it by midnight, does not care that it is out of scope and cannot pay, the $10,000 client has one tweak, and the $1 million client says “Cool, invoice paid.” Read the two together and the lesson is not that big clients are kind. It is that terms, scope and payment travel together, and the client who argues about one will argue about all three.</p><p>Jonathan Stark, who has spent a decade arguing that consultants should stop selling hours, gets to the same place from the other side. His advice is to ask for the whole fee up front, and to ask even when you are sure you will not get it, because the terms you end up with are better than the terms you would have started from.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=uC3MN3tXntU">Watch the recording on YouTube.</a></p><figcaption>How to Get Clients to Pay Faster: Get Paid 100% Upfront. Jonathan Stark, 8 min, published 5 July 2019. Why the ask matters even when the answer is no. <a href="https://www.youtube.com/watch?v=uC3MN3tXntU">Watch on YouTube</a>.</figcaption></figure><p>Dave Ramsey’s business channel gives the operator’s version of the same rule in fourteen minutes: decide the terms before the work, put them in writing, and collect at the moment the client is happiest, which is delivery.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=CgSYM8ieo-8">Watch the recording on YouTube.</a></p><figcaption>The Simple Way to Get Your Clients to Pay on Time. EntreLeadership, 14 min, published 24 November 2023, 22,000 views. <a href="https://www.youtube.com/watch?v=CgSYM8ieo-8">Watch on YouTube</a>.</figcaption></figure><h2 id="overdue-is-the-norm">Overdue is the norm.</h2><p>Zoom out and the picture does not improve. Atradius, the trade credit insurer, reported in September 2025 that in the United States 43% of business-to-business sales made on credit terms are overdue, and that bad debts now write off 5% of the invoices that go long overdue. The Federal Reserve Banks’ Small Business Credit Survey, published in March 2026 from 6,525 employer firms, found that the most common reason a small firm sought financing was to meet operating expenses, at 56%. Read those two together: nearly half of what a firm is owed arrives late, and more than half of the firms that borrow do so to cover the gap between the work and the cash.</p><figure class="figure"><img src="https://ceed.so/assets/blog/late-paying-clients/overdue-is-the-norm-atradius-federal-reserve-uk-government-2025-2026.svg" width="640" height="410" alt="Six tiles: 43 percent of US business-to-business credit sales are overdue and 5 percent of long-overdue invoices end as bad debt (Atradius, September 2025), 56 percent of US small firms that borrowed did so to cover operating costs (Federal Reserve, March 2026, 6,525 firms), late payment costs the UK economy 11 billion pounds a year and closes 38 businesses a day, and the new UK cap on payment terms for large firms paying small suppliers is 60 days (UK Government, May 2026)."><figcaption>Overdue is the norm. Sources: Atradius, B2B payment practices trends in North America, 17 September 2025. Federal Reserve Banks, 2026 Report on Employer Firms, 3 March 2026, 6,525 firms. UK Government press release on the Commercial Payments Bill, 19 May 2026.</figcaption></figure><p>The United Kingdom put a national number on it this year. On 19 May 2026 the government introduced the Commercial Payments Bill with a press release that called it the largest crackdown on late payment in more than 25 years: late payments cost the economy £11 billion a year and close 38 businesses every day. The bill caps the terms large firms can impose on smaller suppliers at 60 days, sets statutory interest at 8% above the Bank of England base rate, and gives the Small Business Commissioner the power to investigate poor payment practice, adjudicate disputes and fine the worst offenders, with fines the release described as worth tens of millions for persistently late payers. The Commissioner’s office explained the bill to small firms in 45 seconds.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=1Hra1kEw-U8">Watch the recording on YouTube.</a></p><figcaption>What does the Commercial Payments (Late Payments) Bill mean for your small business? The Small Business Commissioner, United Kingdom, 45 seconds, published 5 August 2026. <a href="https://www.youtube.com/watch?v=1Hra1kEw-U8">Watch on YouTube</a>.</figcaption></figure><p>There is no American equivalent for commercial work. The federal Prompt Payment Act binds government agencies, and the state prompt-payment statutes mostly bind construction, so for a consultancy, an agency or a fractional practice the only late-payment law that applies is the one written into its own agreement.</p><h2 id="follow-your-contract">Follow your contract.</h2><p>When the client has not paid at all, the advice gets shorter. In r/msp, a technician asked what the firm should do when a client does not pay. The top answer, at 95 points, was three words from u/dumpsterfyr: “Follow your contract.” The second, from u/ntw2, was to “inform your client that you will be stopping work until their overdue” balance is settled. The third, from u/whatsforsupa, drew the line that matters inside a firm: “techs do not make this call.” The decision to stop belongs to the owner, and it belongs in the agreement before it is ever needed.</p><p>A freelancer in r/freelance showed what that looks like when it works. Owed $12,000 by an agency that had already been paid by its own client, he set a deadline of a few days for the full amount, said work would stop the moment it passed, and said legal proceedings would follow a week after that. The agency paid. What he had was not a collections process. It was a line he was willing to hold, written down before the money was late.</p><p>The other lesson in these threads is about size. When an MSP owner described a client who had gone silent owing about $1,300, the replies were unanimous that the amount was not worth a court date, and one, from u/Due_Lake94, named the real safeguard: “The key for me is to have a ‘stop loss’ so I don’t wake up with a client owing me 6-12 months of work.” The stop loss is a limit on how much unpaid work a client can hold at once. Most firms have one. Almost none of them have it anywhere but in the owner’s head.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=xImX7ZJHXqE">Watch the recording on YouTube.</a></p><figcaption>How to Handle Clients Who Don’t Pay. Michael Janda, who built and sold a creative agency, 17 min, published 18 May 2019, 40,000 views. The escalation ladder from reminder to stopped work, and when to fire the client. <a href="https://www.youtube.com/watch?v=xImX7ZJHXqE">Watch on YouTube</a>.</figcaption></figure><h2 id="nobody-read-the-ledger">Nobody was reading the ledger.</h2><p>In August 2026 someone who had taken over billing at a family company posted in r/smallbusiness that they had found a customer owing nearly $200,000. The balance dated from 2022. The customer, another small business, said it had never known about the balance and never received the invoices. The thread reached 656 points and 190 comments, and the top reply, at more than a thousand points, was policy rather than sympathy: “All current orders go to pre-pay or COD until balance is paid in full.” A former accountant added the uncomfortable inference: if a receivable that size could sit unnoticed for three years, “there are other things wrong with the books.”</p><p>The $200,000 is unusual. The mechanism is not. A receivable is a fact about the past that nobody in the firm is paid to look at, and it ages quietly until somebody new opens the ledger. When a bicycle painter in r/smallbusiness described his first small-claims hearing in February 2025, the reply with 407 points was seven words long: “Good to win small claims, hard to collect.” Another owner in the same thread said his firm carries $60,000 to $100,000 in receivables at any time on net 30 and net 60 terms, and that “the only thing we can continue to do is improve upon our accounts receivable process.” Neither firm was doing anything wrong. Both had built a business in which the money arrived long after the work, and neither had a number in front of them every morning that said how much was outstanding and how old it was.</p><h2 id="the-invoice-was-late-first">The invoice was late first.</h2><p>Here is the part the threads do not dwell on, because everyone in them is angry at the client. Before the client was late, the invoice was late. The hours were typed in from memory on Friday, or the following Tuesday. The month closed over three days of the owner’s time. The invoice was assembled in a spreadsheet, checked, sent on the fourth or the fifth. Then the terms started.</p><p>A consultant in r/consulting did the arithmetic in 2023, after a client paid in forty-five days on a contract that said ten. Monthly invoicing, one reply pointed out, “means invoicing is 30 days after the first hours were worked for the client, so payment is 60 days after the first hours worked.” Sixty days, and that is a client who pays on time.</p><figure class="figure"><img src="https://ceed.so/assets/blog/late-paying-clients/two-clocks-the-firm-delay-before-the-invoice-and-the-client-delay-after-it.svg" width="640" height="360" alt="Timeline from an hour worked to cash received, in two parts. The firm’s clock: the hour is worked mid-month, the month closes, the invoice is written and sent about five days later, roughly 20 days of the firm’s own delay. The client’s clock: 30 days of terms, then 9 days late (Xero, March quarter 2026). About 59 days from the hour to the cash."><figcaption>Two clocks. The first belongs to the firm and runs before the invoice exists. The second belongs to the client and runs after it. Only the second one gets complained about.</figcaption></figure><p>Then a third delay, which is a dispute. Clio measured it across the legal profession in its 2025 Legal Trends Report: in an eight-hour day lawyers capture 3.0 billable hours, invoice 2.6 of them, and collect 2.4. Some of the gap between invoiced and collected is clients who cannot pay. More of it is clients who will not pay a number they were not expecting. In August 2026 an agency owner asked r/agency whether a client had ever asked them to prove the hours behind an invoice, then went and had twenty-five conversations about it. His conclusion: “When the invoice is the first thing the client has seen since kickoff, the counting starts.” An invoice that carries a surprise is an invoice that will be paid late, and every day it spends in dispute is a day the firm added, not the client.</p><p>So the firm’s side of the wait has three pieces. The days between the hour and the invoice. The days the invoice takes to write. And the days it spends being argued about because it told the client something for the first time. All three are the firm’s to shorten, and none of them require a single client to change.</p><h2 id="profit-is-not-cash">Profitable. Not paid.</h2><p>A firm can be profitable on paper and unable to pay its own people on Friday, which is the whole reason the wait matters. Harvard Business School Online has the two-minute version of why profit and cash are different numbers, and it is worth two minutes of anyone who runs a firm on retainers and net 30.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=lkEtgnhsV04">Watch the recording on YouTube.</a></p><figcaption>Cash Flow vs. Profit: What’s the Difference? Harvard Business School Online, 2 min, published 2 February 2023, 112,000 views. <a href="https://www.youtube.com/watch?v=lkEtgnhsV04">Watch on YouTube</a>.</figcaption></figure><p>Ignition’s agencies described the consequence in the same 2025 survey: 82% had delayed or canceled hiring or an investment because of cash flow. For a firm of eight, that is the ninth hire who never arrives, paid for by hours that were worked in March and collected in May. NerdWallet’s <a href="https://www.youtube.com/watch?v=pi0CRab6raA">seven ways to deal with late-paying clients</a> is the calm, professional version of the thread above. The cautionary tale is EntreLeadership’s <a href="https://www.youtube.com/watch?v=BVQGi9FJPeg">caller who used client deposits to pay his debts</a>, which is what happens when the two clocks are managed from the same bank account.</p><p>The longer treatment is half an hour from EntreLeadership on cash flow in a business that has to pay its people before its customers pay, which is every firm in this post.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=nP4JU39whr0">Watch the recording on YouTube.</a></p><figcaption>Cashflow Secrets for Long-Term Business Success. EntreLeadership, 31 min, published 11 December 2023, 125,000 views. <a href="https://www.youtube.com/watch?v=nP4JU39whr0">Watch on YouTube</a>.</figcaption></figure><p>Josh Aharonoff, a fractional CFO, walks through what a receivables ledger should tell an owner, how to age it, and what days sales outstanding means for a firm that bills monthly.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=SzmgqIpkLGY">Watch the recording on YouTube.</a></p><figcaption>Everything you need to Know About Accounts Receivable. Josh Aharonoff, Your CFO Guy, 11 min, published 16 July 2024, 94,000 views. <a href="https://www.youtube.com/watch?v=SzmgqIpkLGY">Watch on YouTube</a>.</figcaption></figure><h2 id="the-books">What the books say.</h2><p>Four books for the owner who wants the long version. None of them is about software.</p><ul class="books"><li><a href="https://www.amazon.com/dp/073521414X">Profit First</a><span>Mike Michalowicz, 2017. Take the profit out first and run the firm on what is left, which is the discipline that makes a late payment survivable.</span></li><li><a href="https://www.amazon.com/dp/0989645231">Simple Numbers, Straight Talk, Big Profits</a><span>Greg Crabtree, 2014. The four numbers a small firm actually runs on, and why cash is the one the owner should read every week.</span></li><li><a href="https://www.amazon.com/dp/1422119157">Financial Intelligence for Entrepreneurs</a><span>Karen Berman and Joe Knight, Harvard Business Review Press, 2008. The chapter on receivables, days sales outstanding and what an aging report is for.</span></li><li><a href="https://www.amazon.com/dp/0062407805">Never Split the Difference</a><span>Chris Voss with Tahl Raz, 2016. A former hostage negotiator on the call you rehearse in the car, including the one about the unpaid invoice.</span></li></ul><h2 id="what-ceed-does">The stop loss lives at the hour.</h2><p>We ran a security consultancy on those spreadsheets, and our invoices went out on the fourth or the fifth like everyone else’s. The month that made us build Ceed is in <a href="https://ceed.so/blog/why-we-built-ceed">The invoice told us last. Why we built Ceed.</a> What we built does three things to the firm’s side of the wait, and is honest about what it does not do to the client’s.</p><p>First, the stop loss moves out of the owner’s head and into the agreement. Each client has a budget in hours, and if an hour would push a client over it, Ceed holds that hour for approval the moment it is logged. The account leader approves or declines it that day, and the client hears about the extra before the invoice, not on it. That is u/Due_Lake94’s stop loss, applied at the hour instead of at the sixth month, and it is the one thing that happens here and nowhere else. <a href="https://ceed.so/blog/held-not-hidden">Held. Not hidden.</a> shows what the person who logged the hour sees.</p><figure class="card" aria-label="A held hour, the stop loss applied at the hour"><div class="card-top"><span><b>Beacon Ltd</b> · September</span><span class="chip">Held</span></div><p class="fig"><b>32.5</b> <span>of 32 h</span></p><div class="meter" data-m="98.5"><i></i><i></i></div><p class="entry">Thu 24 Sep · 2 h · Vendor review · Priya S.</p><p class="status">Held for approval. 0.5 h over the client’s budget. The client hears today, not on the invoice.</p><div class="verbs"><span>Approve</span><span>Decline</span></div></figure><p>Second, the invoice is computed from the agreement, not typed. The retainer, the budget, the rates by role, the approved hours past the budget, the discounts: it comes out the same way every time and matches what the client signed because it was made from what the client signed. When the month closes, the invoice exists. The fourth and the fifth go back to being ordinary days.</p><figure class="card" aria-label="An invoice computed the day the month closes"><div class="card-top"><span><b>Invoice</b> · Beacon Ltd · September 2026</span><span class="chip chip-mid">Computed</span></div><div class="rows"><div class="row"><span>Monthly retainer · 32 h</span><span>$7,200.00</span></div><div class="row"><span>Approved hours past the budget · 0.5 h at $225.00</span><span>$112.50</span></div><div class="row row-total"><span>Total</span><span>$7,312.50</span></div></div><p class="card-foot">Month closed 30 Sep. Invoice computed the same day. Nothing typed.</p></figure><figure class="figure shot"><img src="https://ceed.so/assets/blog/late-paying-clients/invoice-computed-from-approved-hours-work-detail-ceed-staging.png" width="1280" height="622" alt="Ceed’s invoice view for a demo account: a Draft, Generated, Submitted, Paid, Settled pipeline, net to invoice $16,000, one line for Tomás Aguilar at Tier 1, and a work detail of six dated entries totalling 40 hours, with the note that every approved entry is evidence under the charges, never a pricing input, and that the month is waiting on one open log."><figcaption>The same idea in the product. An invoice on Ceed’s staging environment for a demo account, September 2026: the math, then the work detail underneath it, six approved entries and forty hours, with the held hour left off. The month cannot bill until the person who logged the hours has marked their month complete.</figcaption></figure><p>Third, the invoice carries no news. Every hour on it was either inside the budget or approved by name before it was billed, so the client has already seen the number that would have started the counting. The dispute that adds three weeks does not begin.</p><figure class="figure shot"><img src="https://ceed.so/assets/blog/late-paying-clients/month-close-readiness-open-items-ceed-staging.png" width="1280" height="302" alt="Ceed’s month close readiness panel for a demo firm: three open items, each closing as a recorded decision. Approvals queue, one open, held hours and requests freeze as is. Cap positions, every account within cap. A delivery score rule, one account with no score. Invoices, all final. Receivables, nothing overdue. Next month’s book, nothing booked."><figcaption>The close, before it happens. Ceed’s readiness panel on staging, September 2026: the held hour is an open item, and receivables sit next to invoices on the same list. Open items never block the close. Closing records each one as a decision with a name on it.</figcaption></figure><p>What Ceed does not do, yet, is chase the client. Payment terms live in the agreement and on the invoice, and the invoice is yours to send and to follow up. Collection and the sync to accounting tools are planned, and marked as such on the <a href="https://ceed.so/compare">comparison page</a>, which is dated. The client’s clock is still the client’s. The firm’s clock, the part of the wait that was always yours, gets shorter by the length of a close and the length of an argument.</p><p>Margin per client is visible to the owners the morning after the close, and the contractor’s payout statement comes from the same hours the invoice used. So when a client is late, she knows exactly what that client is carrying, and exactly what she is carrying for them. That is where a fractional CFO practice, a security boutique or an agency starts the conversation about terms, with the hours in hand. The pricing side of that conversation is <a href="https://ceed.so/blog/the-rate-that-never-moved">The rate was set on day one. The client grew.</a> and the agreement side is <a href="https://ceed.so/blog/scope-creep-and-the-agreement">The agreement said 40 hours. The month said 47.</a></p><h2 id="the-show">Three conversations with people who run firms.</h2><p>The firm behind Ceed also hosts <a href="https://ysecurity.io/podcast/">The Security Podcast of Silicon Valley</a>, 102 conversations since 2021 with the people who build and run security. Three of them are with people who have had to pay a team out of a receivables ledger.</p><ul class="show"><li><span class="ep">14</span><div><a href="https://ysecurity.io/podcast/14-biff-clark-cybersecurity-specialist-and-owner-of-coefficient-of/">Biff Clark, owner of Coefficient Technologies</a><span>March 2022 · Fifteen years of running a small security consultancy, clients and invoices included.</span></div></li><li><span class="ep">83</span><div><a href="https://ysecurity.io/podcast/83-how-small-companies-can-make-their-security-doable/">Phil Howie, founder and CEO of Sidekick</a><span>December 2025 · How small companies build a security practice before they can afford a team, which is the client on the other side of the invoice.</span></div></li><li><span class="ep">102</span><div><a href="https://ysecurity.io/podcast/102-ciso-does-not-spell-ceo/">Chris Kirschke, founder of Kyberis AI</a><span>August 2026 · Twenty-seven years in security operations, then a company to run, with revenue and customers that were suddenly his problem.</span></div></li></ul><p>We are selecting the firms we start with: <a href="https://ceed.so/industries/fractional-cfo">fractional CFO</a>, <a href="https://ceed.so/industries/security">CISO</a>, <a href="https://ceed.so/industries/fractional-executives">CMO and CTO practices</a>, <a href="https://ceed.so/industries/security">security</a> and <a href="https://ceed.so/industries/software">engineering boutiques</a>, <a href="https://ceed.so/industries/consulting">consultancies</a> and <a href="https://ceed.so/industries/agencies">agencies</a> up to fifty people. If your invoices go out on the fifth and come back in sixty days, write to us and say how Ceed would help. A person replies.</p><h2 id="questions">Questions.</h2><div class="faq"><details name="q" open><summary>How late are small business invoices paid on average?</summary><p>In the United States, 9.0 days late on average in the March 2026 quarter, with firms waiting 28.8 days in total to be paid, according to Xero’s Small Business Insights, published 30 April 2026. Both figures were up on the previous quarter. Among agencies, 71% report that at least one in four invoices is paid late (Ignition, May 2025, 273 respondents).</p></details><details name="q"><summary>Should a consultant stop work when a client does not pay?</summary><p>Practitioners in r/msp and r/freelance agree on the order: follow the contract, tell the client in writing that work stops on a stated date if the balance is not settled, and let the owner make that call rather than the technician. The stronger position is to have the stop loss, the most unpaid work a client may hold at once, written into the agreement before the work starts. Ceed applies a budget in hours to each client and holds the hour that would cross it, so the limit is enforced at the hour rather than remembered at the invoice.</p></details><details name="q"><summary>How do I get clients to pay invoices on time?</summary><p>Shorten both clocks. On the client’s side: shorter terms or payment on delivery, a deposit before work starts, a premium for longer terms, and weekly rather than monthly billing for clients who stretch. On the firm’s side: send the invoice the day the month closes rather than a week later, and make sure nothing on it is news to the client. An invoice computed from the agreement, with every over-budget hour approved before it was billed, removes the surprise that starts most disputes.</p></details><details name="q"><summary>Is there a law against paying invoices late?</summary><p>In the United Kingdom, from 2026, yes for large firms paying smaller suppliers: the Commercial Payments Bill introduced on 19 May 2026 caps payment terms at 60 days, sets interest at 8% above the Bank of England base rate and lets the Small Business Commissioner fine persistent late payers. In the United States the federal Prompt Payment Act covers government agencies and most state prompt-payment laws cover construction, so for commercial services work the enforceable terms are the ones in the agreement and on the invoice, plus whatever late fee or interest the agreement names.</p></details></div> https://ceed.so/blog/held-not-hidden 2026-08-04T09:00:00-07:00 2026-09-11T17:30:00-07:00 Jon McLachlanhttps://ceed.so/about

When an hour crosses a client’s budget, software can tell you later, refuse the hour, or hold it for a decision. Only one of those keeps both the hour and the decision in the record.

<p>Forty hours bought. Forty logged by the eighteenth. On the nineteenth, someone on the team does two more hours of good work for the client and logs them. What happens next is the whole design question of a system that runs a firm’s money, and there are only three answers.</p><h2 id="an-alert-is-a-report">An alert is a report.</h2><p>The first answer is to tell you. Most time trackers do this: the budget passes a threshold and an email goes out, within the hour on some, the next morning on others. It is useful. It is also history. By the time you read it the hours are in the month, the work is delivered, and the choice about who pays for it has been made by default. An alert changes what you know. It does not change what happened.</p><p>The people who build these tools know it. The budget email is a project feature, built to keep a project near its estimate. It was never built to hold a rule at the moment the rule is tested.</p><p>Ron Baker, who has argued since the 1990s that professional firms should abolish the timesheet, said the sharpest version on The Soul of Enterprise in 2016: “By definition, once you see something on a timesheet, it can no longer be managed.” We keep the timesheet and we take the point. A report about last week is a history lesson. Baker made the longer case to an accounting audience in 2011, in eight minutes.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=B7B4vTalN5I">Watch the recording on YouTube.</a></p><figcaption>Ron Baker on Black Swans, Trashing Timesheets and Value Pricing. Tom Hood, 8 min, published 25 January 2011. <a href="https://www.youtube.com/watch?v=B7B4vTalN5I">Watch on YouTube</a>.</figcaption></figure><p>The alert has a second cost. IDC’s February 2026 survey of 100 professional services firms for Kantata found a “3% delay in invoices being issued” at firms running on reports rather than records. The hour that is found late is billed late, if it is billed at all.</p><h2 id="a-refused-hour-disappears">A refused hour disappears.</h2><p>The second answer is to refuse the hour. Some trackers and suites can do this: at the budget, the timer stops or the entry is rejected with a message to contact the budget owner. It sounds like discipline. In practice it is the oldest failure in professional services with a new interface. An engineer described the older version on Hacker News in 2010. Told he was over budget at 54 hours on a 50-hour estimate, he “was not to charge any more time to that ticket. This essentially means ‘work for free.’”</p><p>The work still happens. The client still needed it. The record now says it did not happen, and the hour is eaten before anyone with authority has looked at it. Thomas Ptacek, who co-founded two security consultancies, put it plainly in 2024: “Serious consultancies routinely eat billable weeks of time in order to meet client success criteria and retain relationships.” David C. Baker has said for years that the average creative firm captures about 42% of its time rather than the 60% it should. A refusal makes that gap policy.</p><p>The people inside the refusal describe it in detail, and the threads about it are among the most upvoted in their fields. In November 2021 a first-year accountant wrote in r/Accounting that timesheets were the worst part of the job, “worrying about getting my hours up without going over budget on what I’m assigned on.” The thread reached 1,578 points and 171 comments. The reply with 851 points described a firm that sold itself as having no timesheets and then wanted an email to the partner every evening listing the day’s work. The reply with 103 gave the honest version of the rule: “If you spend 6 hours on something, put 6 hours on your timesheet even if the project budget you’ve been given is 2 hours,” followed by the admission that nobody had ever been spoken to for going over budget, only for logging too few billable hours. Another, at 369 points, said the trick was several hours of unpaid overtime a day so the numbers look right.</p><p>Four months earlier a thread titled “Everything they said about billable hours is true” had reached 1,109 points with the same shape: bill less than the schedule and the client is upset, bill more and the client is upset. “By far one of the worst thing in PA is charging times and the sweating over the budget,” wrote one reply at 255 points. Another, at 115, described managers who hand out ninety hours of work a week and want a meeting if anyone charges more than fifty-five. Every one of those firms had a budget and a wall. None of them had a decision.</p><p>Blair Enns, who has spent his career telling creative firms to stop selling hours, has the three-word version.</p><figure class="xq"><blockquote><p>Timesheets. Are. Lies.</p><p>Do with this what you will, but don’t lie to yourself about the implications of this Truth.</p></blockquote><figcaption><b>@blairenns, Blair Enns</b> · 4 June 2019 · 49 likes · <a href="https://x.com/blairenns/status/1135984785879212032">View on X</a></figcaption></figure><p>They are lies when the wall makes them lies. A record that stops at the budget is a record of the budget, not of the work. Jonathan Stark’s ten minutes on why nobody can buy an hour is the cleanest statement of what the client actually purchased, and it is not the entry the timer refused.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=QGOdlFgQSWg">Watch the recording on YouTube.</a></p><figcaption>You Can’t Buy An Hour. Jonathan Stark, 11 min, published 10 February 2022. <a href="https://www.youtube.com/watch?v=QGOdlFgQSWg">Watch on YouTube</a>.</figcaption></figure><p>It also teaches the team the wrong lesson. Buddy Punch’s 2025 survey of 534 US workers found 30% feel time tracking is surveillance and 47% want access to their own records. A wall at the budget says the system is there to police them. The truth is the other way around. Every hour your team works counts. The only question is who pays for it, and that question belongs to the firm, not to the person who did the work at eleven at night.</p><h2 id="a-held-hour-waits">A held hour waits.</h2><p>The third answer is the one Ceed gives. The hour that would push a client over budget is saved, marked, and held. It waits for a named person, the account leader or an owner, to say yes or no. Nothing is billed quietly. Nothing disappears.</p><ol class="steps"><li class="step"><span class="tag">Logged</span><p>2.0 h · Harbor &amp; Vine · Revisions, round 3</p></li><li class="step"><span class="tag tag-held">Held</span><p>Over the 40 h budget. Waiting for Dana.</p></li><li class="step"><span class="tag tag-ok">Approved</span><p>On the March invoice, at $150 an hour.</p></li></ol><p>Approved, the hour lands on that month’s invoice at the rate in the agreement. Declined, it stays on the record and off the invoice, and the firm knows exactly what it chose to give away, when, and to whom. Both answers are true. Both are in the record. The budget held either way, because the rule was enforced at entry and not read about the morning after.</p><figure class="figure shot"><img src="https://ceed.so/assets/blog/why-we-built-ceed/today-two-hours-held-approve-with-a-reason-ceed-staging.png" width="1280" height="480" alt="Ceed’s Today page for a demo account: two hours held on Acme Co, logged by Tomás Aguilar, over the booked hours. The card explains that approving raises the allocation and declining keeps the hours on record and off the invoice, shows one entry and two hours held, a typed reason that reads Their CFO asked for it on Thursday’s call, bill it at the agreement rate, and two buttons, Decline and Approve."><figcaption>The hold, in the product. Ceed’s Today page on the staging environment, September 2026, with a demo account: two hours past the booked hours, held for approval, the reason typed and kept with the approver’s name. Two verbs, and no third.</figcaption></figure><figure class="figure shot"><img src="https://ceed.so/assets/blog/why-we-built-ceed/activity-append-only-held-to-approved-ceed-staging.png" width="1280" height="372" alt="Ceed’s Activity page, headed Every change, forever, append-only: actor, action, before and after. Two rows for Acme Co by Jon: a time entry changed from 42 booked hours and held to 44 and approved, and a time entry added with its description, hours and status."><figcaption>Both answers are in the record. Ceed’s Activity page on staging, September 2026: every change, forever, with the actor, the action, and the value before and after. The top row is the held hour becoming approved and the booked hours moving from 42 to 44. A decline would sit in the same list.</figcaption></figure><p>There is a quieter benefit. The system takes the question, so the account lead does not have to. Over-servicing is mostly people-pleasing at the account level, a yes said to be liked. A hold turns that yes into a decision made by the person whose margin it is, on the record, with the hours in front of them.</p><h2 id="what-the-person-logging-sees">What the person logging sees.</h2><p>One message a day. No timers, no screenshots, no wall.</p><figure class="card" aria-label="The daily Slack reminder"><div class="card-top"><span><b>Slack</b> · direct message</span><span class="chip chip-mid">Today, 9:00</span></div><div class="msg"><span class="msg-from">Ceed</span>Hours left this month.<br>Harbor &amp; Vine · 0 h<br>Northline Health · 12.5 h<br>Copperfield Tools · 31.0 h<br>Log yesterday’s hours.</div></figure><p>The hold is framed as the client’s budget in question, never as the person’s hour. Everyone sees their own hours. The person who logged the two hours on the nineteenth knows at once that they are held, and knows by that afternoon whether the client is paying for them. Nothing they did is lost.</p><figure class="figure shot"><img src="https://ceed.so/assets/blog/held-not-hidden/time-tracking-log-slack-reminder-month-complete-ceed-staging.png" width="1280" height="479" alt="Ceed’s Time tracking page: You’ve logged 0.0 h today, your pay is $0. A form with Logging for, Partner, Date, Start, End, Duration and Description, a Log it button, scope buttons for Today, Month and Year, a note reading Done logging the month? Accounts you worked can invoice only after everyone on them says so, with a button My month is complete, and a line reading If you’re allocated on a partner this month, Slack reminds you when today is still empty."><figcaption>What the person logging sees. Ceed’s Time tracking page on staging, September 2026: one form, no timer, their own pay for the day, and two sentences that matter. The month cannot invoice until everyone who worked on the account says their month is complete, and Slack reminds them only when today is still empty.</figcaption></figure><p>The threads on the other side of the timesheet are about walls and screenshots, not about hours. In August 2025 an engineer told r/ExperiencedDevs about a profitable startup that suddenly required everyone to log everything, then announced a loss three months later, a thread that reached 800 points and 179 comments. Two of the replies are the two designs in this post. One, at 127 points: “I work for a consultancy, here we track time to invoice our customers.” Another, at 54: “Honestly, this is better for the engineer. Lost 2 hours in a meeting? It now shows.” When the hour is counted for the client’s budget and the person’s own record, it protects the person. When it is counted to watch them, it does the other thing.</p><p>In May 2026 someone at a managed services provider asked r/sysadmin about tracking non-billable time in five-minute increments, 195 points and 157 comments. The top reply, at 287: “Make sure to add at least 30 minutes a day on the time sheet card for time spent updating time sheets.” Another, at 153: “all this leads to is employees padding their time.” The same month, one salaried remote worker’s answer to a new timesheet policy was liked 39,000 times.</p><figure class="xq"><blockquote><p>I’m a salaried employee. But, I work remotely. My job asked us can we start using timesheets to monitor our time. Cause people don’t be working frfr. So I submitted my timesheet and it had 68 hours for one work week. I sent it to my manager and asked could I be paid overtime.</p></blockquote><figcaption><b>@Hearts0faKing</b> · 12 May 2026 · 39,120 likes · <a href="https://x.com/Hearts0faKing/status/2054248180808577296">View on X</a></figcaption></figure><p>Sixty-eight hours is the record the manager did not want. It is also true, and the only design that survives contact with a true record is one in which the hours are the person’s and the decision is the firm’s. Basecamp drew that line in its own terms of service in 2020, when it barred third parties from using its interface for anything that “remotely records, monitors, or reports” a user’s activity, with one exception.</p><figure class="xq"><blockquote><p>New Basecamp policy: “Third parties may not access and employ the API if the functionality is part of an application that remotely records, monitors, or reports a Service user’s activity other than time tracking, both inside and outside the applications”</p></blockquote><figcaption><b>@dhh, David Heinemeier Hansson</b> · 4 May 2020 · 391 likes · <a href="https://x.com/dhh/status/1257380983265005570">View on X</a></figcaption></figure><h2 id="monitoring-is-the-other-design">Monitoring is the other design.</h2><p>The hold is sometimes mistaken for surveillance, so it is worth saying what surveillance is. In August 2022 The New York Times reported that eight of the ten largest private employers in the United States track the productivity of individual workers, many in real time, where a pause can cost pay and, at one large insurer, low keyboard activity can cut a bonus. Jodi Kantor, who reported it with Arya Sundaram, explained it on CBS the next morning and on The Daily ten days later.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=4n8XbiXSDe0">Watch the recording on YouTube.</a></p><figcaption>New York Times’ Jodi Kantor on the rise of employee surveillance. CBS Mornings, 5 min, published 15 August 2022, 24,000 views. <a href="https://www.youtube.com/watch?v=4n8XbiXSDe0">Watch on YouTube</a>.</figcaption></figure><p>The American Psychological Association measured what that does to the people being watched. In its 2023 Work in America survey of 2,515 employed adults, 51% knew their employer monitored them. Of those, 56% said they typically felt tense or stressed at work, against 40% of the unmonitored, and 28% said they had experienced harm to their mental health at work, against 16%. Tara Behrend of Michigan State University, then president of the Society for Industrial and Organizational Psychology, said the data showed the tools do not make people work better: “They are counterproductive for the organizations that use them.”</p><figure class="figure"><img src="https://ceed.so/assets/blog/held-not-hidden/monitored-workers-vs-not-apa-work-in-america-2023-nyt-2022.svg" width="640" height="470" alt="Paired bars from the American Psychological Association 2023 Work in America survey: monitored workers against those not monitored. Feel tense or stressed at work, 56 against 40 percent. Say the workplace hurts their mental health, 45 against 29 percent. Have experienced harm to it at work, 28 against 16 percent. Above the bars: 51 percent of US workers know their employer monitors them, and eight of the ten largest private US employers track individual productivity, The New York Times, 2022."><figcaption>Watched people work worse, and say so. Sources: American Psychological Association, 2023 Work in America survey, Harris Poll, 2,515 employed adults, April 2023. Jodi Kantor and Arya Sundaram, The New York Times, 14 August 2022.</figcaption></figure><p>Cory Doctorow, reading the same Times story, named the mechanism in a thread that August.</p><figure class="xq"><blockquote><p>This is yet more proof that “you treasure what you measure,” or, more formally, “any target becomes a measurement” (AKA #GoodhartsLaw).</p><p>The decline of worker productivity in pursuit of metrics is an inescapable failure mode of bossware.</p></blockquote><figcaption><b>@doctorow, Cory Doctorow</b> · 21 August 2022 · 221 likes · <a href="https://x.com/doctorow/status/1561417509273731073">View on X</a></figcaption></figure><p>Bloomberg had filmed the industry two years earlier, twelve minutes on the software that watches while you work, and CBS returned to it in 2025 with the numbers larger. A hold measures none of that. It does not know when the person was at the keyboard, what they typed or whether they were idle. It knows one thing: that an hour, logged by the person who worked it, would take a client past the budget the client bought, and that someone with authority should say yes or no before the invoice does.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=rLjZ6mbodcE">Watch the recording on YouTube.</a></p><figcaption>How Bossware is Watching While You Work. Bloomberg Originals, 12 min, published 11 December 2020, 142,000 views. <a href="https://www.youtube.com/watch?v=rLjZ6mbodcE">Watch on YouTube</a>.</figcaption></figure><figure class="vid"><p><a href="https://www.youtube.com/watch?v=-FBmHm30vUo">Watch the recording on YouTube.</a></p><figcaption>Your boss may be using surveillance software to monitor you. CBS News, 4 min, published 26 February 2025. <a href="https://www.youtube.com/watch?v=-FBmHm30vUo">Watch on YouTube</a>.</figcaption></figure><h2 id="closed-means-closed">Closed means closed.</h2><p>The last thing a hold gives you is a month you can close. Every hour was either within budget, approved past it, or declined past it, by a named person, on a dated record. When the month closes, the invoices, the statements and the margin are frozen and nothing in them changes after. That is a record a buyer, a lender or your own bookkeeper can read without asking what really happened, because what really happened is what it says.</p><h2 id="the-books">What the books say.</h2><p>Six books on trust, rules and records, none of them about time tracking, all of them about why a hold works and a wall does not.</p><ul class="books"><li><a href="https://www.amazon.com/dp/1416549005">The Speed of Trust</a><span>Stephen M. R. Covey, 2006. Trust as an economic quantity, and why a firm that checks everything moves slower than one that checks the right thing once.</span></li><li><a href="https://www.amazon.com/dp/1594484805">Drive</a><span>Daniel H. Pink, 2009. Autonomy, mastery and purpose, and what happens to all three when people are watched.</span></li><li><a href="https://www.amazon.com/dp/0062874780">It Doesn’t Have to Be Crazy at Work</a><span>Jason Fried and David Heinemeier Hansson, 2018. The Basecamp position on time, attention and not watching people, from the people who wrote the policy quoted above.</span></li><li><a href="https://www.amazon.com/dp/014313700X">Nudge</a><span>Richard H. Thaler and Cass R. Sunstein, final edition 2021. Choice architecture, which is what a hold is: the default keeps the hour, and the decision is made by the person whose margin it is.</span></li><li><a href="https://www.amazon.com/dp/0312430000">The Checklist Manifesto</a><span>Atul Gawande, 2009. Why a rule enforced at the moment it applies beats a rule everyone knows and nobody checks.</span></li><li><a href="https://www.amazon.com/dp/0525536221">Measure What Matters</a><span>John Doerr, 2018. What to measure and what not to, from the man who brought objectives and key results to Google. A held hour is a measure. A screenshot is not.</span></li></ul><p>The firm behind Ceed also hosts <a href="https://ysecurity.io/podcast/">The Security Podcast of Silicon Valley</a>, 100 conversations since 2021 with the people who build and run security. Three of them are about walls, signals and who owns a decision.</p><ul class="show"><li><span class="ep">95</span><div><a href="https://ysecurity.io/podcast/95-stop-saying-no-how-security-leaders-enable-ai-instead-of-it/">Pranava Adduri and George Gerchow of Bedrock Data</a><span>May 2026 · Stop saying no. Security leaders who put in guardrails instead of walls, which is the hold in another trade.</span></div></li><li><span class="ep">84</span><div><a href="https://ysecurity.io/podcast/84-what-gets-missed-when-nobody-reviews-the-code/">Jack Cable, co-founder and CEO of Corridor</a><span>December 2025 · What gets missed when nobody reviews the code, and why a signal beats a wall of alerts. The hour has the same problem.</span></div></li><li><span class="ep">91</span><div><a href="https://ysecurity.io/podcast/91-why-asking-developers-to-fix-everything-is-a-bad-idea/">Neatsun Ziv on why asking developers to fix everything is a bad idea</a><span>March 2026 · Who should own a decision, and what happens when it lands on the person nearest the keyboard instead.</span></div></li></ul><p>Two other shows have the long version. <a href="https://www.thesoulofenterprise.com/tsoe/timesheets">The Soul of Enterprise</a> spent its 109th episode, in 2016, on trashing the timesheet. <a href="https://www.nytimes.com/2022/08/24/podcasts/the-daily/workplace-surveillance-productivity-tracking.html">The Daily</a> spent 24 August 2022 on the rise of workplace surveillance, with Jodi Kantor. Listen to both and the hold sits exactly between them: a record without a wall, a rule without a watcher.</p><p>Where the time trackers, the suites and the agreement-billing tools stand on this, row by row and dated, is on the <a href="https://ceed.so/compare">comparison page</a>. It credits them where they are ahead, which is real, and it names the one thing that happens here and nowhere else. The month that made us build it, with the numbers behind it, is in <a href="https://ceed.so/blog/why-we-built-ceed">The invoice told us last. Why we built Ceed.</a> The held hour as the stop loss against late payment is in <a href="https://ceed.so/blog/late-paying-clients">The client paid late. The invoice was later.</a>, and as the change order at the hour in <a href="https://ceed.so/blog/scope-creep-and-the-agreement">The agreement said 40 hours. The month said 47.</a></p><h2 id="questions">Questions.</h2><div class="faq"><details name="q" open><summary>What is the difference between a budget alert and a held hour?</summary><p>Timing and authority. A budget alert is sent after the hours are in the month, usually by email, to whoever is subscribed, and changes nothing about the record. A held hour is stopped at the moment it is logged, before it reaches the invoice, and waits for a named person, the account leader or an owner, to approve or decline it. The alert reports. The hold decides, and keeps the hour either way.</p></details><details name="q"><summary>Is holding an hour a form of employee monitoring?</summary><p>No. Monitoring software records activity: keystrokes, screenshots, idle time, location. A hold records one fact the person entered themselves, that an hour of work would take a client past the budget the client bought, and routes the decision to the person whose margin it is. The person who logged the hour sees their own hours and the outcome the same day. Nothing about how they worked is captured, and nothing they logged is lost.</p></details><details name="q"><summary>Who decides on a held hour?</summary><p>The account leader for that client or an owner of the firm, by name. The decision is recorded with the reason and the time, and both are frozen when the month closes. The person who logged the hour does not decide, which is the point: over-servicing is usually a yes said at the account level to be liked, and the hold moves that yes to the person who pays for it.</p></details><details name="q"><summary>What happens to a declined hour?</summary><p>It stays on the record and off the invoice. The firm sees exactly what it chose to give away, when, to which client and on whose decision. The client’s budget holds, and the invoice matches the agreement.</p></details></div> https://ceed.so/blog/the-client-sees-the-fee 2026-07-21T09:00:00-07:00 2026-09-11T17:30:00-07:00 Jon McLachlanhttps://ceed.so/about

A flat retainer is a fixed fee sized in hours only the owner knows. What happens to the margin when nobody watches that number, and what changes when the hour past it waits for a decision.

<p>The advice in the fractional world is consistent. Do not sell hours. Sell the outcome, price the value, put a monthly fee on the agreement and stop thinking about time. It is good advice, and the people who give it size their retainers in hours anyway.</p><p>The “gold standard for a fractional executive,” in Taylor Crane’s words at Fractional Jobs this February, “is a retainer for $10,000 per month for approximately 10 hours per week of work.” The Fractional Work Report 2026, with 1,733 respondents, found 46% of fractional executives bill primarily on a monthly retainer. In accounting, CPA.com’s 2024 benchmark of 206 client advisory practices found 57% bill a fixed fee with regular out-of-scope monitoring and another 27% a fixed fee with minimal monitoring. The fee is flat. Behind it, always, is a number of hours.</p><figure class="figure"><img src="https://ceed.so/assets/blog/the-client-sees-the-fee/the-private-budget-by-the-numbers-fractional-jobs-cpa-ignition-idc-2022-2026.svg" width="640" height="410" alt="Six tiles. 46 percent of fractional executives bill mainly on a monthly retainer, Fractional Work Report 2026, 1,733 respondents. 84 percent of client advisory practices bill a fixed fee, CPA.com 2024 benchmark, 206 practices. 57 percent of agencies lose 1,000 to 5,000 dollars a month to unbilled work, Ignition, May 2025. 88 percent of accounting firms put off the out-of-scope conversation and 43 percent absorbed the work, Ignition, August 2022, 506 firms. 5 percent margin leakage from unmanaged scope, IDC for Kantata, February 2026."><figcaption>The fee is flat. The budget is private. The 84% of client advisory practices on a fixed fee split into 57% that watch scope regularly and 27% that barely do. Sources: Fractional Jobs, 2026. CPA.com and AICPA, December 2024. Ignition, May 2025 and August 2022. IDC for Kantata, February 2026.</figcaption></figure><p>The pressure to sell the fee rather than the hour is real and it is growing. In March 2025 Greg Isenberg asked whether $750-an-hour law firms would survive a tool that drafted his contract in fifteen minutes, and 18,000 people liked the question.</p><figure class="xq"><blockquote><p>Are we going to pretend $750/hour law firms are going to be business as usual in the AI age?</p><p>I just used Grok Deep Research to draft a simple contract. Took 15 minutes. Would have cost $2,000 with a lawyer.</p><p>When I sent it to my attorney to review, his response was “looks good”</p></blockquote><figcaption><b>@gregisenberg, Greg Isenberg</b> · 25 March 2025 · 18,672 likes · <a href="https://x.com/gregisenberg/status/1904632504667300165">View on X</a></figcaption></figure><p>Taylor Crane has made the case for the retainer at length on other people’s shows. In January 2026 he spent half an hour with WRKdefined on how fractional work is bought and sold, including the arithmetic behind the monthly fee.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=q6Fn0siOO9A">Watch the recording on YouTube.</a></p><figcaption>Ep. 211: Taylor Crane, founder of Fractional Jobs. WRKdefined, 37 min, published 30 January 2026. <a href="https://www.youtube.com/watch?v=q6Fn0siOO9A">Watch on YouTube</a>.</figcaption></figure><h2 id="the-number-only-you-know">The number only you know.</h2><p>That number is the private budget. The client bought a fee and a result. You priced the fee by asking how many hours it should take and multiplying by what your time is worth, and then you did the decent thing and never mentioned the hours again. Which is fine, until the hours change and the fee does not.</p><figure class="card" aria-label="A client budget, within the month"><div class="card-top"><span><b>Harbor &amp; Vine</b> · March</span><span class="chip chip-ok">Within budget</span></div><p class="fig"><b>40.0</b> <span>of 40 h</span></p><div class="meter" data-m="100"><i></i></div><p class="status status-ok">Within budget. The client sees $6,000. You see forty hours.</p></figure><p>Crane names the cost in the same breath as the standard: “There’s a natural incentive for scope creep, which means you’re working for less than you expected.” That sentence is the whole problem. The fee is a promise to the client. The hours are a promise to yourself, and nobody is holding you to it.</p><p>Jonathan Stark, who has spent a decade telling consultants to stop billing by the hour, described the client’s side of the fee in April 2026, after buying a website for a flat $2,800 that took the agency perhaps ten hours.</p><figure class="xq"><blockquote><p>I paid $2,800 flat fee for a new website.</p><p>Would I be happier if it took longer? No.</p><p>In fact, I would’ve paid more for them to finish it in a day instead of a week.</p></blockquote><figcaption><b>@jonathanstark, Jonathan Stark</b> · 6 April 2026 · 9 likes · <a href="https://x.com/jonathanstark/status/2041162767525105877">View on X</a></figcaption></figure><p>The client sees the fee and is glad of it. The agency saw ten hours against a budget it wrote when it quoted, and whether it made money on the job depended on that budget, not on the fee. Stark’s 2019 video on retainers puts the harder question in its title: do you trust your clients?</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=qS2L3dNcnDQ">Watch the recording on YouTube.</a></p><figcaption>Consulting Retainers: Do You Trust Your Clients? Jonathan Stark, 8 min, published 31 January 2019, 4,200 views. <a href="https://www.youtube.com/watch?v=qS2L3dNcnDQ">Watch on YouTube</a>.</figcaption></figure><p>Ron Baker and Ed Kless said on The Soul of Enterprise in 2018 what the subscription firms are actually selling: “We’re not pricing a service, we’re pricing an outcome and insurance (peace of mind).” Insurance is a good word for it. An insurer that does not count its claims is not brave. It is briefly profitable.</p><h2 id="what-it-costs-to-look-away">What it costs to look away.</h2><p>The numbers are not small. In Ignition’s May 2025 survey of 273 agency managers and executives, 57% said they lose between $1,000 and $5,000 every month to unbilled work, and 78% said they rarely or only sometimes charge for out-of-scope work. Arron Bennett, who runs a finance practice for agencies, put the mechanism in one line this June: “The extra hours get logged under the client, the retainer fee stays fixed, and the effective hourly rate on the account drops month by month.” His worked example is a $15,000 retainer consuming 240 hours at a $75 loaded cost, which is $18,000 of delivery on a $15,000 fee. The account looks profitable in the pipeline and loses $3,000 a month.</p><p>Dillon Towey, who runs operations at a nineteen-person accounting firm, told Ignition how it feels from inside: “We’d charge a client $600 a month on the assumption that we would spend no more than six hours taking care of their accounting needs. For a long time, even when we could see it was taking eight, 10, or 12 hours to take care of their needs, we’d just take it in the shorts.” Ignition’s 2022 survey of 506 US firms found 88% had delayed or avoided the conversation about it, and 43% absorbed the work.</p><p>The threads say the same thing in the first person. In December 2025 a web designer asked r/Entrepreneur how to tell a client the project was finished when the quick requests kept arriving after the final invoice, eight emails in three weeks. The thread reached 223 points. The reply with 80 points reframed it: “How does a grocery store treat you if you keep coming back in for additional items? They smile and happily ring you up and charge you for your items.” The reply with 66 turned it into the retainer: “Work a maintenance retainer into future contracts so you can continue to get paid.” Both are right, and together they are how the private budget is born. The retainer that answers scope creep is sized in hours, and then the hours creep.</p><p>IDC put a number on the creep in February 2026, from a survey of 100 professional services firms for Kantata: a “5% margin leakage from unmanaged scope due to poor variation tracking.” Five points of margin is the difference between a practice that pays its owner and one that pays its clients.</p><p>Notice what every one of those firms had. They had the private number. They knew six hours was the budget. What they did not have was the moment: a point at which the seventh hour was a question to be answered rather than a fact to be discovered.</p><h2 id="watched-at-the-hour">Watched at the hour. Not at the invoice.</h2><p>That moment is what Ceed adds, and it is the only thing it adds to the retainer. You keep the fee flat. You keep the hours to yourself. You write the hours behind each retainer into the client’s agreement, and Ceed counts every hour the team logs against it. The hour that would cross the budget is held, marked, and put in front of you for a yes or a no, the moment it is logged.</p><figure class="card" aria-label="A held hour, waiting for a decision"><div class="card-top"><span><b>Harbor &amp; Vine</b> · March</span><span class="chip">Held</span></div><p class="fig"><b>42.0</b> <span>of 40 h</span></p><div class="meter" data-m="95.2"><i></i><i></i></div><p class="entry">Thu 19 Mar · 2.0 h · Landing page revisions, round 3 · Priya K.</p><p class="status">Held for approval. 2.0 h over the client’s budget.</p><div class="verbs"><span>Approve</span><span>Decline</span></div></figure><p>Approve it, and the extra goes on the invoice at the rate in the agreement. Decline it, and it stays on the record and off the invoice, so you know exactly what you chose to give and to whom. Either way the month is not a surprise, the seventh hour was a decision, and by the third held hour you are having the conversation 88% of firms postpone, with the hours in hand and the fee not yet broken.</p><figure class="figure shot"><img src="https://ceed.so/assets/blog/the-client-sees-the-fee/partner-cap-booked-leader-service-progress-ceed-staging.png" width="1280" height="702" alt="A client page on Ceed for a demo account, Acme Co: customer since September 2026, Slack channels, cap plus excess $26,200, booked $17,600, a delivery score missing for the month, leader Sasha, closer Jon, status active, type customer, and the service card On-demand security team, active and staffed, with a progress bar reading $17.6k completed of $26,200 a month."><figcaption>The private budget as a number the firm can see. A client page on Ceed’s staging environment, September 2026, demo account: the cash cap and the excess above it, what is booked against it this month, the account leader, and the retainer’s progress bar with the cap marked on it. The client sees none of this.</figcaption></figure><p>The month reads as a burn. Cash billings against the cap. Hours delivered against hours booked. Both are live, and both come from the same entries the invoice will use.</p><figure class="figure shot"><img src="https://ceed.so/assets/blog/the-client-sees-the-fee/partner-economics-burn-cash-vs-cap-delivered-vs-booked-ceed-staging.png" width="1280" height="912" alt="Ceed’s client economics view for September 2026: a bar for cash billings against cap plus excess reading $17.6k of $26.2k, with a thin marker for the booked amount and a thick one for the cap, and a bar for delivered against booked reading $17.6k delivered of $17.6k booked, live from time tracking."><figcaption>The month as a burn. Ceed’s client economics view on staging, September 2026: cash billings against the cap plus excess, with the booked amount as a thin marker and the cap as a thick one, and hours delivered against hours booked, live from time tracking.</figcaption></figure><p>A fractional CFO who runs his practice this way explained in 2023 how he keeps the hours out of the client conversation entirely, which is the point. The hours are for the firm. Charles Leikauf’s seventeen minutes on what a fractional CFO can charge is the fuller version of the same arithmetic.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=xDcYuosv0Eg">Watch the recording on YouTube.</a></p><figcaption>How I Avoid Hourly Pricing Discussions (Fractional CFO). The CFO Report, 4 min, published 11 April 2023. <a href="https://www.youtube.com/watch?v=xDcYuosv0Eg">Watch on YouTube</a>.</figcaption></figure><figure class="vid"><p><a href="https://www.youtube.com/watch?v=s0LMxS76M6I">Watch the recording on YouTube.</a></p><figcaption>How Much Can I Charge As A Fractional CFO? Charles Leikauf, 17 min, published 27 May 2024, 9,100 views. <a href="https://www.youtube.com/watch?v=s0LMxS76M6I">Watch on YouTube</a>.</figcaption></figure><h2 id="the-invoice-still-says-one-line">The invoice still says one line.</h2><p>None of this reaches the client unless you want it to. A flat retainer invoices as a flat retainer. The hours behind it, and the budget you sized it with, stay yours.</p><figure class="card" aria-label="An invoice computed from the agreement"><div class="card-top"><span><b>Invoice</b> · Harbor &amp; Vine · March 2026</span><span class="chip chip-mid">Computed</span></div><div class="rows"><div class="row"><span>Monthly retainer · 40 h</span><span>$6,000.00</span></div><div class="row row-total"><span>Total</span><span>$6,000.00</span></div></div><p class="card-foot">Computed from the agreement dated 2 Feb 2026. Nothing typed.</p><p class="card-foot">The 2.0 h declined on 19 Mar stay on the record and off this invoice.</p></figure><p>Chris Do’s advice to designers on the same subject, never justify the price, has been watched more than a million times. The retainer client bought a result, and the one-line invoice is the result’s price. The hours behind it were never the client’s business, and with a record at the hour they no longer have to be the owner’s worry either.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=Abi8kwkfZbA">Watch the recording on YouTube.</a></p><figcaption>Don’t Justify Your Prices. Do This Instead. Chris Do, The Futur, 9 min, published 19 October 2023, 1.2 million views. <a href="https://www.youtube.com/watch?v=Abi8kwkfZbA">Watch on YouTube</a>.</figcaption></figure><p>The longest argument for the flat fee is Ron Baker’s. He spent seventy minutes with Jonathan Stark in 2023 on the subscription model for professional firms, the book he wrote about it with Paul Dunn, and why the hour should go. He is right about the price. The firms in this post show what happens to the hours after the price is right.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=5DKtt8YEUzE">Watch the recording on YouTube.</a></p><figcaption>Ron Baker, Time’s Up With Jonathan Stark, 1 h 14 min, published 18 July 2023. <a href="https://www.youtube.com/watch?v=5DKtt8YEUzE">Watch on YouTube</a>.</figcaption></figure><h2 id="the-books">What the books say.</h2><p>Eight books on the fee, the retainer and the subscription. Every one of them assumes the owner knows the hours behind the price.</p><ul class="books"><li><a href="https://www.amazon.com/dp/1119893526">Time’s Up</a><span>Paul Dunn and Ronald J. Baker, 2022. The subscription business model for professional firms, from the man who has argued against the hour since the 1990s.</span></li><li><a href="https://www.amazon.com/dp/159184746X">The Automatic Customer</a><span>John Warrillow, 2015. Nine subscription models and what each does to a firm’s value, including the ones a consultancy can actually run.</span></li><li><a href="https://www.amazon.com/dp/0525536469">Subscribed</a><span>Tien Tzuo with Gabe Weisert, 2018. Why the subscription economy happened, from the founder of Zuora, and what it asks of the seller every month.</span></li><li><a href="https://www.amazon.com/dp/1119776929">Value-Based Fees</a><span>Alan Weiss, third edition, 2021. Fees on outcomes rather than time, and the retainer chapter every fractional executive should read before quoting one.</span></li><li><a href="https://www.amazon.com/dp/1264264917">Million Dollar Consulting</a><span>Alan Weiss, sixth edition, 2021. The whole practice, from proposal to fee to the client who wants more than the agreement says.</span></li><li><a href="https://www.amazon.com/dp/1683501640">The Irresistible Consultant’s Guide to Winning Clients</a><span>David A. Fields, 2017. How consulting work is actually bought, which is the half of the fee conversation the seller does not see.</span></li><li><a href="https://www.amazon.com/dp/B0D91GR548">Hourly Billing Is Nuts</a><span>Jonathan Stark. The short, blunt case against the hour. Read it, then count the hours anyway.</span></li><li><a href="https://www.amazon.com/dp/B0DCCZL2D7">The Four Conversations</a><span>Blair Enns, 2024. The conversations that set the price, from the author of the Win Without Pitching Manifesto.</span></li></ul><h2 id="three-things-this-month">Three things to do this month.</h2><ol><li>Write down the hours behind every retainer you sell. Not the rate you tell clients. The number you priced it with.</li><li>Count every hour the team works against that number, by client, as it is logged. Not on Friday. Not at the close.</li><li>Decide the hour past the budget the day it is logged, on the record, with the client’s name on the decision.</li></ol><p>The first is yours. Ceed does the second and the third, for 0.1% of what you invoice, for <a href="https://ceed.so/industries/fractional-cfo">fractional CFO and accounting practices</a>, <a href="https://ceed.so/industries/fractional-executives">fractional executives</a>, <a href="https://ceed.so/industries/agencies">agencies</a> and the other firms that sell their team’s time. The month that taught us the third, and the moment we built to catch it, is in <a href="https://ceed.so/blog/why-we-built-ceed">The invoice told us last. Why we built Ceed.</a> The pricing side of the private budget, the rate set on day one and never moved, is in <a href="https://ceed.so/blog/the-rate-that-never-moved">The rate was set on day one. The client grew.</a>, and what the retainer’s rollover rule and block hours have to do with it is in <a href="https://ceed.so/blog/scope-creep-and-the-agreement">The agreement said 40 hours. The month said 47.</a></p><p>The firm behind Ceed also hosts <a href="https://ysecurity.io/podcast/">The Security Podcast of Silicon Valley</a>, 99 conversations since 2021 with the people who build and run security. Three of them sit on either side of a retainer.</p><ul class="show"><li><span class="ep">7</span><div><a href="https://ysecurity.io/podcast/7-michael-brooks-vciso-and-director-of-cyber-risk-services-at/">Michael Brooks, vCISO and Director of Cyber Risk Services at Trava</a><span>August 2021 · The fractional CISO model from someone who runs it, and what a fraction of a CISO is worth.</span></div></li><li><span class="ep">83</span><div><a href="https://ysecurity.io/podcast/83-how-small-companies-can-make-their-security-doable/">Phil Howie, founder and CEO of Sidekick</a><span>December 2025 · How small companies build a security practice before they can afford a team, which is the client on the other side of the retainer.</span></div></li><li><span class="ep">14</span><div><a href="https://ysecurity.io/podcast/14-biff-clark-cybersecurity-specialist-and-owner-of-coefficient-of/">Biff Clark, owner of Coefficient Technologies</a><span>March 2022 · Fifteen years of running a small security consultancy, clients and invoices included.</span></div></li></ul><h2 id="questions">Questions.</h2><div class="faq"><details name="q" open><summary>What is the private budget behind a retainer?</summary><p>The number of hours the owner divided the fee by when pricing it. A $6,000 retainer priced at $150 an hour has a private budget of forty hours. The client sees $6,000 and a result. The firm’s margin on the account depends entirely on whether the team’s hours stay near forty, which is why the budget has to be counted even though the client never hears the number.</p></details><details name="q"><summary>Should I tell the client how many hours are behind the fee?</summary><p>Usually not, and Ceed does not. A flat fee invoices as a flat fee. The hours are the firm’s cost and the firm’s business. What the client should hear about, before the invoice rather than on it, is work outside the agreement, and a held hour gives the account leader that conversation on the day the hour is logged, with the hours in hand.</p></details><details name="q"><summary>How do I price a monthly retainer?</summary><p>Taylor Crane’s benchmark for a fractional executive is about $10,000 a month for roughly ten hours a week. Jonathan Stark and Alan Weiss would price the outcome rather than the hours. Whichever way the number is set, write down the hours you sized it with, because that number is the budget the month will be measured against, and the month does not care how the fee was justified.</p></details><details name="q"><summary>What happens when a retainer’s hours run out before the month does?</summary><p>On a spreadsheet, nothing, until the invoice. On Ceed, the hour that would cross the budget is held the moment it is logged and put in front of the account leader or an owner with the client’s name on it. Approved, it is billed at the rate in the agreement. Declined, it stays on the record and off the invoice, so the firm knows what it gave away and to whom. Either way the retainer stays flat on the invoice.</p></details></div> https://ceed.so/blog/why-we-built-ceed 2026-07-07T09:00:00-07:00 2026-09-11T17:30:00-07:00 Jon McLachlanhttps://ceed.so/about

We ran a security consultancy on a spreadsheet. One month it ran tens of thousands of dollars past the hours a client had bought, and we found out when we wrote the invoice. What over-servicing and unbilled hours look like from inside a firm that sells its team’s time, and what we built to stop it.

<p>YSecurity sells its team’s time. Penetration tests, compliance programs, identity rollouts, incident response, billed in fifteen-minute increments against a monthly cap, with no retainers and no minimums. It is a good business with one hard question at the end of every month. Did the hours we worked become the money we earned.</p><p>The industry has names for the gap. One time-tracking vendor defines time leakage as “any billable work that goes unrecorded, miscategorized, or never appears on an invoice.” Agencies call it over-servicing. Accountants call it scope creep. Inside the firm it is simpler than any of those. It is an hour somebody worked that nobody decided to give away.</p><p>For years our answer lived in a spreadsheet. Each client had a tab. Each tab had the cap the client had bought, the rate, and the hours the team typed in from memory on Friday afternoon, or the following Tuesday. The rules we had agreed with our clients lived in cells. The cells held if somebody remembered to check them.</p><p>The hours were the weakest cell. A timesheet filled in from memory is a guess, and the research on how bad a guess has been available for a decade. Accelo, which makes software for firms like ours, surveyed more than 500 professionals in the summer of 2014 and found that people who record their time daily are 66% accurate, people who record it weekly are 47% accurate, and people who record it less often than weekly are 35% accurate. Logging daily cut the time lost to memory from 23% to under 5%, and the company put the cost of the weekly habit at about $52,000 per professional, per year. Our team logged on Fridays.</p><figure class="figure"><img src="https://ceed.so/assets/blog/why-we-built-ceed/timesheet-accuracy-daily-66-weekly-47-accelo-2014.svg" width="640" height="400" alt="Bar chart: people who record their time daily are 66 percent accurate, weekly 47 percent, less often than weekly 35 percent. Below, daily logging cuts lost time from 23 percent to under 5 percent, and a firm loses about 52,000 dollars per professional per year to memory when time is recorded weekly. Accelo survey of more than 500 professionals, July to August 2014."><figcaption>A timesheet filled in on Friday is half a guess. Source: Accelo (then AffinityLive), Time is Money, a survey of more than 500 professionals fielded July to August 2014.</figcaption></figure><p>The people filling in the sheets know it. When a system administrator asked r/sysadmin in June 2023 whether it was normal to account for every hour of a salaried day, a requirement explained to him as being “to show how profitable we are as a company,” the thread reached 503 points and 647 comments. The top reply, at 578 points: “the last task, every day on my timesheet was ‘Filled out timesheet of completed daily tasks’.” Another, at 149, logged one line of eight hours a day that read “Did the needful.” The most upvoted post on the subject in r/consulting, at 342 points, is a picture of a manager saying “Hey team it’s Friday. Don’t forget to submit those timesheets.” Friday is the problem. By Friday, Tuesday is gone.</p><h2 id="the-month">The month the cells did not hold.</h2><p>One month, nobody did. A client had bought a fixed number of hours. The work was urgent and good and the team did it. Nobody logged the extra as it happened, or everybody did and nobody looked, which comes to the same thing. When the invoice was written, the month was tens of thousands of dollars past what the client had agreed to pay.</p><figure class="figure"><img src="https://ceed.so/assets/blog/why-we-built-ceed/client-budget-crossed-on-the-9th-found-at-the-invoice-on-the-31st.svg" width="640" height="360" alt="Timeline of a consulting firm’s month: hours worked cross the client’s budget on the 9th and the overrun is found on the 31st, when the invoice is written. The 22 days between are shaded as work past the budget that nobody decided."><figcaption>How a client budget is crossed early and found late. Everything in the shaded stretch was billed by surprise or given away.</figcaption></figure><p>We were not unusual. In Magnetic’s benchmark of 104 agencies, with a median size of twenty people, 68% said they regularly go over project budgets and 57% said they get no warning before it happens. The month we are describing is the normal month, with a bigger number on it.</p><p>The newer numbers say the same thing at industry scale. In February 2026 IDC surveyed 100 professional services organizations in the United States, Canada and the United Kingdom for a white paper sponsored by Kantata, which sells software to those firms, and concluded that firms which look at that kind of software and never adopt it may be quietly losing 5 to 10% of their potential revenue and productivity each year. The paper names the leaks: “5% margin leakage from unmanaged scope due to poor variation tracking,” “up to 20% of skilled employees’ time lost to administration work,” and a “3% delay in invoices being issued.” The sponsor has a product to sell, and the numbers are still the ones every firm we know recognizes. Ours was the 5%, found on the 31st.</p><p>Sometimes the invoice never tells at all. In May 2022 a marketer who runs campaigns for small businesses posted in r/smallbusiness that he had been looking through his payments account and realized he had not invoiced a client since the previous October. Six months of work. The client had noticed nothing and neither had he. The thread is small, 33 points, and it is the purest version of the problem: the only place the hours and the money met was one person’s memory, and the person was busy.</p><p>There are two things a firm can do at that point, and over the years we did both. You can send the invoice and surprise a client who trusted you, then take the call that follows, and the discount that follows the call. Or you can eat the hours, which means paying your people for work nobody will ever pay you for. Neither is a decision. Both are what happens when the decision was never made.</p><h2 id="missed-not-lost">Missed. Not lost.</h2><p>We started calling these missed opportunities, because that is what they were. Nobody took the money. We never had the moment in which to keep it.</p><p>The hour worked at eleven at night and never counted was a missed opportunity to bill it. The budget crossed on the ninth and found on the thirty-first was a missed opportunity to ask the client, while it was still a question, whether they wanted the extra work. The cap that was too small for a year was a missed opportunity to reprice it, because we could never put the hours in front of the client. The partner paid from a sheet we hoped was right was a missed opportunity to pay them from the same numbers the invoice used. The equity we took from a startup as fees, recorded in no book, was a missed opportunity to know what the firm had earned. And the three days of the owner’s month that went into closing the books were a missed opportunity to do anything else with them.</p><p>Every one of them was a decision we did not know we were making. That was the pain. Not the money, though the money hurt. The firm’s own rules were held by nobody at the one moment they mattered, and reported to us afterwards as history.</p><p>David C. Baker has measured the same gap across thousands of firms. On 2Bobs, the podcast he hosts with Blair Enns, he put it in two numbers: “the average firm in the marketing, digital, advertising space is capturing 42 percent of all the time rather than 60.” Not because the firms are idle. “It’s not because they’re not busy. They’re busy,” he said, and “the difference between capturing 60 and 42 percent is that they are underpricing some things and over-servicing things.” The hours were worked. They were never counted.</p><figure class="figure"><img src="https://ceed.so/assets/blog/why-we-built-ceed/hours-captured-42-percent-vs-60-percent-david-c-baker-2bobs.svg" width="640" height="300" alt="Bar chart: the average creative firm captures 42 percent of the hours it works, against the 60 percent David C. Baker says a well run firm captures. The 18 point gap is labelled under-pricing and over-servicing."><figcaption>Hours captured by the average creative firm, against what Baker says a well run firm captures. Source: David C. Baker with Blair Enns, 2Bobs, “Transcending Timesheets”, 7 October 2020.</figcaption></figure><figure class="vid"><p><a href="https://www.youtube.com/watch?v=x-mwbljeDoM&amp;t=1221s">Watch the recording on YouTube.</a></p><figcaption>Transcending Timesheets. 2Bobs, David C. Baker and Blair Enns, 33 min, first released 7 October 2020. Baker’s four arguments against timekeeping and the one reason he keeps it. The player starts at the passage quoted above, <a href="https://www.youtube.com/watch?v=x-mwbljeDoM&amp;t=1221s">20:21 on YouTube</a>.</figcaption></figure><p>Ron Baker, the accountant who has spent thirty years telling professional firms to throw their timesheets away, said the thing we kept coming back to on his own show in 2016: “By definition, once you see something on a timesheet, it can no longer be managed.” We disagree with him about the timesheet and agree with him completely about the sentence. A record read after the month is history. Ours was a very accurate history of decisions nobody made. In 2010 the ABA Journal filmed him making the longer argument to lawyers, seven minutes on why the hour is the wrong thing to sell.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=nVj93eqDAIE">Watch the recording on YouTube.</a></p><figcaption>Escaping the Tyranny of Time. Ron Baker with the ABA Journal, 7 min, published 3 September 2010. <a href="https://www.youtube.com/watch?v=nVj93eqDAIE">Watch on YouTube</a>.</figcaption></figure><p>Jonathan Stark, who has built a practice on telling consultants to stop billing by the hour, is more careful about the record than his reputation suggests. In a thread from February 2023 he said why he keeps the door open.</p><figure class="xq"><blockquote><p>Unlike many of my peers, I’m not categorically opposed to the idea of keeping timesheets.</p><p>Tracking hours is a cost optimization tactic, which can be useful if your costs are out of control. Just remember that you can only increase your profits so far by controlling costs.</p></blockquote><figcaption><b>@jonathanstark, Jonathan Stark</b> · 3 February 2023 · 84 likes · <a href="https://x.com/jonathanstark/status/1621732708962418688">View on X</a></figcaption></figure><p>Our costs were out of control for one month and we did not know it until the 31st. That is the whole case for the record. Not a timesheet read on Friday about Tuesday, but a count made at the hour, by the person who worked it, against the number the client bought, in front of someone with the authority to act before the month is over.</p><h2 id="stop-counting-hours">The advice was to stop counting hours.</h2><p>The advice we heard, and the advice most firms like ours hear, is to stop selling time. Price the outcome, put a fee on the agreement, and let the hours go. Jonathan Stark has built a career on it. On The Futur’s livestream, watched 276,000 times, he described the firm he ran before he changed his mind: “I was fighting with clients about estimates that we went over. I was arguing about invoices and time sheets, and I was always whipping the developers to get their hours in by the end of the week so we could invoice on Monday.” We recognized every word.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=B1b7QlQILRo&amp;t=165s">Watch the recording on YouTube.</a></p><figcaption>Hourly Billing Is Nuts. Stop Trading Time For Money. The Futur with Jonathan Stark, livestream, 11 September 2018, 1 h 25 min, 276,000 views. The player starts at the passage quoted above, <a href="https://www.youtube.com/watch?v=B1b7QlQILRo&amp;t=165s">2:45 on YouTube</a>.</figcaption></figure><p>Patrick McKenzie, who writes as patio11 and has told a generation of consultants to charge more, put the case for the price in a post from 2019 that consultants still send each other.</p><figure class="xq"><blockquote><p>Rates exert gravity.</p><p>If you charge more, you’ll spend your time talking to more sophisticated clients, working in better businesses, specializing in projects close to the money. These are compounding advantages.</p><p>If you charge less, similar dynamics apply.</p></blockquote><figcaption><b>@patio11, Patrick McKenzie</b> · 10 February 2019 · 595 likes · <a href="https://x.com/patio11/status/1094425564209909760">View on X</a></figcaption></figure><p>David C. Baker made the same point to The Futur in 2020, nine minutes on getting paid for judgment rather than for hours. We agree with all of it, and it was not the problem we had. Whatever we charged, the hours were still our cost, and the cost was counted last.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=HNoLn3rapK4">Watch the recording on YouTube.</a></p><figcaption>Getting Paid To Think. David C. Baker with Chris Do, The Futur, 9 min, published 29 April 2020, 48,000 views. <a href="https://www.youtube.com/watch?v=HNoLn3rapK4">Watch on YouTube</a>.</figcaption></figure><p>The consultants who take the advice find the same thing. In August 2023 the owner of a technology consultancy told r/consulting he was moving clients and contractors from hours to tiers, “monthly subscriptions that reflect the average value we both agree we provide,” because “hours do not reflect value.” The thread reached 199 points. The top reply, at 135, was one sentence: “This will only work if you do not underestimate the amount of work involved in the services you provide.” The fee is flat and the hours behind it still have to be counted, by somebody, against something.</p><p>We agree with him about the price and disagree about the record. Whether a firm bills by the hour or by the outcome, the hours are its cost, and a cost nobody counts is a decision nobody made. The firms that took the advice sized their fixed fees in hours anyway, then stopped watching the number. That is the subject of <a href="https://ceed.so/blog/the-client-sees-the-fee">They see the fee. You see the hours.</a> This post is about the moment the number is crossed. What the same missing record does to getting paid, to the rate and to the agreement is in three later posts: <a href="https://ceed.so/blog/late-paying-clients">The client paid late. The invoice was later.</a>, <a href="https://ceed.so/blog/the-rate-that-never-moved">The rate was set on day one. The client grew.</a> and <a href="https://ceed.so/blog/scope-creep-and-the-agreement">The agreement said 40 hours. The month said 47.</a></p><h2 id="alert-refuse-hold">Alert. Refuse. Hold.</h2><p>So we asked what software would have to do to have stopped that month. Not what it would have to show us. What it would have to do.</p><p>When an hour crosses a client’s budget, a system can do one of three things. It can tell you later, in an email the next morning, which is a report, and by then the hour is in the month. It can refuse the hour, which means the work was done and the record now says it was not, and the hour is eaten before anyone decides. Or it can hold the hour: save it, mark it, and put it in front of a named person for a yes or a no, the moment it is logged.</p><p>The refusal is the industry default, and the people inside it describe it precisely. In July 2025 an accountant posted in r/Accounting under the title “Manager: ‘Never eat hours.’ Also manager: ‘Why did you go over budget?’” They had logged fourteen honest hours against an eight-hour budget and were marked down for inefficiency. The thread reached 920 points. The top reply, at 218: “Welcome to public accounting where the budgets are made up and the hours don’t matter.” Another, at 31: “They want you to eat your hours, they don’t want to know you are eating your hours.” That is a refusal with a human face. The hour is worked, the record says it was not, and the person who did the work carries the difference.</p><figure class="figure"><img src="https://ceed.so/assets/blog/why-we-built-ceed/alert-refuse-hold-what-software-does-when-an-hour-crosses-the-budget.svg" width="640" height="360" alt="Three ways time-tracking software handles an hour over a client budget: a budget alert emailed later with the hour already in the month, a refused time entry missing from the record, and a held hour waiting for approval with the budget intact and both the hour and the decision on the record."><figcaption>Three things software can do with the hour that crosses a budget. Only the hold keeps the hour and the decision on the record. Where each tool in the field stands is on the <a href="https://ceed.so/compare">comparison page</a>, dated.</figcaption></figure><figure class="card" aria-label="A held hour, waiting for a decision"><div class="card-top"><span><b>Acme Co</b> · June</span><span class="chip">Held</span></div><p class="fig"><b>41.5</b> <span>of 40 h</span></p><div class="meter" data-m="96.4"><i></i><i></i></div><p class="entry">Tue 9 Jun · 1.5 h · Board deck · Maya R.</p><p class="status">Held for approval. 1.5 h over the client’s budget.</p><div class="verbs"><span>Approve</span><span>Decline</span></div></figure><p>We built the third. If an hour would push a client over budget, Ceed holds it for approval the moment it is logged. The hour stays on the record. The budget still holds. The person who logged it knows at once, the account leader decides that day, and the client hears about the extra before the invoice, not on it. <a href="https://ceed.so/blog/held-not-hidden">Held. Not hidden.</a> became the rule everything else follows, and that post shows what the person who logged the hour sees.</p><figure class="figure shot"><img src="https://ceed.so/assets/blog/why-we-built-ceed/today-two-hours-held-approve-with-a-reason-ceed-staging.png" width="1280" height="480" alt="Ceed’s Today page for a demo account: two hours held on Acme Co, logged by Tomás Aguilar, over the booked hours. The card explains that approving raises the allocation and declining keeps the hours on record and off the invoice, shows one entry and two hours held, a typed reason that reads Their CFO asked for it on Thursday’s call, bill it at the agreement rate, and two buttons, Decline and Approve."><figcaption>The same moment in the product. Ceed’s Today page on the staging environment, September 2026, with a demo account: two hours past the booked hours, held for approval, the reason typed and kept with the approver’s name, and Approve and Decline as the only two verbs.</figcaption></figure><h2 id="computed-from-the-agreement">The invoice comes from the agreement.</h2><p>The second rule came from the invoice itself. Ours had been typed, from a spreadsheet, by a person who was tired. In Ceed the invoice is computed from the agreement: the retainer, the budget, the rates by role, the discounts, the equity taken as payment. It comes out the same way every time, and it matches what the client signed because it was made from what the client signed.</p><figure class="card" aria-label="An invoice computed from the agreement"><div class="card-top"><span><b>Invoice</b> · Acme Co · June 2026</span><span class="chip chip-mid">Computed</span></div><div class="rows"><div class="row"><span>Monthly retainer · 40 h</span><span>$8,000.00</span></div><div class="row"><span>Approved hours past the budget · 1.5 h at $200.00</span><span>$300.00</span></div><div class="row row-total"><span>Total</span><span>$8,300.00</span></div></div><p class="card-foot">Computed from the agreement dated 3 Feb 2026. Nothing typed.</p></figure><figure class="figure shot"><img src="https://ceed.so/assets/blog/why-we-built-ceed/today-invoice-ready-nothing-billed-until-approved-ceed-staging.png" width="1280" height="369" alt="Ceed’s Today page with an item reading Acme Co’s invoice is ready, $16,000 invoiceable, nothing is billed until you approve it, and a card headed Invoice ready: approved hours, priced by the waterfall, preparing opens a draft and approving inside the document freezes it, with the document line reading draft or none, nothing issued."><figcaption>In the product, the invoice waits for a person. Ceed’s Today page on staging, September 2026, demo account: the approved hours are priced by the agreement and prepared as a draft. Nothing is issued until an owner approves it, and approving inside the document freezes it.</figcaption></figure><p>The same entries pay everyone. The contractor’s payout statement and the partner’s commission come from the hours the invoice used, so there is no second sheet to reconcile and no argument on payday. Margin per client is visible this morning, to the owners and whoever they name, and the server enforces who sees what. When a month closes, it closes. The invoices, the statements and the margin are frozen as a record, and nothing in it changes after. The close stopped being a project and became a record.</p><figure class="figure shot"><img src="https://ceed.so/assets/blog/why-we-built-ceed/activity-append-only-held-to-approved-ceed-staging.png" width="1280" height="372" alt="Ceed’s Activity page, headed Every change, forever, append-only: actor, action, before and after. Two rows for Acme Co by Jon: a time entry changed from 42 booked hours and held to 44 and approved, and a time entry added with its description, hours and status."><figcaption>The record itself. Ceed’s Activity page on staging, September 2026: every change, forever, with the actor, the action, and the value before and after. The top row is a held hour becoming approved, with the booked hours moving from 42 to 44.</figcaption></figure><h2 id="pricing">0.1%. That is the pricing page.</h2><p>We priced Ceed the way we wished our own tools had been priced. 0.1% of what a firm invoices. No seats, so adding a contractor for a month costs nothing. No tiers, so the hold is not a feature on a higher plan. No minimum, so a month you invoice nothing costs nothing. Invoice $200,000 and pay $200. The rate never moves, so the renewal email never arrives.</p><h2 id="our-books-first">Our books first.</h2><p>Ceed is the record YSecurity runs on today. Every hour our team logs, every client’s cap, every invoice, every payout statement and every close goes through it, and the rule that would have saved us that month holds itself now, at the hour, without anyone remembering to check.</p><div class="founders"><div class="founder"><img src="https://ceed.so/assets/blog/why-we-built-ceed/jon-mclachlan-co-founder-ceed-ysecurity-160.jpg" width="160" height="160" alt="Jon McLachlan, co-founder of Ceed and YSecurity"><div><b>Jon McLachlan</b><span>Co-founder. Started in security at Apple. Led teams at Pure Storage, UnifyID and Robinhood.</span></div></div><div class="founder"><img src="https://ceed.so/assets/blog/why-we-built-ceed/sasha-sinkevich-co-founder-ceed-ysecurity-160.jpg" width="160" height="160" alt="Sasha Sinkevich, co-founder of Ceed and YSecurity"><div><b>Sasha Sinkevich</b><span>Co-founder. Built security from the ground up at Robinhood, Yugabyte and Symphony.</span></div></div></div><p>The firm behind Ceed also hosts <a href="https://ysecurity.io/podcast/">The Security Podcast of Silicon Valley</a>, 98 conversations since 2021 with the people who build and run security. Three of them are with people who run the kind of firm this post is about.</p><ul class="show"><li><span class="ep">7</span><div><a href="https://ysecurity.io/podcast/7-michael-brooks-vciso-and-director-of-cyber-risk-services-at/">Michael Brooks, vCISO and Director of Cyber Risk Services at Trava</a><span>August 2021 · The fractional CISO model, from someone who runs it. The kind of practice Ceed starts with.</span></div></li><li><span class="ep">14</span><div><a href="https://ysecurity.io/podcast/14-biff-clark-cybersecurity-specialist-and-owner-of-coefficient-of/">Biff Clark, owner of Coefficient Technologies</a><span>March 2022 · Fifteen years of running a small security consultancy, the business side included.</span></div></li><li><span class="ep">80</span><div><a href="https://ysecurity.io/podcast/80-think-like-a-hacker-why-curiosity-drives-innovation-and-security/">Ted Harrington, author of Hackable and a partner at Independent Security Evaluators</a><span>October 2025 · On the mindset that improves systems rather than exploiting them.</span></div></li></ul><p>Two other shows have said in public what we learned in private. <a href="https://www.thesoulofenterprise.com/tsoe/timesheets">The Soul of Enterprise</a>, Ron Baker and Ed Kless, spent an episode in September 2016 on trashing the timesheet, which is where the sentence about management above comes from. <a href="https://www.parakeeto.com/blog/from-losing-money-to-strong-profits-real-case-client-study-with-carson-pierce-ep-206/">The Agency Profit Podcast</a>, from Parakeeto, walked through a real agency in November 2025 whose revenue was almost entirely going to pay its own people, and whose first fixes were getting the team to log time and counting account management as delivery. And the advice at Y Combinator’s Startup School is the one we followed without knowing it: notice the problem you have yourself, and check that other people have it too.</p><figure class="vid"><p><a href="https://www.youtube.com/watch?v=Th8JoIan4dg">Watch the recording on YouTube.</a></p><figcaption>How to Get and Evaluate Startup Ideas. Jared Friedman, Y Combinator Startup School, 32 min, published 17 November 2022, 1.6 million views. <a href="https://www.youtube.com/watch?v=Th8JoIan4dg">Watch on YouTube</a>.</figcaption></figure><h2 id="the-books">What the books say.</h2><p>Seven books for the owner of a firm that sells its team’s time, in the order we wish we had read them.</p><ul class="books"><li><a href="https://www.amazon.com/dp/0887307280">The E-Myth Revisited</a><span>Michael E. Gerber, 1995. Why the technician who starts a firm ends up running it from a spreadsheet, and what a system is for. The first book most consultancy founders are handed, for a reason.</span></li><li><a href="https://www.amazon.com/dp/1492180742">The Mom Test</a><span>Rob Fitzpatrick, 2013. How to find out whether other people have your problem without leading them. The questions to ask before you build anything.</span></li><li><a href="https://www.amazon.com/dp/0307463745">Rework</a><span>Jason Fried and David Heinemeier Hansson, 2010. Scratch your own itch, and the short chapter on why estimates are guesses.</span></li><li><a href="https://www.amazon.com/dp/0684834316">Managing the Professional Service Firm</a><span>David H. Maister, 1993. The book on how a firm that sells time actually makes money, including the arithmetic every owner should know on how hours worked become hours billed.</span></li><li><a href="https://www.amazon.com/dp/0470584610">Implementing Value Pricing</a><span>Ronald J. Baker, 2010. The case against the hour from the man who has made it longest. Read it to understand what the price should be, then keep the record anyway.</span></li><li><a href="https://www.amazon.com/dp/B011T6SNA2">Built to Sell</a><span>John Warrillow, 2011. Why a firm that lives in the owner’s head is worth nothing to anyone else, and what a buyer wants to see in the record.</span></li><li><a href="https://www.amazon.com/dp/0358213258">Company of One</a><span>Paul Jarvis, 2019. Staying small on purpose, which only works if the small firm’s hours are counted.</span></li></ul><p>We are selecting the firms we start with: <a href="https://ceed.so/industries/fractional-cfo">fractional CFO</a>, <a href="https://ceed.so/industries/security">CISO</a>, <a href="https://ceed.so/industries/fractional-executives">CMO and CTO practices</a>, <a href="https://ceed.so/industries/security">security</a> and <a href="https://ceed.so/industries/software">engineering boutiques</a>, <a href="https://ceed.so/industries/consulting">consultancies</a> and <a href="https://ceed.so/industries/agencies">agencies</a> up to fifty people. If your firm sells its team’s time and finds out about the budget when it writes the invoice, write to us and say how Ceed would help. A person replies.</p><h2 id="questions">Questions.</h2><div class="faq"><details name="q" open><summary>What is over-servicing?</summary><p>Over-servicing is work a client did not pay for that the firm never decided to give away: the extra hours logged under a fixed fee, the revision that was out of scope, the incident handled at 2 a.m. and never billed. Time-tracking vendors call the same gap time leakage, “any billable work that goes unrecorded, miscategorized, or never appears on an invoice.”</p></details><details name="q"><summary>Why do firms find out about an over-budget month at the invoice?</summary><p>Because the budget lives in a spreadsheet or a report and the hours arrive later, from memory. Nothing checks the hour against the budget at the moment it is logged, so the first place the two numbers meet is the invoice. In Magnetic’s benchmark of 104 agencies, 57% said they get no warning before a budget is exceeded.</p></details><details name="q"><summary>What does it mean to hold an hour?</summary><p>The hour that would push a client over budget is saved, marked as held, and put in front of a named person for a yes or a no the moment it is logged. Approved, it goes on the invoice at the rate in the agreement. Declined, it stays on the record and off the invoice. Either way the hour and the decision survive, which is the whole of <a href="https://ceed.so/blog/held-not-hidden">Held. Not hidden.</a></p></details><details name="q"><summary>Why not stop tracking time, as the pricing experts advise?</summary><p>Because the hours are the firm’s cost whether or not they are the client’s price. Jonathan Stark, Ron Baker and Blair Enns are right that the hour is the wrong thing to sell. They also concede, in the recordings above, that a firm whose costs are out of control needs to count them. A flat fee with no record of the hours behind it is a bet the owner cannot check until the month closes. Ceed lets a firm price however it likes and still counts every hour against the budget the fee was sized with, at the moment it is logged.</p></details><details name="q"><summary>How accurate is a timesheet filled in at the end of the week?</summary><p>About half right. Accelo’s 2014 survey of more than 500 professionals found daily loggers 66% accurate, weekly loggers 47% and less-than-weekly loggers 35%, with daily logging cutting lost time from 23% to under 5%. That is why Ceed asks for the hours the day after they are worked, with one Slack message a day, and why the budget is checked at entry rather than at the close.</p></details></div>