i have an opportunity to set myself up as a consultant and have some questions for anyone in this community who travels for consulting gigs.
1. for out-of-town work, do you charge for travel time? if yes, at the same hourly rate as your actual "billable hours"?
2. also for out-of-town work, do you charge for actual expenses, or per diem?
3. is there an IRS guideline I should be following for any/all of this?
I don't so a ton of traveling for work, but some.
Good luck! I hope it works out for you.
1. Not usually, although it depends.
2. Per diem on meals actuals on lodging/travel. Usually with a contract estimate of expected travel costs
3. I have an accountant.. This changes from time to time.
Here is an image from a person that I took a bunch of advice from, I cut his company info off the top but the name is in the body, you can find the "company" on Manta but there is no web presence I can find. I don't even know if he is still in the game or not. This was distributed to customers so I don't think I am giving away anything secret here. Notice this is really old so the rates aren't current. I did mine the same way when I was consulting and never had a customer complain about my billing.
Re my background - I've worked both as a self-employed consultant where it was me, myself & I, and I've worked for my current employer as a consultant and now manage a few consultants.
1. Usually not for the time to and from the designated site, but I would bill travel cost (plane tickets, mileage etc, potentially hotels, parking and restaurants). That said, if the client has multiple sites, I'm supposed to be at site A and in the middle of the day they send me to site B, well, they're paying for that time as well as the travel expenses incurred - once the taximeter starts running, it's not going to get turned off until the end of the day.
2. Actual expenses, if you're working on a fixed per diem that works for, say, Chicago and you're working in Seattle, you're paying for stuff out of pocket that you probably shouldn't.
3. That's something you really want to talk through with an accountant, I don't think it's worth becoming an expert in that. Just make sure to keep all receipts, but you'll need that for your client invoices already.
One thing to consider - sometimes clients want you to adhere to their travel policy. If that's the case, you definitely want to make sure you get a copy of it first and it's spelled out in the contract exactly what version you're adhering to. Nothing like finding out that the client's travel policy requires that you only book red eye flights on Spirit and stay in Motel 6 or cheaper, ideally sharing the room with a competitor's consultant. The way I look at this is that I don't want to get rich off the expenses, but the reasonable expenses that I wouldn't have if I was working with someone remotely are covered.
A lot of travel policies are reasonable, but there's always that one client that wants you to stay in a motel so good the roaches just moved out on a per diem that's not enough to pay for breakfast.
Oh, and when it comes to rates (yes, I know you didn't ask about that) - they're paying for your expertise and the time it takes to acquire that, so the hourly/daily rate needs to reflect that. They're not paying for an hour of your time, they're paying for the 20/30/40 years of experience that is leading up to the hour of your time.
Also, if they want a daily rate,explain to them how many hours that buys them. I had some clients in the UK that had the idea they were paying me a daily rate and that would cover as many hours in the day that they wanted. I had to explain to them that I draw the line at 10 hours and then I'm starting to charge extra.
Also, figure out where your boundaries are. For example, I'm not getting up at 3am to take an early morning flight to a client and save them a night in a hotel. They're not getting their money's worth if I'm dead nuts tired, and I don't enjoy working when all zombied up on five Red Bull.
Believe it or not we had a three man team travel to chemical plants to pressure test hoses.
1. We did have travel days and charge; per person x 8 hours x lower rate than the testing rate.
2. We charged a per diem for food/hotels and the rate was the same. We also had a mileage charge to cover the boys traveling from Houston to Detroit.
3. No idea
After charging a big plant for a 7 day test the manager calls me to say they undercharged on the hotel rooms and we need to add another $1500 to the invoice. He was told to pound sand.
good feedback so far, thanks! keep it coming!
Why would a large chemical plant drop $15,000-$18,000 to test and certify 600-700 hoses?
Liability - can you factor money in for future issues? Now the plant has somebody to sue should an incident occur.
I like to visit an expensive restaurant on my first visit anywhere and then I turn in the receipt. If nobody protests it sets the bar in a nice place for future travel. If they protest I will kindly back it down a couple notches. "Sorry".
My bro-in-law worked for XYZ doing management consulting. Billed at $5,000 per day + actual expenses like air, hotels, taxi, food up to a set value per day. Soup to nuts. That seemed liked a fairly simple methodology.... right? At that point I realized there are levels to this game called life.
Engineering consultant:
Per diem based on 12hrs at applicable hourly rate. Hourly rates here (Australia) are hard to compare to rates there.
actual costs (travel, meals) + 15%
I'd say duke nailed it for most of my comments. However....
for part 1. Find out what the rules are. Your time means something and you don't need to be a pending 8 hours to get somewhere to do a single day's work then repeat. There is an opportunity cost as a consultant you need to factor in either through paid time for travel or a rate that makes it ok for 8 hours work to cover 24 hours of potential billable time.
part 2 I am a big fan of per diems. The extra effort you put in to find a better deal (usually though rewards program discounts YOU earned) or risking bed bugs in a less reputable place should go to the person who earned or risked for it, not their bean counter. Base it on what it costs you to live the way you live at home. Don't want a ratty hotel room and cheap fast food? Set your per diem to stay at a hotel that matches your bedroom quality and the kind of food you eat at home.
part 3 ...., yeah. Talk to an accountant. Barring government entity requirements the IRS milage rate is the only standard I know of.
I work on industrial equipment in large facilities. Here is a breif rundown.
This pricing structure works out well for us. Just flat rate per tech per day regardless of what they are doing. Makes putting estimates and billing a lot easier too.
Long story short, don't sell yourself short. Travel costs are kind of a joke because if you are busy, you could be working full rate at a closer job. So if this customer further from your home base wants you, they need to make it worth your while. Same with Per Diems. A realistic Per Diem is around $250 right now, and that doesn't really even cover fuel for your car. A decent Hilton property is over 2 bills pretty much anywhere. Bill Airfare at "comfort plus" or above if applicable.
The whole "contractor rates" lightbulb really turned on when I was working with a guy who owned his own construction company.
"I get $50 to get out of bed."
"I get $200 to load up my excavator"
"Clock is ticking from when I pull out of my driveway to when I get home"
At the time I was like "this guy is an shiny happy person" then I realized he is a guy with a valuable service and skill set and knows to charge accordingly.
OHSCrifle said:My bro-in-law worked for XYZ doing management consulting. Billed at $5,000 per day + actual expenses like air, hotels, taxi, food up to a set value per day. Soup to nuts. That seemed liked a fairly simple methodology.... right? At that point I realized there are levels to this game called life.
What did/does your bil do??
Datsun310Guy said:Why would a large chemical plant drop $15,000-$18,000 to test and certify 600-700 hoses?
Liability - can you factor money in for future issues? Now the plant has somebody to sue should an incident occur.
This is a good point. When I was in oil and gas all of our contracts had a limit of liability clause, we always asked for limit being the value of the contract. TBH I don't remember if that was something we ever bent on or not. But if you are a one man band certainly a contract clause to consider.
jfryjfry said:OHSCrifle said:My bro-in-law worked for XYZ doing management consulting. Billed at $5,000 per day + actual expenses like air, hotels, taxi, food up to a set value per day. Soup to nuts. That seemed liked a fairly simple methodology.... right? At that point I realized there are levels to this game called life.
What did/does your bil do??
It was some "management consultant" role populated by Ivy League MBAs. From my perspective it was primarily separating fortune 100 bank and telecom clients from their money. A different world than I live in.
I've worked in consulting for a while now, but I'm not heavily involved with the billing process. Plus, most of my work (IT) is remote, so I don't travel often for work.
1. No, the time is generally not billable. There's a per-mile reimbursement if it's outside the metro area where you live. Or, if you're flying, you can get reimbursed for plane tickets, hotels and rental cars. If you're flying and doing actual work while you're sitting in the airport or on the plane, that can be billable.
2. For meals and misc expenses, it's a per-diem.
3. There's IRS guidelines on per-diems and mileage reimbursements. I know the per-diems are on a geographic basis.
AngryCorvair (Forum Supporter) said:i have an opportunity to set myself up as a consultant and have some questions for anyone in this community who travels for consulting gigs.
1. for out-of-town work, do you charge for travel time? if yes, at the same hourly rate as your actual "billable hours"?
2. also for out-of-town work, do you charge for actual expenses, or per diem?
3. is there an IRS guideline I should be following for any/all of this?
I worked for an engineering consulting firm before I retired. I charged for travel time at my usual hourly rate plus whatever the IRS mileage number was at the time (it's $0.655/mile for 2023). I would also charge for other expenses such as meals. For the most part my work was within 150 miles of home base, I drove my own car, and didn't include overnight travel.
For projects that were right in my back yard (say within 10 miles) I would typically not bother with charging mileage, it wasn't worth the effort for a few bucks.
Important IRS note...
If you are a W-2 employee, you CAN NOT claim business expenses such as mileage. You can only do that if you set up a legitimate business and file separate taxes for it.
Not a big deal, but it will cost you if you make a mistake.
Start an LLC, have separate bank accounts, file some paperwork, file the separate taxes, get a 1099 from the customer, and make the effort to offer consulting services to more customers (because the IRS frowns on "businesses" that only have 1 customer- that's a captive subcontractor, and might end up being treated like a W-2 employee).
But everyone starts with 1 customer, so it's not an issue for a while.
Best of luck!!
I do management-type consulting, and don't have much to add except that, as you can see, a lot depends on your industry. What works in trades and engineering might not sell to the Office Space crowd.
I bid my work by the day, per project, with actual expenses and IRS mileage, but don't bill travel time per se. If it's short it's a cost of doing business, longer trips I'll work on the plane.
Definitely find out what your client's travel policies are. Most of the contracts refer to these policies, and even when they don't that's how the client thinks.
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