Billing Equipment to the Client

The methodology for billing equipment costs to the client is based on the change in meter hours and the status of timesheets for the period being marked up. It’s a fair observation to say it is a decidedly cryptic formula. In our defense, an important client worked out the details with their important client, so we made it happen. Here are the details:

EQ – Monthly Equipment Billings Methodology

The billing can be previewed by generating the Equipment Job History report under ‘Equipment Reports’.

There are two possible ways that actual monthly billing will be calculated:

1) Usage Billing — based on the equipment’s actual usage (the cumulative delta of the equipment’s hour meter readings throughout the month), combined with any standby usage.

2) Availability Billing — based on the equipment’s availability during the month. (The sum of the quantities entered on all timesheets with status “Used” for that month.)

The greater of these two methods is the amount that will be billed.

1) USAGE BILLING

There are two components to an equipment’s “usage billing” — one for timesheets with status “Used” and one for timesheets with status “Standby”.

A) Used

The Used component for the month is nominally based on the sum of the equipment’s actual usage (as determined by the delta of its hour meter readings on its various timesheets). However, this value is bounded by the minimum and maximum billing hours as indicated by the rate type on those timesheets.

e.g. Rate Type SHE has 200 minimum billing hours and 400 maximum billing hours.

This is complicated by the fact that these minimum and maximum billing hours assume that the equipment was available for the entire month. If the equipment was not available for the entire month, then we prorate the minimum and maximum values to reflect this.

e.g. AC_001 has 18 timesheets in November with a “Used” status. Since November has 30 days in it, we prorate the minimum and maximum billing hours by 18/30. The rate type on these timesheets is SHE so the minimum billing hours will be 200 x 18/30 = 120 hours and the maximum billing hours will be 400 x 18/30 = 240 hours.

AC_001 has been used for a total of 48 hours in November (as determined by the delta of its meter readings for the month). Since this is less than the prorated minimum billing hours of 120 hours, we use 120 hours to calculate the “Used” component. AC_001 has a “Used” rate of $8.99 (this is the sum of the regular rate + OGM + fuel), so we get $1,078.80 for the Used portion of AC_001’s usage billing for November.

B) Standby

The Standby component for the month is a prorated percentage of the minimum billing hours (as determined by the timesheet’s rate type) based on the number of days on standby in that month.

e.g. AC_001 has 12 timesheets in November with a status of “Standby” and its standby rate is $6.27. The rate type on these timesheets is SHE so the minimum billing hours are 200. The monthly standby billing rate is therefore $6.27 x 200 = $1,254.00. However, since it was on standby for only 12 of November’s 30 days, we prorate this value: $1,254.00 x (12/30) = $501.60. $501.60 is the standby portion of AC_001’s usage billing for November.

The total “Usage Billing” is the sum of the Used and Standby portions.

e.g. The total “Usage Billing” for AC_001 is $1,078.80 + $501.60 = $1,580.40.

2) AVAILABILITY BILLING

An equipment’s availability is determined by the sum of all the quantities entered on timesheets with a “Used” status during the month. (Timesheets with a “Not in use” or “Standby” status have no effect on the calculation of “Availability Billing”.) However, there is a maximum on this value which is the same as the minimum monthly billing hours for the appropriate rate type. (For rate type SHE, this minimum is 200 hours, so the maximum number of “availability hours” will be 200.)

Once the number of availability hours are determined, it is multiplied by that equipment’s hourly rate (regular rate + OGM + fuel) to get a monthly billing figure.

e.g. AC_001 has 18 timesheets with a “used” status, each with 10 hours entered for the quantity. This gives a total of 180 hours of availability. The rate type on these timesheets (SHE) has minimum billing hours of 200, so 200 hours is the maximum number of billing hours for this equipment. Since 180 is less than this, 180 is the number we will use to calculate the “availability billing”. AC_001 has a “Used” rate of $8.99 (this is the sum of the regular rate + OGM + fuel) so the total “Availability Billing” for AC_001 is 180 hours x $8.99 = $1,618.20.

ACTUAL BILLING

The actual billing for the month is the greater of the “Usage Billing” or the “Availability Billing”.

e.g. Since AC_001’s “Availability Billing” of $1,618.20 is greater than its “Usage Billing” of $1,580.40, the actual billing for the month will be $1,618.20.

EFFECTIVE HOURLY RATES

The above examples all refer to hourly rates. For equipment that uses monthly rates, an “effective” hourly rate can be determined by dividing the monthly rate by the minimum billing hours for the timesheet’s rate type (usually 200 hours).

e.g. AB_006 has a monthly regular rate of $326.00. On timesheets with rate type SHE (which have minimum billing hours of 200), its effective hourly regular rate will be $326.00/200 = $1.63.