How to track project budget vs hours as a freelancer

The short answer

Turn the project price into hours by dividing it by your hourly rate. Write down the hours you spend, every day you work on the project. Once a week, compare two numbers: the share of the hours you have used, and the share of the work that is actually done. If the first number is more than about ten points ahead of the second, you are heading over budget, and the time to tell the client is now, not at the end.

That is the whole method. The rest of this guide is how to do each step without it becoming a second job.

Step 1: turn the budget into hours

Clients think in money. You run out of time. So convert the price into the unit you actually spend.

Budget in hours = project price (excluding tax and any costs you pass on) divided by your hourly rate.

A 4,800.00 project at 80.00 an hour is a 60-hour budget. If you priced the job as a fixed fee without an hourly figure behind it, use the rate you would want to earn; the day rate calculator works out that rate from your target income, and the hourly rate calculator does it from a salary you want to match.

Keep back a reserve. I hold 10 to 15% of the hours out of the plan for the things that always happen: an extra call, a file in the wrong format, a feedback round that arrives in three emails. On a 60-hour budget that is about 8 hours, leaving 52 to plan the work with.

Step 2: split the hours across the stages

Break the project into the stages you quoted and give each one its share of the hours. For a small brand identity project:

This is the same breakdown you should have used to price the job. If you did not, the guide on how to price a freelance project shows how to build it, and the quote template guide shows how to put the stages in front of the client.

Step 3: log the hours, roughly but every day

You do not need a timer running all day. You need a number per day that is honest to the nearest half hour. A note at the end of the day works: date, project, stage, hours. A spreadsheet works. What does not work is reconstructing a week of hours on Friday from memory, because the hours you forget are the small ones, and the small ones are the leak.

Log the unglamorous time too: calls, emails, exporting files, re-reading the brief. On my own 3D projects the gap between the hours I thought I spent and the hours I logged was always in that category.

Step 4: compare spent against done, once a week

This is the part people skip. Hours spent on their own say nothing. 30 hours used out of 60 is fine if half the work is done and a problem if a third is.

Each week, write down:

• Percent spent: hours used divided by the budget in hours.
• Percent done: your honest estimate of how much of the work is finished. Use the stages: if concepts are approved and revisions are half done, you can count it from the stage hours.
• Burn rate: hours used per week.
• Projected total: hours used divided by percent done. If you have used 44 hours and 60% of the work is done, the job is on course to take about 73 hours.

A worked example for the 60-hour project above:

In week 1 the gap is three points and nobody should worry. In week 2 the gap is ten points and the projection says 75 hours against a budget of 60. That is the week to look at why. In this example it was the concept stage: the client asked for a fourth direction that was never in the quote, and I said yes on a call without writing it down.

The projection is crude. It assumes the rest of the job goes at the same pace as the first part, which it rarely does. It is still far better than finding out at the end.

When to warn the client

Tell the client as soon as you know two things: the budget will be exceeded, and why. Not when you hit 100%.

There are only two honest causes, and they lead to different conversations:

1. The scope grew. Extra concepts, an extra format, a third revision round. That is a change request, and the client pays for it. Raise it the moment it is asked for, ideally before you do the work.
2. You underestimated. The work in the quote is taking longer than you planned. That is your cost, at least on a fixed-price job. Absorb it, finish the work, and fix your estimate for next time.

Mixing the two up is how freelancers lose clients. Do not send a bill for your own underestimate dressed up as scope creep.

A short warning email for the first case:

Subject: Budget check on the brand identity project

Hi Anna,

A quick update before we go further. The quote covered three concept
directions and two revision rounds. We are now on a fourth direction,
which is outside that.

The fourth direction is about 8 hours of work, so 640.00 at the
project rate. I can add it as a change to the quote, or we can drop
it and pick from the three we have. Either is fine with me.

Can you let me know which you prefer before I carry on with it?

Thanks,
Alex

Change requests

Every change to the scope should end up in writing with a price and a time impact, even a small one. It does not need a new contract; a short email reply that the client agrees to is enough for most work. Keep a list on the project of every change, its hours and whether it was approved. At the end you add the approved changes to the final invoice as their own lines, and nobody is surprised.

If you find yourself writing the same change requests on every project, the scope in your quotes is too vague. A statement of work with deliverables, revision rounds and exclusions spelled out stops most of them before they start.

After the project

Compare the final hours with the plan, stage by stage, and write down where the gap was. After five or six projects you will see a pattern: for me it was always revisions and handover, never the creative work. Put that into your next quote, and the budget tracking gets quieter every time.

Questions