IT Chargeback Model

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What is an IT Chargeback Model?

How to I Your chargeback model may be an internal service organization that is allocating variable costs, or, a self-supporting internal agency that is truly operating with little or no associated corporate funding. Either answer, or something in between, is okay, but you need work with finance and define your model before you start. You also need to track these charges very carefully, evaluate your chargeback strategy for accuracy, and then fine tune your model. There are a few more questions to consider prior to implementing a chargeback model. Again, there are many correct answers, but you need to ask the questions.

  • Rate sheet or hourly charge? Many internal groups provide standardized deliverables. It may be better to develop standard costs for standard work, e.g., a new 3 page brochure will cost X dollars.
  • If charging back based on hours, what rate will you use? You can track hours by function with a rate for each function, or use a blended rate. As a rule of thumb, the more “agency-like” your model, the more appropriate to use actual rates for each function to calculate the total charge. This is especially important if some clients are using an inordinate amount of high-end creative, or require a lot of account manager time.
  • Are you going to provide estimates? This is not necessary in the rate sheet model, but very important if charging based on project hours. This gives the client the ability to compare with outside agency prices and provides you with the opportunity to track estimate to actual metrics. [1]