Glossary
Time and materials (T&m)
Time and materials (T&M) is a billing model where a client is invoiced for the actual hours worked by the agency team at agreed rates, plus any direct costs such as travel, expenses, or third-party services. It is one of the two main project billing structures used by agencies, alongside fixed fees. T&M transfers scope risk from the agency to the client, since the final cost depends on how much work is actually required.
When T&M billing is appropriate
T&M works well when the scope of work is inherently uncertain: research and discovery phases, agile development engagements, ongoing advisory relationships, and any work where the final deliverable depends on findings along the way.
It is also appropriate when the agency and client have an established trust relationship and the client prefers transparency about where time is going over cost certainty.
Managing T&M from the agency side
From the agency's perspective, T&M eliminates the delivery cost risk of fixed fees, but it introduces a different challenge: clients on T&M have visibility into hours and may push back on the team's efficiency or question specific entries. Detailed timesheet records and transparent communication about how time is being spent are essential.
Many T&M engagements include a cap or not-to-exceed budget, which limits the client's total exposure while still allowing for scope flexibility within that envelope.
T&M and invoice accuracy
Accurate T&M invoicing requires reliable time tracking. Invoices should match approved timesheets, with a clear breakdown of hours by person, task, and date. Clients on T&M will scrutinise invoices more carefully than those on fixed fees, so the quality of time records matters for billing trust.
Example
An agency runs a discovery phase for a product strategy project on T&M at £120/hour. The work takes 85 hours across two strategists and a researcher. The invoice is £10,200 for the phase. The client reviews the timesheet breakdown and approves. This transparent approach builds trust before moving into a larger, fixed-fee execution phase.