When should I use contribution percentages in project contracts?
Contribution percentages can be used with single contract or multi-contract funding scenarios. For example:
- A single contract has been established where the customer will only pay for a fixed portion of the billable project costs.
- Multiple contracts with one or more customers have been established where each contract contributes a percentage towards the billable project costs.
Contribution percentages only apply to bill transactions arising from project costs, and not milestones or billing events.
Note: Contribution percentages are intended to reflect real-world
contracts, and not a dynamic allocation of charges such as recurring services billing,
where service usage metrics drive the allocation percentages.
Therefore, contribution
percentages are typically expected to be:
- Fixed for the duration of a contract, changing by exception through renegotiation between the supplier and customer.
- Limited to a few contracts per project, where contractual percentages are significant. For example, a 60:40 split between two customers.
Deviations may result in:
- A high frequency of contract amendments, which can give rise to performance issues.
- The need to build integrated solutions to maintain contracts, as doing so manually becomes unviable.
- Marginal contribution percentages, which result in zero-amount billing exceptions or rounding issues.