All Scrum experts agree that the Scrum methodology does not explicitly explain how to bill a customer, and this is not a Scrum issue, but a matter of contractual agreement. However, in the real world, we do work, we deliver the work and we expect to be paid for the work, even if we use the Scrum methodology. So today I will explain how we combine these two worlds – Agile and Financial (which is not Agile at all) in the software development process and how to make client invoicing using scrum methodology.
Scrum is designed for projects where we do not know exactly the scope of the whole project and we leave room for deviations, ideas, improvements, and changes. Time and Material is a natural contract type for Scrum software development projects.
How To Limit Your Spending In a T&M Contract?
Clients can limit the total amount spent on the project with a “not to exceed amount” note in a contract. In this case, the parties have agreed to work together to deliver the maximum value for the agreed period of time and the agreed budget. However, the maximum value is not equal to the working product. I always recommend asking the potential vendor what budget is needed to deliver a working software product. It is no problem for an experienced team to give you a more or less accurate timeline and budget for the project after a Project Discovery Stage.
Why Hours In Jira Are Different From The Hours In An Invoice?
The estimated number of hours for stories and tasks in a sprint usually differs from the invoice (less). This is not because the vendor is giving the wrong estimations but there are other reasons for this.
Reason 1: The daily dedicated work capacity of a human
Nobody works 8 hours a day. According to scientific studies, this is simply impossible. At best, you will get 6 hours of dedicated work from your employee. For this reason, we never plan 8 hours of work per day for each employee. We do the planning based on previous team performance. Usually, this is around 80% of the full capacity. For example, if this is a weekly sprint, you do not plan 40 hours of work for a developer, but you plan 30-33 hours.
Reason 2: Unexpected issues changes or improvements
As a rule, changes, new ideas, and issues usually arise during each sprint, which is why the planned workload of the scrum development team is 80% and not 100%.
The Example Of Planning, Approval, And Billing Process In Scrum
| Actions | Horisont of scrum planning | Responsible | Supports |
| 1. Release sprint planning. We agree at a high level on what should be done in a midterm (1-3 months). The agreed Release vision goes to Jira Release Planning as a note.
|
1-3 months | Product Manager | Scrum Master |
| 2. The Sprint Planning. The release is divided into Sprints. Each sprint usually lasts two weeks. The length of the sprint is agreed in advance and can generally be between 1-4 weeks.
|
1-4 weeks | Product Manager | Scrum Master |
| 3. During the sprint grooming the team defines tasks, makes clarifications, and estimates the time needed to implement each task. | 1-2 weeks | Product Manager | The Scrum Team |
| 4. The Scrum Master plans a sprint process based on previous scrum team members’ performance. And approves the sprint with the Product Manager. The Scrum Master plans the workload not 1:1 to the sprint time, but based on the team members’ real performance (team velocity). | 1-4 weeks | Scrum Master | The Scrum Team |
| 5. During the demo meeting, the team presents deliverables developed during the sprint. The product owner approves them, asks for changes, and makes comments. Changes and improvements are usually planned for the next sprint or added to the product backlog. | 1-4 weeks | Scrum Master | The Scrum Team |
| 6. When the month ends, the Scrum Master checks the hours logged and creates an invoice based on the time spent with the relevant comments. The Scrum Master is responsible for approving the invoice with the Product Owner. | 2-4 weeks | Scrum Master | The Scrum Team |
Why Does Sprint by Sprint Billing Not Work?
If you are running more than one software development project, I recommend linking the billing to a calendar month, not to future sprints. Sprints can overlap a few months, and in this case, the accountants of both organizations will be confused about which money applies to which month. The financial world is tied to a calendar, not sprints, and CFOs, accountants, and regulators do not care about Scrum. They want explicit information about how much we have billed a particular client this month.
FAQ
What Is the Scrum Methodology?
Scrum is an agile framework used for managing complex projects. It emphasizes iterative progress, collaboration, and adaptability. In the Scrum process, according to the sprint backlog, work is divided into small, manageable pieces called “sprints,” typically lasting 2-4 weeks. Teams review and adapt their processes after each sprint, ensuring continuous improvement and flexibility in response to changing requirements.
What Are the 5 Rules of Scrum?
- Transparency: The project manager must be responsible for the outcome of all aspects of the Scrum processes. Transparency ensures that the scrum team understands the work and the goals.
- Inspection: The Scrum team inspects the Scrum artifacts as they progress toward the Sprint Goal to detect undesirable variances. This inspection should not be so frequent that it gets in the way of the work, but must be regular enough to ensure timely detection of issues.
- Adaptation: If any aspects of the process deviate outside acceptable limits and the resulting product will be unacceptable, the process must be adjusted. Adaptations are made as soon as possible to minimize further deviation.
- Commitment: Scrum team’s success depends on personal commitment to achieving the goals of the Scrum team. This commitment is reinforced through daily stand-ups and sprint planning meetings.
- Respect: Scrum team members respect each other as skilled, independent people, and are respected as such by cross-functional team members. This respect fosters a collaborative and positive working environment.
What Is the Difference Between Agile Methodologies and Scrum?
Agile is a broad philosophy that encompasses various methodologies and practices aimed at iterative development, collaboration within the agile community, and flexibility. It promotes continuous delivery and customer feedback.
The Scrum framework is part of the Agile methodology. It provides a structured way to implement Agile principles through roles, events, and artifacts. Compared to the general Agile philosophy, the Scrum framework is more prescriptive, with defined processes, scrum values, and responsibilities.
Can You Have Deadlines in Scrum?
Yes, you can have deadlines in Scrum. While Scrum focuses on iterative progress and flexibility, deadlines are often necessary to meet business needs and stakeholder expectations. Scrum deadlines are typically aligned with the end of sprints or project milestones, ensuring incremental progress toward the final goal.
What Is a Scrum in Project Management?
In project management, professional Scrum is an Agile framework used to organize and manage tasks. It involves dividing the project into small, manageable sprints. The Scrum team consists of Scrum Masters, Product Owners, and Development Teams, as well as ceremonies like sprint planning meetings, daily scrum meetings, sprint reviews, and scrum retrospectives. This structured approach helps teams work collaboratively, adapt to changes quickly, and deliver high-quality products incrementally.
