Retainer billing is an arrangement where a client pays a fixed recurring fee for an agreed block of work or hours each period, usually monthly. Logged time draws down against that block, and the difference between the agreed hours and the hours actually used tells you whether you are over or under-servicing the account.
Drawdown vs logged hours
A retainer starts each period with a balance of agreed hours. As your team logs time, those hours are subtracted from the balance, leaving a remaining figure.
Remaining hours = agreed hours for the period - hours logged so far
Watching that balance during the period, rather than discovering it at the end, is what keeps a retainer profitable.
Over-servicing and under-servicing
| Situation | Hours used vs agreed | Effect |
|---|---|---|
| Over-servicing | Used exceeds agreed | You work for free, margin falls |
| On track | Used roughly equals agreed | The retainer is priced well |
| Under-servicing | Used is below agreed | Client may question the value |
A worked example
A client is on a 40 hour monthly retainer. By the third week your team has logged 36 hours, leaving 4 remaining with a week still to go. That is an early warning of over-servicing. Hour Cap tracks hours used and remaining on each retainer and can alert you against thresholds, so you can have the scope conversation before the month closes rather than after.
Related terms
Retainer billing draws on your billable hours and is judged by the same utilization and realisation lens as project work. For the full method, read retainer billing explained, and to invoice a period straight to your accounting system see how Hour Cap handles retainer billing in Xero.