Rate drift: when a new rate rewrites last quarter's invoice

The call about January

In March, the senior consultant's rate went up, as the contract allowed. In April, the client's controller called about the January invoice. The copy he had downloaded from the shared report did not match the one he had paid. Same hours, same work, a higher total. Someone had run the report again, and the report had applied the new rate to the old hours.

The person who saw it first

Karim, the delivery lead, understood the problem before the call ended. He did not argue about which copy was right. He showed the client the January lines as they had been recorded, each hour at the rate that applied in January, unchanged since the day it was approved. The March increase applied from March, as the contract said.

The client's trust went up, not down. The controller had seen that the firm's numbers did not move under him. They extended the engagement for another year.

The textbook name: rate drift

Rate drift is what happens when the past changes because a rate changed today. It appears whenever cost or billing is calculated on demand from the current rate card, rather than stored with the work when it was recorded. A rate increase then silently inflates history. A rate correction silently changes margins on closed projects. Reports produced on different days disagree, and nobody can say which one is true.

It is a quiet problem until it reaches a client or an auditor. Then it becomes a question of credibility, because a number that changes on its own cannot be trusted.

Signs to watch for

Rate drift is easy to detect if you look for it. Run the same cost or billing report for a closed month on two different days and compare them. If the figures differ while no hours were added, the system is recalculating history. Look at margins on closed projects: if they change after the projects closed, the rates beneath them are not fixed.

Another sign is a rate card kept as a single number per person or role, with no start date. A rate without a date cannot be applied correctly to the past, because the system does not know which rate was valid when the work was done.

The cost is credibility as much as money. A client who sees an old invoice change will question every new one. A finance team that cannot reproduce last quarter's figures will spend days explaining the difference. And an auditor will treat any figure that moves on its own as a finding.

How to prevent it

Freeze the rate on the line. When hours are recorded and approved, store the rate that applied on that day with them. Give every rate a start date and keep its history, so a new rate starts on its date and never reaches back. Then the cost and billing of any past period stay what they were, and a new report shows the same figures as the old one.

Finally, treat a rate change as a decision, not an edit. Record who changed it, when, and from which date it applies. Where the change affects a client or a contract, let it pass through an approval, so the person who agreed the price knows before the first invoice at the new rate leaves. A rate with a clear history is a rate everyone can defend.

How ApprovedFlow does it

In ApprovedFlow the rate is frozen on each line when the hours are recorded. Rates have a history with dates, and a change can go through approval where a company asks for it. A new rate starts on its date. Last quarter's cost and billing stay what they were, whatever happens to the rate card.

A question for you

If your rates changed today, which of your old numbers would move with them?