Retainers, Milestones & Fees That Do Not Quietly Erode
Retainers look like the most stable revenue a firm can have and are frequently its least profitable work. What a retainer actually promises, why scope drift is invisible without recorded time, and the three billing models that suit different kinds of engagement.
A retainer is attractive to both sides for opposite reasons. The client wants predictable cost and unrestricted access; the firm wants predictable revenue and bounded effort. Those two things cannot both be true, and the retainer that is never revisited resolves the contradiction quietly in the client's favour.
The pattern is familiar in Kenyan law, audit and consulting firms. A retainer agreed three years ago at a comfortable figure now covers a client who calls twice a week, and nobody can prove it — because the work is done, the relationship is good, and nobody records time on a retainer since "it is a fixed fee anyway".
Record time on fixed fees especially
This is the counter-intuitive discipline that decides whether a firm knows anything about its own profitability. On hourly work, time recording is how you bill — everyone does it because the invoice depends on it. On fixed fees and retainers, time recording is how you find out whether the fee was right, and it is precisely where firms stop.
The consequence is that the work you know most about is the work where the price was never at risk, and the work you know nothing about is the work where you carry all of it.
A retainer nobody measured
Illustrative, in KES. Nothing improper happened. The client's needs grew gradually, the firm absorbed it because the relationship is valuable, and nobody noticed because no month ever felt unreasonable. Without recorded hours this conversation cannot even be started, let alone won.
Firms record time meticulously on hourly work, where the price is protected, and stop recording on fixed fees, where they carry all the risk. It is precisely backwards.
Three models, three different disciplines
If the work is unpredictable and the client accepts variability
Time and materials
Bill recorded hours at agreed rates. The discipline is capture — unrecorded time is unbilled time, and the leakage is at the timesheet, not the invoice.
If the deliverable is defined and repeatable
Fixed fee per engagement
Price from your own history of what this kind of work actually takes. The discipline is scope: what is included, what is a variation, and who says so.
If the client needs ongoing availability
Retainer
A fee for a defined scope or a capped volume of work. The discipline is the annual review, with recorded hours as the evidence — a retainer that is never reviewed only ever drifts one way.
Most firms use all three and manage only the first. Fixed fees priced on instinct rather than on recorded history is the second most common cause of unprofitable work, after retainers nobody reviews.
Milestones make fixed fees survivable
A fixed fee billed entirely on completion means the firm finances the whole engagement and carries all the collection risk — and on a long engagement, the delay that pushes completion into the next quarter is rarely the firm's fault and always the firm's cash flow problem.
Billing against milestones fixes both, provided the milestones are verifiable rather than aspirational. "Draft report submitted" is a milestone. "Fieldwork substantially progressed" is a negotiation. Define them at engagement, tie a percentage to each, and invoice as each is met.
The milestone nobody defines is the last one
Engagements routinely stall at 90% because the final deliverable's acceptance criteria were never agreed. Define what completion means at the start — a signed report, a submitted filing, a handover meeting — or the final invoice waits on an event nobody can point to.
Scope drift is a conversation, not a confrontation
Firms avoid raising scope drift because it feels like accusing a good client of taking advantage. Framed with data it is neither uncomfortable nor adversarial: "the retainer assumed sixteen hours a month, we have averaged thirty-eight over the last six, and we should look at whether the scope or the fee is what has changed."
That sentence is impossible without recorded hours and nearly always ends well with them. Clients rarely believe they are getting free work; they usually assume the fee covers it, because nobody told them otherwise. The related profitability view is in engagement profitability, and the time-capture discipline in billable time in Kenya.
What we do and do not do
What AWRA OpsHub does today
- Time recorded against a project or engagement, whether or not it is billed hourly.
- Engagements as projects with budgets, so recorded effort can be compared against what was assumed.
- Milestones per project with dates and status.
- Invoices raised against the engagement, with receivables ageing and statements behind them.
- Costs and disbursements coded to the engagement, so profitability is effort plus expense, not effort alone.
- Timesheet periods that can be locked, so a billed period stops changing after the fact.
What it does not do
- No recurring retainer billing. A monthly retainer invoice is raised by you; nothing generates it on a schedule.
- No milestone-triggered invoicing. A milestone marked complete does not raise an invoice.
- No rate cards per client or per matter. Chargeable rates and their variations by client are maintained outside the system.
- No work-in-progress or unbilled revenue accounting. Recorded-but-unbilled time is visible as time, not carried as a WIP balance in the ledger.
The first two are process rather than obstacle for most firms — retainer invoicing is a monthly routine and milestone billing is a decision somebody makes. The WIP line matters more if your accountant expects a formal work-in-progress figure at year end; settle that with them early.
A review rhythm that keeps fees honest
- Monthly: hours recorded against each retainer, compared with the assumption behind the fee.
- Quarterly: effective hourly rate per client, ranked. The bottom three are your conversation list.
- Annually: every retainer reviewed on its anniversary, with the hours data in front of both parties.
- Per fixed-fee engagement, at close: estimated hours against actual, fed into how you price the next one.
- Never: a retainer that has run unchanged for three years. That is not stability, it is an unpriced expansion.
Our take
Record time on fixed fees and retainers especially — that is where you carry the risk and where you currently know least. Review every retainer annually with the hours in front of you, define the final milestone before the engagement starts, and price fixed fees from your own history rather than instinct. The conversation you are avoiding goes considerably better with data than without it.
See engagement time and budget
Time recorded against engagements whatever the billing model, budgets and milestones, disbursements coded to the job and lockable timesheet periods.
Explore engagement costingFrequently asked questions
Why record time on a fixed fee?
Because that is the work where you carry the pricing risk. On hourly work the invoice protects you automatically; on a fixed fee or retainer the only way to know whether the price was right is to know what the work took. Firms that stop recording on fixed fees end up knowing most about the engagements where price was never at risk and nothing about the ones where it always is.
How often should retainers be reviewed?
Annually, on the anniversary, with recorded hours in front of both parties — and never allowed to run three years unchanged, which is not stability but an unpriced expansion. The conversation is far easier than firms expect when it is framed with data: clients rarely believe they are receiving free work, they generally assume the fee covers it because nobody has told them otherwise.
Does the system raise retainer invoices automatically?
No — there is no recurring billing, so a monthly retainer invoice is raised by you. For most firms this is a short monthly routine rather than an obstacle, and it has an incidental benefit: raising the invoice manually is a moment where somebody could notice that the hours behind it have doubled. Automation would remove that prompt as well as the effort.
Should we bill fixed-fee work at milestones?
Almost always, because billing entirely on completion means financing the engagement and carrying all the collection risk, and completion slips for reasons that are rarely yours. Tie a percentage to each milestone and make the milestones verifiable — "draft report submitted" rather than "fieldwork substantially progressed". Above all, define what final completion means before you start, or the last invoice waits on an event nobody can point to.
Can we hold different rates per client?
Not as maintained rate cards in the system — chargeable rates and their client-specific variations live outside it, and the rate is applied when you bill. Recorded time is captured against the engagement regardless, which is what supports the profitability analysis. If per-client rate cards are central to how your firm operates, raise it during evaluation rather than assuming it exists.
