Credit: Shutterstock photoStatements of work may sound like something only large companies should use, but they are increasingly important for small business owners as well. Sure, the breadth and volume of work you do may be more modest than a bigger provider, but there’s equal potential for ambiguity, even disagreement, about what precisely you’ll be doing, and when.
Below, we outline just exactly what a statement of work is and why you should be using one for every project you do.
What Is a Statement of Work?
A statement of work (SOW) is a document that outlines the how, what, when, who and why of the work you’ll be doing for your client. SOWs are frequently used in project management and consulting disciplines, but they are applicable to a wide range of services.
A good statement of work will detail the work activities, deliverables and timelines for the project. More specifically, an SOW should include the purpose and scope of work, physical location of work, a timeline and milestones for the project, a list and schedule of deliverables, acceptance criteria (i.e., what constitutes “done” for the project), pricing, payment and billing and any special requirements or standards that need to be met (i.e., quality standards, industry standards).
Pluses to Using SOWs
Having a good statement of work can help your project run more smoothly in the following ways:
1. Setting expectations
An SOW will define clear expectations with your client, including everything for which both you and the client are responsible. With an SOW, you know exactly what services or items you’ll need to produce for your client and when. You’ll also know what constitutes “good work” based on the acceptance criteria you and your client agreed upon.
(In some ways, then, the SOW is to an agreement on work what a personal guarantee is to a loan. Such a guarantee is a written, legal promise that a borrower, typically the business owner, will repay business debts in the event that the business cannot. This means that if a business defaults on a loan, the business owner will be personally responsible for repaying it.)
Another benefit to using an SOW is that you can explicitly state when and how you and the client will communicate, including when they will deliver feedback on your services, or revise the work scope. A revision timeline within your SOW offer a great tool for keeping your client as accountable as you are throughout the project.
2. Avoiding scope creep
Continuous and poorly planned expansion kills many a good project. Without an SOW, it’s all too easy to fall prey to so-called scope creep, as the client keeps asking for more services without also offering to extend the timeline or increase the budget.
A signed SOW arms you to ask for additional time or money for any new work that’s requested. Agreed changes can then be reflected in an updated SOW. Alternatively, the SOW can, from the outset, stipulate any work you won’t agree to do, thus heading off potentially disruptive discussions down the road.
3. Avoiding billing squabbles
Chasing down unpaid invoices is a pain, but an SOW can help keep your client accountable to paying you. The client will also sign the SOW, effectively making it a contract. This facilitates your getting paid on time and in full, because you have the client’s written agreement that they’ll do so. In every SOW you create, outline the total charges for the project and what the payment schedule will be.
The article Why You Should Use a Statement of Work originally appeared on ValuePenguin.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
