What is a statement of work, and how do I create one?

Managing your customer’s expectations when working on a project can be difficult. When the exact details of a project aren’t established beforehand, misunderstandings about timelines and outcomes can occur. 

Communicating specific details ahead of a project can help each party reach a shared understanding and avoid conflict over expectations further down the line.

In this guide, we’ll cover what you need to do to create a statement of work (SoW), and how it can help make dealing with clients easier. 

We’ll discuss:

• What is a statement of work?
• Types of SoW
• How to create one
• How Countingup can help

No matter your industry, if you’ve just launched an exciting new business venture, Countingup can help you understand your business and save time. Read on to find out how.

A statement of work (or SoW) is a document detailing the client project’s exact outcome(s). 

SoWs are typically used in medium-to-large scale projects where defining both parties’ expectations is important. SoWs become a shared reference point in determining what’s in the project’s scope and isn’t. 

Because of this established understanding, SoWs hold both parties accountable: ensuring the future work is complete and the working relationship is successful. 

An SoW is useful for the client because it gives them assurance as to what’s being done. However, they’re just as valuable to you if clients ask for changes or additions to the work initially agreed upon. 

If the client’s requests are reasonable, you can accommodate the changes and adjust the necessary costs. Similarly, if you run into issues after starting, you can quickly identify what has to change in the proposed work and suggest workarounds.

SoWs are different from other types of documents involved in business relationships. For example, SoWs on their own are not contracts. Rather, a contract binds the client to pay you for the completed work stated in the SoW. Similarly, a SoWs is not a ‘Requests for Proposal’ document. An SoW is usually a more detailed version of the work outlined in the proposal document. 

SoWs are relevant in any industry where one party seeks to hire another to perform work, ranging from construction to consultancy or software development. However, depending on the client and industry norms, there are a number of different SoWs types you might come across.

Statements of work come in three main categories, and one may be more popular in your industry. Each one places different responsibilities and risks on the parties involved, so you’ll need to know how they affect you.  

Level of effort SoWs emphasises how a project should be completed, rather than what is produced. It details any materials and working hours necessary for the project and its timeframe. Level of effort SoW may be used for shorter-term or more straightforward projects where a less specific outcome is accepted and are more common in service industries. For example, simple repair work in a client’s office.

Performance-based SoWs place more emphasis on the project’s outcome. For this reason, they’re considered more flexible approaches to project relationships between businesses.

They specify the objectives and resources needed more closely, but may be looser with defining the process of the project. For example, delivering a rebrand for a client’s website and marketing materials.

Design (or detail) SoW combines both: determining the outcome(s) and specifying the method(s).

These SoWs may be used in construction projects of protected buildings where environmental/historical concerns have to be met. They can also occur in software development projects requiring compatibility with a specific computer language. 

Because a client places more restrictions on the project, they hold most of the risk if the project fails somehow, as you simply provided labour and expertise as the supplier.

Whatever SoW you provide or agree to, make sure the language is precise, and all terms are agreed to before the work begins. Clients can still be misled from vaguely worded statements of work.

SoWs have various key elements, including: 

• Objectives and outcomes – specify the end result of the project.
• Scope of work – detail what needs to be done to fulfil the end result, how it will be done and on what time scale. This can include a schedule of the procedure, its phases and sub-tasks.
• Requirements and authority– determine what’s approved and who says so.
• Location and time – identify where and when the work is to take place. This can also specify working hours and whether certain holidays are observed.
• Rules and expectations – establish set rules and practises to follow. These can range from specific tools to use, or environmental practices to follow.
• Warranty and maintenance – specify to what extent you’re required to fix any damage or provide additional consultancy after the project is completed.
• Technical definitions – detail technical and industry terms in simple language.
• Payment details – determine how much the project will cost, a reasonable upper limit (if it’s an estimate), and the terms of payment delivery (both method and timescale of payment).

Paperwork and client relationships take time to manage and navigate; and once you actually start the project, your workload increases even more.

Use the Countingup app to manage your bookkeeping and save time.

Countingup is your business current account and accounting software is in one simple app. With all your financial information in one place, we can automate your bookkeeping so you can take your mind off of it. 

Take advantage of our invoicing feature and helpful expense reminders to keep on top of your finances when you’re on the go, and access real-time profit and loss reports so you gain insights into your business at a glance.

Find out more here and sign up for free today.