During many of our webinars on financial topics, including our recent presentation, “Financing Clinical Trials: Appropriate Compensation and Allocation of Study Budgets,” attendees often ask questions regarding the difference between the “cost of doing business” and “overhead” or “indirect costs.”
To find an appropriate answer to these common questions, I did some digging and, in my research, I was hard pressed to find definitions that differ. What I found is that the “cost of doing business,” “overhead,” and “indirect costs” all point to the same things. Those are the things in your business that either cannot be charged to a specific research study or those items that you need in order to do your work. Things such as your building or workspace (rent), insurance, computer system (hardware and software), utilities (phone, lights, heat), taxes and other professional services. Professional services can vary from the attorney that reviews your contracts to the HR department or consultant, or your accountant that handles your payroll.
Research sites might want to consider the details of “other professional services” in order to include more of these hidden costs of doing business. Professional services includes keeping your coordinators and other staff trained, maintaining memberships in professional organizations that keep you abreast of industry developments, costs for software solutions that make your site more efficient and attractive to sponsors, and costs of your answering service. The more inclusive you are, the better you are at capturing all the costs that cannot be directly associated with a specific study. Your study budgets will be more accurate, and you will be able to make your trials more profitable.
When sponsors say you have to absorb something as the “cost of doing business,” feel free to push back and let them know, while you can appreciate their need to keep costs down, you have the same need to make sure the services they need from you are their “cost of doing business.”
To learn more about negotiating overhead costs with sponsors and assuring your site is appropriately compensated for clinical trial costs, read our free eBook “Negotiating a Stronger Clinical Trial Agreement and Budget.“