There are several ways an Interior Designer can charge for their services, but there are two ways that are most common, and they are an hourly rate or flat fee rate.
An hourly rate, is just that, a fee that the designer charges for each hour spent on the project. This is the most common rate for residential design. I prefer not to bill clients at this rate because often times clients don't know or understand how many hours would be required, and sometimes neither does the designer. For instance if I am working with a client to select a table lamp for their Master Bedroom, and one client is particularly indecisive, it might take me 20 hours researching, selecting, presenting (and re-presenting), phone calls, possibly in-person meeting, etc. to come to a decision, whereas another client who can make decisions faster, and does not need as much interaction with me, it might only take 2 hours of my time. So the client who takes 20 hours of my time will have a much higher bill than the client who only took 2 hours. This is where hourly rates get tricky. Designers can estimate their time, but it's just that; an estimate. A designer never really knows if a client will take 2 or 20 hours. If the 20-hour client is expecting a bill for 2 hours, and then receives a much higher bill than expected, often times the client will feel mislead and harbor resentment towards the designer for charging them so much for such a "small" change. This is why I stay away from hourly fees.
The usual alternative is a flat fee. Which is exactly what it sounds like; one fee for all of a designers services for a project. This is the most common rate for commercial projects because it is easier to stick to a timeline (usually timelines are more important in commercial work than finding that perfect table lamp). Flat fees usually include an outline of services with a schedule. By providing a schedule the project often times stays on track better than an hourly fee project. Companies also usually like to see the total cost rather than to be surprised in the end with a much larger bill than expected.
I find that using a flat fee rate combined with an hourly fee (for additional work beyond agreed upon scope of work) is best, which I outline in my agreement with clients. I prefer to break down the project into phases and bill the client for each of these phases. Each phase has a certain amount of revisions, meetings, phone time allowance, and estimated time spent on the project during that phase. Should a client need additional revisions, meetings, etc. or wants unlimited amount of time to chat on the phone, I then bill my clients at an additional hourly rate. This additional bill is then sent out bi-weekly to the client. I usually try to give a client an estimate on how many additional hours the project will need based on my experience on previous projects, the client's ability/rate to make decisions, and any other factors specific to the project (contractors/architects, spouses, other workloads, time frame, material availability, etc.). I feel that billing clients based on a flat fee is more transparent for the client, and often times makes the client feel like their needs are being met more efficiently than an hourly rate. However, time-is-money and I don't want to be taken advantage of, so I have set up parameters within each phase to protect myself and the client in case additional work is needed. I don't want a client to feel too limited, but I also don't want them to feel that they can monopolize my time. This way it is best for both the client and myself.