Accountants Day Rate Formula
Learn how to calculate an accountant's daily charge-out rate from salary, costs, billable days and a target profit margin.
This formula estimates the daily revenue an accountant or accountancy practice needs to charge to cover planned annual costs and retain a chosen share of revenue as profit. It helps turn an annual financial target into a practical daily rate.
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Recommended Daily Rate
Where:
First total the annual salary, employer costs and overheads. Increase that amount to allow for the target profit margin, then divide the required annual revenue by the number of days expected to be billed.
Variables Explained
| Variable | What It Means | Unit |
|---|---|---|
| annualSalary - Target annual salary | Annual pay the business is expected to provide before personal taxes. | currency |
| employerCostsPercent - Employer costs | Employment-related costs expressed as a percentage of salary. | percent |
| annualOverheads - Annual business overheads | Annual operating costs such as software, insurance, marketing and office expenses. | currency |
| targetProfitMargin - Target profit margin | Profit retained after included costs as a percentage of revenue. | percent |
| billableDays - Billable days per year | Realistic number of days that can be invoiced to clients. | days |
Step-by-Step Calculation
Calculate annual employer costs
Convert the employer-cost percentage to a decimal and multiply it by the target salary.
employerCosts = annualSalary * (employerCostsPercent / 100)
Find the annual cost base
Add salary, employer costs and annual overheads.
annualCostBase = annualSalary + employerCosts + annualOverheads
Calculate required annual revenue
Divide the cost base by the share of revenue left after the target profit margin.
targetAnnualRevenue = annualCostBase / (1 - targetProfitMargin / 100)
Calculate the daily rate
Spread required annual revenue across expected billable days.
recommendedDayRate = targetAnnualRevenue / billableDays
Calculate planned annual profit
Subtract the included annual cost base from target revenue.
targetAnnualProfit = targetAnnualRevenue - annualCostBase
Example: accountant daily rate with a 20% margin
Employer costs
$60,000 × 15%
$9,000
Annual cost base
$60,000 + $9,000 + $12,000
$81,000
Target annual revenue
$81,000 ÷ (1 − 20%)
$101,250
Recommended daily rate
$101,250 ÷ 210
$482.14 per day
Target annual profit
$101,250 − $81,000
$20,250
Final Result
The estimated minimum daily rate is about $482 per day, before any applicable sales taxes.
Assumptions
- ✓The target salary is treated as a cost of the business.
- ✓Employer costs are estimated as a fixed percentage of salary.
- ✓Overheads are fixed for the year and do not change with revenue.
- ✓All billable days can be invoiced and collected at the calculated rate.
- ✓The selected profit margin is calculated before corporation tax, personal tax, financing costs and unentered expenses.
Limitations
- !Actual utilisation may be lower than the planned number of billable days.
- !Client work may be priced as fixed fees rather than daily rates.
- !Overheads, staffing costs and service capacity can change during the year.
- !The calculation does not assess market demand, competition or client willingness to pay.
Common Mistakes to Avoid
Using total working days instead of realistic billable days.
Forgetting pension contributions, payroll costs, insurance or software subscriptions.
Adding the profit percentage to costs rather than calculating profit as a percentage of revenue.
Treating sales tax or VAT as revenue available to cover costs.
Rounding the rate down without checking the resulting annual revenue.
Related Formulas
Frequently Asked Questions
What is the formula for an accountant's day rate?
Divide the annual revenue required by expected billable days. Required revenue equals the annual cost base divided by one minus the target profit margin as a decimal.
Why divide by one minus the profit margin?
A profit margin is a share of revenue, not a percentage added to cost. At a 20% margin, costs must represent 80% of revenue, so costs are divided by 0.80.
Can the target profit margin be 100%?
No. A 100% margin would leave no revenue to cover salary or business costs, and the formula would involve division by zero.
Should overheads include non-billable administration costs?
Include the cash costs of administration in overheads, while allowing for the time spent on administration by reducing billable days.
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