Daily Project Profit Formula for Accountants
Learn how daily project profit and profit margin are calculated from client fees, labour, direct costs and overhead allocation.
Daily project profitability estimates what remains from one day of accounting work after the estimated cost of delivering it. Separating total delivery cost from the daily fee helps practices compare engagements using a consistent basis.
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Daily Project Profit
Where:
Start with the fee charged for one day, then subtract labour, project-specific expenses and the allocated share of business overheads.
Variables Explained
| Variable | What It Means | Unit |
|---|---|---|
| dailyClientFee - Daily client fee | Revenue charged to the client for one full project day. | currency |
| dailyLabourCost - Daily labour cost | Total daily employment or contractor cost for people delivering the work. | currency |
| dailyDirectCosts - Daily direct costs | Project-specific daily expenses, such as travel, specialist software or subcontractors. | currency |
| dailyOverheadAllocation - Daily overhead allocation | The daily share of general practice costs allocated to the project. | currency |
| dailyTotalCost - Total daily cost | The combined labour, direct and allocated overhead cost for one day. | currency |
| dailyProjectProfit - Daily project profit | Estimated profit remaining after all entered daily costs. | currency |
| dailyProfitMargin - Daily profit margin | Daily project profit expressed as a percentage of the daily client fee. | percent |
Step-by-Step Calculation
Enter daily project revenue
Use the amount charged to the client for one day of work before deducting costs.
dailyClientFee
Calculate total daily cost
Add the cost of people, project-specific expenses and allocated shared overheads.
dailyLabourCost + dailyDirectCosts + dailyOverheadAllocation
Calculate daily project profit
Subtract total daily delivery cost from the daily client fee.
dailyClientFee - dailyTotalCost
Calculate daily profit margin
Divide daily profit by the client fee and multiply by 100. The minimum denominator prevents division by zero.
(dailyProjectProfit / max(dailyClientFee, 0.01)) * 100
Example: profit on a daily accounting assignment
Add labour and direct costs
$550 + $75
$625
Add allocated overhead
$625 + $125
$750
Calculate daily project profit
$1,200 − $750
$450
Calculate profit margin
($450 / $1,200) × 100
37.5%
Final Result
Estimated daily project profit: $450. Estimated daily profit margin: 37.5%.
Assumptions
- ✓The daily client fee is revenue earned for one complete project day.
- ✓Labour, direct costs and overhead allocation are all estimated on the same daily basis.
- ✓The overhead allocation is a reasonable share of general practice costs for this engagement.
- ✓VAT or sales taxes, corporation tax, financing costs and unentered costs are excluded.
Limitations
- !Actual profit can differ if work takes longer than expected or time is written off.
- !Scope changes, discounts and unbilled work can reduce the revenue earned from the day.
- !An overhead allocation method may not reflect every project's actual use of shared resources.
- !The calculation estimates profitability for one day and does not measure cash collection timing.
Common Mistakes to Avoid
Using an employee's salary alone instead of their full employment or contractor cost.
Leaving out travel, specialist software, data purchases or subcontractor costs.
Comparing projects where overheads have been allocated using inconsistent methods.
Entering a project fee that does not reflect discounts, write-offs or the actual amount billed.
Treating a positive daily profit as a guarantee that the entire engagement will be profitable.
Related Formulas
Frequently Asked Questions
What is the formula for daily project profit?
Daily project profit equals the daily client fee minus daily labour cost, daily direct costs and daily overhead allocation.
How is daily project profit margin calculated?
Divide daily project profit by the daily client fee, then multiply by 100.
Why include overhead allocation in project profit?
Allocated overheads provide a fuller estimate because client work uses shared resources such as administration, technology, management and premises.
Can daily project profit be negative?
Yes. A negative result means the entered daily delivery costs are greater than the daily client fee.
What direct costs should be included?
Include costs specifically linked to the project day, such as travel, subcontractor work, specialist tools, materials or data purchases.
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