Accountants Project Profit (Hourly) Calculator
Estimate the revenue, costs, profit and profit margin of an accounting project billed by the hour.
Overview
This hourly project profit calculator helps accounting firms estimate the expected revenue, delivery costs, profit, and margin for an engagement. Enter the expected billable hours, client billing rate, likely write-offs, staff cost, overhead allocation, and any direct project expenses.
How it works
The calculator first multiplies billable hours by the hourly billing rate to find gross revenue. It reduces this amount by the expected write-off percentage to estimate net revenue. Labor cost is calculated from hours and staff cost per hour, while overhead is calculated from hours and the overhead allocation. These costs, plus other direct costs, are deducted from net revenue to estimate project profit. Profit margin is project profit divided by net revenue.
How to use this calculator
- 1Enter the number of hours you expect to bill to the client.
- 2Add the average hourly billing rate for the engagement.
- 3Include an allowance for anticipated write-offs or discounts.
- 4Enter the staff cost and overhead cost for each billable hour.
- 5Add any fixed costs that relate directly to the project.
- 6Review the estimated profit and profit margin.
Example Calculation
Billable hours
40
Hourly billing rate
$150
Expected write-off rate
5%
Staff cost per hour
$65
Overhead cost per hour
$20
Other direct project costs
$300
Estimated project profit
$2,000
At 40 hours billed at 150 per hour, with a 5% write-off allowance, expected net revenue is 5,700. Estimated total costs are 3,700, producing estimated project profit of 2,000 and a profit margin of about 35.1%.
Frequently asked questions
What is project profit for an accounting engagement?
Project profit is the expected revenue from the engagement minus the labor, allocated overhead, and other direct costs associated with delivering it.
What is a good profit margin for an accounting project?
A suitable margin varies by firm, service type, client relationship, staffing model, and risk. Compare the result with your own target margin and similar completed projects.
Why should I include write-offs in the calculation?
Write-offs reduce the revenue ultimately recovered from the work. Including an expected allowance gives a more realistic profitability estimate than using the full standard billing value.
Should partner time be included as a staff cost?
Include a cost for partner or manager time if you want the result to reflect the economic cost of all time used on the project. The appropriate rate depends on your firm’s costing approach.
Does this calculator include tax?
No. The estimate is before business taxes and does not account for tax treatment that may apply to revenue or expenses.
Can I use this calculator after a project is complete?
Yes. Replace estimates with actual hours, billing, write-offs, and costs to review the realized profitability of a completed engagement.
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Assumptions and warnings
Assumptions
- Results are estimates based on the billable hours, rates, costs, and write-off allowance entered.
- Staff cost per hour is assumed to represent the cost of the time used on this project.
- Overhead is allocated evenly for each billable hour.
- Profit is calculated before business taxes, interest, owner drawings, and costs not entered in the calculator.
Warnings
- This calculator provides an estimate only and is not financial, accounting, or tax advice.
- Actual project profitability can change if hours, recoverability, staffing mix, or costs differ from plan.