Accountants Project Quote Formula
Learn how an accountants project quote is calculated from planned hours, costs, contingency, profit markup and a client discount.
This formula estimates a fixed project fee before tax. It starts with the planned labour and direct expenses, then adds a contingency allowance and profit markup before deducting any agreed discount.
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Recommended project quote
Where:
Calculate labour cost, add direct expenses, allow for uncertainty, add markup, then reduce the resulting fee by any client discount.
Variables Explained
| Variable | What It Means | Unit |
|---|---|---|
| estimatedHours - Estimated project hours | Total planned time for preparation, delivery, communication, review and administration. | hours |
| hourlyRate - Hourly billing rate | Internal or target value assigned to each planned project hour. | currency |
| directExpenses - Direct project expenses | Expected costs directly connected to the assignment, such as filing fees, software charges or specialist support. | currency |
| contingencyRate - Contingency allowance | Percentage added to base project cost for scope uncertainty or additional work. | percent |
| profitMarkup - Profit markup | Percentage added to the cost after contingency has been included. | percent |
| discountRate - Client discount | Percentage reduction applied to the quote before tax. | percent |
Step-by-Step Calculation
Calculate estimated labour cost
Multiply the expected hours by the billing rate used for the project.
labourCost = estimatedHours * hourlyRate
Find the base project cost
Add planned direct expenses to the estimated labour cost.
baseCost = labourCost + directExpenses
Add the contingency allowance
Calculate the allowance for uncertainty as a percentage of the base cost.
contingencyAmount = baseCost * (contingencyRate / 100)
Calculate cost including contingency
Combine the base cost and contingency amount.
costWithContingency = baseCost + contingencyAmount
Add profit markup
Apply the chosen markup to the cost including contingency.
quoteBeforeDiscount = costWithContingency * (1 + profitMarkup / 100)
Apply the client discount
Reduce the pre-discount quote by any agreed discount.
projectQuote = quoteBeforeDiscount * (1 - discountRate / 100)
Calculate the effective hourly quote rate
Divide the final quoted fee by planned hours to see the effective rate across the assignment.
effectiveHourlyRate = projectQuote / estimatedHours
Year-end accounts and tax return quote example
Estimated labour cost
20 × 150
$3,000
Base project cost
3,000 + 50
$3,050
Contingency amount
3,050 × 10 / 100
$305
Cost including contingency
3,050 + 305
$3,355
Profit markup amount
3,355 × 20 / 100
$671
Recommended project quote
3,355 + 671
$4,026
Effective hourly quote rate
4,026 ÷ 20
$201.30 per hour
Final Result
Recommended project quote: $4,026 before tax, equivalent to $201.30 per planned hour.
Assumptions
- ✓The hourly billing rate represents the intended value of each project hour.
- ✓Direct expenses are estimated separately and included in the quote.
- ✓Contingency is calculated on labour cost plus direct expenses.
- ✓Profit markup is calculated on cost after contingency.
- ✓Any discount is applied after contingency and markup.
- ✓The result is before VAT, GST, sales tax and other taxes not entered as expenses.
Limitations
- !Actual time, costs and scope may differ from the estimate.
- !A fixed fee may need adjustment when the scope changes materially.
- !The calculation does not assess client willingness to pay, competitive positioning or collection risk.
- !Tax treatment and how fees must be presented can vary by location and engagement.
- !The effective hourly rate is based on planned hours, not actual time ultimately spent.
Common Mistakes to Avoid
Leaving out client communication, review, corrections and administration when estimating hours.
Applying markup only to labour while overlooking direct expenses and contingency.
Confusing profit markup with profit margin; they use different percentage bases.
Applying a discount before adding contingency and markup when the intended pricing policy is to discount the final quote.
Including tax in direct expenses and then adding tax again when issuing the quote.
Using an hourly billing rate that does not reflect the intended cost recovery or pricing target.
Related Formulas
Frequently Asked Questions
How do you calculate an accountant project quote?
Multiply planned hours by the hourly rate, add direct expenses, add contingency, apply profit markup, then deduct any client discount.
Is profit markup calculated before or after contingency?
In this calculator, profit markup is calculated on the cost after the contingency allowance is added.
What is the effective hourly quote rate?
It is the final project quote divided by the planned project hours. It helps compare a fixed fee with the hours expected.
Does the project quote formula include tax?
No. The result is a before-tax estimate. Applicable taxes should be considered separately.
What is the difference between markup and margin?
Markup is a percentage of cost. Margin is a percentage of the selling price. This calculator uses markup.
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