Accountants Project Quote (Monthly) Formula
Learn how a monthly accounting project quote is calculated from planned hours, costs, overhead allowance and target profit margin.
This formula estimates a recurring monthly accounting fee that is intended to recover labour and client-specific costs, allow for shared business overheads, and leave the selected profit margin. It provides a consistent starting point for pricing monthly bookkeeping, reporting, payroll support and similar recurring engagements.
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Recommended Monthly Quote
Where:
First calculate labour and direct costs. Add an overhead allowance to create the cost base, then divide that cost base by the portion of the quote that remains after the target profit margin.
Variables Explained
| Variable | What It Means | Unit |
|---|---|---|
| monthlyHours - Estimated monthly hours | Total expected monthly time for delivery, review, meetings, client communication and routine administration. | hours |
| hourlyRate - Target hourly rate | The hourly labour value the engagement should recover before overheads and profit. | currency |
| monthlySoftwareCosts - Monthly software costs | Client-specific recurring subscriptions, licences, data tools or portal costs. | currency |
| otherDirectCosts - Other monthly direct costs | Other expected client-specific costs, such as outsourced work, postage or travel. | currency |
| overheadRate - Overhead allowance | Percentage allowance for shared operating costs applied to direct costs. | percent |
| targetProfitMargin - Target profit margin | Desired profit as a percentage of the final monthly quote. | percent |
Step-by-Step Calculation
Calculate monthly labour cost
Multiply planned monthly hours by the target hourly rate.
labourCost = monthlyHours * hourlyRate
Add direct client costs
Combine labour cost with software and other costs that relate directly to the client.
directCosts = labourCost + monthlySoftwareCosts + otherDirectCosts
Calculate the overhead allowance
Apply the overhead percentage to the direct costs.
overheadAmount = directCosts * (overheadRate / 100)
Find the cost base
The cost base is the estimated monthly cost to service the engagement before profit.
costBase = directCosts + overheadAmount
Calculate the monthly quote
Divide the cost base by the percentage of the fee remaining after the target profit margin.
monthlyQuote = costBase / (1 - targetProfitMargin / 100)
Calculate supporting results
These show the estimated profit and the implied fee per planned hour.
monthlyProfit = monthlyQuote - costBase; effectiveHourlyQuote = monthlyQuote / monthlyHours
Example: Recurring bookkeeping and reporting package
Monthly labour cost
12 × $75
$900.00
Total direct costs
$900 + $30 + $20
$950.00
Overhead allowance
$950 × 15%
$142.50
Cost base
$950 + $142.50
$1,092.50
Recommended monthly quote
$1,092.50 ÷ (1 − 25%)
$1,456.67
Implied hourly quote
$1,456.67 ÷ 12
$121.39 per hour
Final Result
The estimated monthly quote is $1,456.67, with estimated monthly profit of $364.17 after the cost base and overhead allowance.
Assumptions
- ✓The engagement is recurring monthly and the estimated hours represent a typical month of agreed work.
- ✓The target hourly rate represents the labour value to be recovered from the engagement.
- ✓The overhead allowance is applied as a percentage of direct costs.
- ✓The target profit margin is profit as a percentage of the final quote, not a markup on cost.
- ✓Taxes, payment processing fees, bad debts and exceptional work are excluded unless included in the inputs or an allowance.
Limitations
- !Actual time may vary because of client responsiveness, transaction volume, data quality or changing requirements.
- !A percentage overhead allowance may not reflect every firm’s actual cost structure.
- !The formula does not assess market positioning, client value, competition or willingness to pay.
- !One-off onboarding, catch-up work and out-of-scope requests need separate consideration.
- !This is a pricing estimate and not financial, tax or business advice.
Common Mistakes to Avoid
Using only production time and omitting review, meetings, follow-up and administration from monthly hours.
Treating a 25% profit margin as the same as a 25% markup on cost.
Entering general business overheads again as direct client costs without checking for duplication.
Leaving out client-specific software, outsourced work or regular travel costs.
Using a fixed fee without defining the included monthly scope and process for extra work.
Related Formulas
Frequently Asked Questions
How is a monthly accounting project quote calculated?
The calculator adds labour, software and other direct costs, applies an overhead allowance, then divides the cost base by one minus the target profit margin.
Why does the formula divide by one minus the profit margin?
A target margin is a share of the final fee. For example, with a 25% margin, costs must equal 75% of the quote, so the cost base is divided by 0.75.
What is the difference between margin and markup?
Margin measures profit as a percentage of the selling price. Markup measures profit as a percentage of cost. Equal percentages produce different prices.
What does the effective hourly quote show?
It divides the recommended monthly quote by planned hours, showing the implied client fee per planned hour.
Can the target profit margin be zero?
Yes. At 0%, the calculated quote equals the cost base, so there is no estimated profit in the calculation.
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