Accountants Revenue Target (Hourly) Calculator
Estimate the annual revenue and hourly billing rate your accounting practice needs to cover pay, overheads, profit and uncollected work.
Overview
This Accountants Revenue Target (Hourly) Calculator estimates the annual fees, monthly revenue and average hourly billing rate your practice needs to support target owner compensation, overhead costs, retained profit and realistic billable hours.
How it works
The calculator first adds target owner compensation, annual overheads and target profit to find the revenue that must be collected. It then increases that amount to allow for invoices that may be discounted, written off or not collected. Finally, it divides the annual invoiced revenue target by your available annual billable hours to calculate the average hourly rate required. Monthly and weekly targets are shown as useful tracking benchmarks.
How to use this calculator
- 1Enter the annual compensation you want the owner or principal to receive.
- 2Add all expected annual business overheads.
- 3Set the annual profit you want the practice to retain.
- 4Estimate realistic billable hours per week and billable weeks per year.
- 5Enter the proportion of invoiced fees you expect to collect.
- 6Review the hourly rate and revenue benchmarks to inform your pricing and capacity plan.
Example Calculation
Target owner compensation
$120,000
Annual business overheads
$80,000
Target annual profit
$20,000
Billable hours per week
25
Billable weeks per year
46
Expected collection rate
90%
Required hourly billing rate
$212.56
With a £120,000 owner compensation target, £80,000 of overheads, £20,000 profit, 1,150 annual billable hours and a 90% collection rate, the practice needs to invoice about £244,444 per year, or roughly £212.56 per billable hour.
Frequently asked questions
What is a revenue target for an accounting practice?
It is the level of fee income the practice needs to generate over a period to cover its costs, pay the owner or team and achieve its desired profit.
Why are billable hours lower than total working hours?
Not all working time can be charged to clients. Administration, client acquisition, internal meetings, training, leave and compliance work all reduce available billable time.
What collection rate should I use?
Use a rate based on your recent payment history after allowing for credit notes, fee discounts, write-offs and overdue invoices that may not be recovered.
Can I use this calculator for fixed-fee accounting services?
Yes. The hourly result is an average revenue-per-billable-hour target. For fixed-fee work, compare the expected fee with the time needed to deliver the service.
Does the target hourly rate include VAT or sales tax?
No. Use net service revenue and exclude taxes collected on behalf of a tax authority, as these are not normally practice income.
How often should I update my revenue target?
Review it at least annually and whenever you expect a meaningful change in costs, staffing, pricing, service mix, capacity or collection performance.
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Assumptions and warnings
Assumptions
- Owner compensation, annual overheads and target profit are treated as separate annual funding requirements.
- The hourly rate is an average across all client work and does not reflect different service prices, fixed fees or client mixes.
- The collection rate accounts for expected discounts, write-offs and uncollected invoices.
- Billable hours exclude non-chargeable time such as administration, training, sales and leave.
- Results are planning estimates and do not include personal taxes, financing costs or changes in costs during the year.
Warnings
- This calculator provides a business-planning estimate only and is not financial or tax advice.
- Review your targets regularly as staffing, overheads, client demand and collection performance can change.