Agency project and retainer profitability

Most agencies know their revenue and guess at their margin. The hours are already being logged; what is missing is the arithmetic that turns them into a number you can act on, and the confidence that the number means what you think it means. Here is exactly how Time Trakkr calculates it.

The two figures, and the asymmetry between them

Both are computed from the same time entries, over whatever date range you are looking at.

Revenue is the sum, over entries marked billable, of hours multiplied by the effective billable rate. Non-billable entries contribute nothing.

Cost is the sum, over every tracked entry, of hours multiplied by the effective cost rate. Billable or not, the time cost you money.

That asymmetry is the point. An account where half the work cannot be billed shows a margin that reflects it, because the unbillable half still lands in the cost column. A report that counted billable hours on both sides would describe every project as healthy and tell you nothing.

Which rate gets used

Rates resolve in a fixed order, first match winning, so you can set a default once and override it only where reality differs:

• Billable: the rate stored on the entry itself → the person’s rate on that project → the project’s hourly rate → the person’s default as it stood on that date → their current default.
• Cost: the rate on the entry → the person’s cost rate on that project → their default as it stood on that date → their current default.

The entry-level snapshot is what stops history moving. Give somebody a raise and last quarter’s margin stays as it was reported, because those entries carry the rate that applied when the work was done.

Retainers are measured against one month

A budget that resets monthly is compared against the hours in that month, with arrows to step back through previous ones.

This is worth saying plainly because it was wrong until recently, and the failure was silent: a monthly retainer was charged every hour the project had ever accumulated against a single month’s allowance. A 20-hour retainer three months old reported “-43.08 remaining (0%)” while sitting comfortably inside budget. If you previously raised a budget to stop it reading negative, that is worth revisiting.

An illustration, not a benchmark

The numbers below are invented to show the arithmetic. They are not a benchmark, an industry average, or a claim about what your agency should expect.

• A designer logs 30 billable hours at a $120 billable rate → $3,600 revenue.
• The same designer logs 10 more hours on the account that cannot be billed — a pitch revision, a scoping call. Revenue unchanged.
• All 40 hours cost $60 each → $2,400 cost.
• Margin is $1,200 on $3,600, and the 10 unbillable hours are why it is not $1,800.

What it will not tell you

• It is not accounting. These are time-derived figures. Cash collected, tax and overheads live in your accounting system and are not modeled here.
• Revenue is not the same as invoiced or paid. Billable time is revenue you could bill, in the range you are looking at. Whether it was invoiced, and whether the invoice was paid, are different questions.
• A zero rate produces a zero. Where no rate resolves anywhere in the chain, the calculation uses zero rather than guessing — so a project with no rates set reports no revenue rather than a plausible-looking wrong number.

Related

• Time tracking for agencies — the workflow this sits inside, from logged hour to sent invoice.
• Features — reporting, approvals and invoicing in detail.
• Help center — setting rates, budgets and cost rates.

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