But there are lots of different factors influencing those areas. 

To truly understand your revenue and profits, you need to first understand billable rates and your average billable rate (ABR). 

This way, you know how efficiently you’re generating revenue and profits. And can adjust your pricing or resource allocations to boost your margins. 

Here are the basics: 

What is a billable rate?

The billable rate (sometimes called “bill rate”) is how much a client pays for an hour of work. The billable rate is based on billable hours. That is, when you invoice the client for 100 hours of work, how much do you charge for those hours? 

Billable rates can vary by client, the type of work, and the role or team member performing the work.

For example, on the invoice below, this agency charged their client three different billable rates: 

• Project management work: $100/hour
• Consulting work:$150/hour 
• Strategy work: $170/hour 

We’ll discuss how to set these rates later. For now, just keep in mind that your billable rates can vary. 

4 key types of rates

There are a lot of terms and metrics related to billable rates. And knowing the difference between them allows you to accurately calculate profitability. 

Focus on these four: 

• Employee hourly rate: How much a team member earns per hour 
• Actual Cost Per Hour (ACPH): How much it costs to employ someone for an hour of work 
• Billable rate: How much a client pays for an hour of work 
• Average billable rate (ABR): The average hourly rate earned across all time worked in a given period (also known as Effective Hourly Rate (EHR))

All of these numbers should be different. 

Let’s look at a design agency’s team. Junior designers make $40/hour. And senior designers make $70/hour. These are the employee hourly rates. 

However, the ACPH for those employees will be higher. The actual cost of employing those two for an hour of work includes more than just their salary. You also need to factor in things like benefits, overhead, and paid time off. 

So, in this case, the ACPH might be $75/hour for junior designers. And $125/hour for senior designers. 

To cover those overhead costs and still make a profit in professional services, your billable rate has to be higher than your ACPH. 

Here, then, you might charge your newest web design client $130/hour for work done by junior designers and $200/hour for senior designers. These are the billable rates. 

Finally, the ABR factors in all the billable and non-billable time invested in a project across roles, showing how much money you’re bringing in hourly on average. It’s a key indicator of how efficiently you’re generating revenue. 

Say your team did 50 hours of work: 30 billable hours by junior designers, 10 billable hours by senior designers, and 10 non-billable hours. 

Using their billable rates, this adds up to $5,900 in revenue: 

• 30 hours by junior designers at $130/hour = $3,900 
• 10 hours by senior designers at $200/hour = $2,000 

Then, you’d divide that total by the total hours worked to get your ABR: 

($5,900) / 50 total hours of work = $118/hour (ABR)

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Why it’s important to track billable rates and your average billable rate (ABR) 

Tracking both billable rates and your ABR tells you how efficiently you’re generating revenue. 

Monitoring billable rates helps you set more effective pricing strategies to get the most return for your team’s investment.

Understanding your billable rates also helps you manage: 

• Profitability: You need to set (and maintain) high-enough billable rates to cover business costs, generate profit, and support business sustainability. 
• Competitive pricing: Strategic billable rates help you keep prices affordable in your market while still allowing you to hit your profit margin targets 
• Project budgeting: Knowing your billable rates makes it easier to estimate realistic project costs. Even with flat-fee pricing, you can use billable rates and estimated time to figure out how much you’ll need to spend. 

Then, tracking your ABR signals when you need to improve profit margins—whether that’s by adjusting pricing, staffing, or your clients.

Because it accounts for all the time employees spend on the project, it’s a more accurate depiction of how much money you’re truly bringing in each hour.

Which, by proxy, makes your costs, revenue, and profits calculations more inclusive and accurate. 

ABR is especially helpful if you’re using flat-fee pricing. Even when you’re not using an hourly model, your ABR needs to be able to effectively cover your ACPH while still leaving you adequate profit margins. 

For example, if you’re billing a $30,000 project and spend 150 hours on it, your ABR is $200.

Knowing this and comparing it to your target ABR and ACPH can help you strengthen: 

• Your pricing strategy: Seeing your true ABR tells you when you need to adjust billable rates to meet your profit targets
• Your staffing strategy: Understanding your ABR helps you choose the most cost-effective mix of team members to complete a project
• Your data analysis: Looking at your ABR helps you evaluate profitability by team, roles, projects, and clients. So, you can identify areas for improvement, focus on higher-value projects and clients, or adjust staffing to improve profitability. 

How to calculate billable rates

Setting strategic billable rates is a big help for boosting profits. The key is to make sure they cover your ACPH, account for non-billable time, and align with your profitability targets. 

Using this approach might lead to higher billable rates than other methods (like guess-timating). But it supports long-term profitability and sustainability. 

Here’s how to calculate a billable rate that makes sense for your business: 

1. Determine your Average Cost Per Hour (ACPH)

As we previously mentioned, your ACPH is the total amount you have to pay for your team for every hour worked. 

Start by adding up all the annual costs for your team. This includes: 

• Annual salaries 
• Benefits (health insurance, retirement contributions, etc.) 
• Overhead (rent, utilities, software subscriptions, etc.) 
• Any regular freelance or consultant costs 

So, an employee’s annual salary maybe $60,000. But the total cost of employing them for a year maybe $80,000—that’s the number you want to use here. 

Then, calculate the total number of annual hours your team and regular freelancers or consultants are available to work in a year.

Be sure to exclude time for: 

• Holidays 
• Vacations
• Sick leave
• Non-billable work (e.g., internal meetings, training, etc.) 

Let’s say your team has five members with the following costs: 

So, in this example, your total annual cost for your entire team is $397,000. 

And if each of your team members has 35 hours available for billable work and receives an average of three weeks of annual PTO, their annual capacity would be 1,715 hours.

Which brings your total annual capacity to 8,575 hours. 

Now, use the following formula to calculate your ACPH: 

ACPH = Total Annual Costs / Total Annual Capacity 

In this example, it would be:

$397,000 / 8,575 = $46/hour. 

2. Set your target delivery margin

Your delivery margin is how much profit remains after accounting for the costs associated with delivering a service. 

For example, if your delivery cost is $100 per hour and you charge your client $150 per hour, your delivery margin would be $50/hour (or 35%). 

We recommend aiming for a 70% delivery margin. Generally, this margin will allow you to: 

• Cover your costs (your ACPH)
• Generate enough profit to keep the business running and sustainable 
• Absorb fluctuations in project workloads as well as unexpected project expenses or non-billable hours

Set your target margins higher if you want to generate a higher profit, if you have a lot of scope fluctuations in projects, or if you want more room to cover expenses. 

3. Calculate your hourly billable rate

Now, use the following formula to determine your optimal hourly billable rate: 

ACPH / (1 – delivery margin target) = Hourly billable rate 

Following our previous example, our sample agency has an ACPH of $46. And let’s say they’re aiming for a target delivery margin of 70%. 

Their hourly billable rate would be: 

$46 / (1 – 0.70) = $153/hour. 

And they could choose to go up to $155/hour for a round number for clients. 

How to calculate and monitor your ABR

Monitor your ABR regularly to analyze how much revenue you’re actually bringing in hourly. This helps you identify if your current billable rates are covering costs while still leaving you with a healthy profit margin. 

Weekly analysis is best for high-volume teams. For smaller teams working on longer-term projects, monthly analysis may be sufficient.

Either way, you want to calculate your ABR with enough time to make adjustments that strengthen your margins before your projects wrap up. 

Beyond shorter-term reviews, quarterly and annual reviews give a big-picture look at profitability. And help with long-term planning, revenue forecasts, and making business decisions about which projects to take on. 

But first, here’s how to calculate your ABR: 

1. Track billable revenue

To calculate your ABR, you need to understand the total billable revenue you’re bringing in.

Tally up all the income you’ve invoiced for billable work in your chosen timeframe. This could come directly from invoices. Or you can ask your finance team to pull it from their accounting software. 

Or, in Scoro, you can quickly find it in the “Project list” view. 

Head there and click “Data columns” → “Gross income.”

Now, you can see your actual (black text) and estimated (gray text) billable revenue for each project. Then, add up your actuals to get your total billable revenue.

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2. Track total hours worked on projects 

Next, you’ll need to determine the total billable and non-billable hours spent on each project. And for that, you need a time tracking system in place. 

Scoro’s built-in time tracker removes the hassle of manually tracking time in a spreadsheet or timesheet.

For example, you can start tracking time using the timer from any page in Scoro. Click the stopwatch in the navigation bar.

Then, select the task you’re working on and click the “play” button to start it. 

As your team tracks time, Scoro will automatically label the project, client, and tracked time as billable or non-billable based on the chosen task type. 

Find all this info in the “Project list” view.

Go to “Project list” → “View.” Click “Data columns.” In addition to the pre-set boxes, check the “Labor cost,” “Estimated duration,” “Total done,” and “Done, billable” ones, too.

Now, besides seeing each project’s logged time, you can also see the respective cost of that time:

• Estimated duration: Shows the estimated hours for the entire project
• Total done: Shows the total hours tracked to the project
• Done, billable: Shows the amount of tracked billable time for the project 
• Labor cost: Shows your company’s total cost of labor based on tracked hours for each project

Add up the number of hours in the “Total done” column to set yourself up to calculate your ABR.

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3. Divide your total billable revenue by the total hours worked 

Using your numbers from the previous two steps, calculate your ABR with this formula: 

Total Billable Revenue / Total Hours Worked = ABR 

Let’s say you’re running a monthly analysis of all client projects to find your ABR for July. 

Looking at invoices, you find that your team generated $63,400 in revenue during July. And based on your time-tracking software, you see that your team spent 512 hours on client work. 

So, in this case, the formula would be:

$63,400 (revenue) / 512 (hours worked) = $124 ABR

Meaning that, across all team members, projects, and clients, you billed an average of $124 per hour. 

If you want to skip that math, though, just use Scoro’s “Project list view” to see your per-project ABR. Because it automatically factors in both billable and non-billable time entries, Scoro’s ABR calculation tends to be more precise than manual tracking or basic software. 

Click “View” → “Data columns.” Then, check “Average billable rate.”

To see the numbers determining that ABR, check “Gross income” and “Total done,” too. We also recommend checking “Delivery margin” to see how your actual margins measure up to your targets. And “Labor cost” to see actual labor costs compared to your ACPH. 

Now, you’ll see your automatic ABR calculation in the “Average billable rate” column. Scoro calculates this based on “Gross income” (invoiced revenue) and tracked time (shown in the “Total done” column). 

4. Analyze your ABR’s effectiveness with Scoro’s “Project list” view 

Look beyond the surface of your ABR to understand the “whys” behind it. 

By digging deeper, you can start to figure out how to adjust billable rates, productivity, and team utilization to better support your project profitability.

Compare your actual ABR to your target on a weekly or monthly basis. If it’s not measuring up, dig into your project-level tracked time and finances to understand what’s eating into it. 

Ask yourself: 

• Is your team completing a lot of non-billable time for each project? If so, review your non-billable activities to see if any should actually be considered billable, like emails or extra Zoom calls. 
• Are your labor costs unnecessarily expensive? If so, adjust your staffing or your team’s workloads to speed up deliveries and reduce your APCH for the project. 
• Do you frequently experience scope creep or budget overruns? If so, review our project budgeting and project estimates guides to set more accurate quotes. Or raise your pricing to create a higher delivery margin for unexpected costs and scope changes. 

Find the answers to these questions (and more) using Scoro’s “Project list” view. 

From “Project list,” use “View” → “Data columns” again. And select “Gross income,” “Labor cost,” “Project profit,” “Delivery margin,” and “Average billable rate.” 

Beyond determining your ABR for each project, this view will help you answer important questions like: 

• How much did we really end up making on each project? (Look at “Gross income”) 
• How much did this project cost us to deliver based on time spent? (Look at “Labor cost”) 
• What was the resulting profit and delivery margin? (Look at “Project profit” and “Delivery margin”) 

Click on any project title to see expanded data—tracked time, revenue, expenses, task durations, resources used, and more—on that project. 

You can also use the “Filter” options to further analyze your ABR and profitability. 

For example: 

To monitor the ABR and profitability of current projects in real time, click “Filter” → “Status” → “In progress.”

Here, you can quickly identify any current projects that need adjustments to stay on track with your target delivery margin and ABR goals. 

To analyze completed projects, click “Filter” → “Status” → “Completed.”

Here, you can see trends in your ABR over time, pinpoint the most profitable types of projects, and identify where you can improve. 

To analyze the value of your clients, click “View” → “Grouped by” → “Clients.”

Prioritize those clients with consistently high ABRs. And focus on working more with similar clients in the future. 

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Understanding how much revenue you’re actually making for each hour of employee work is crucial for building a sustainable business. 

But as we said at the beginning, many factors beyond billable rates influence profit and revenue. 

Scoro makes it easy to analyze them all.

Just take it from Cosmonauts & Kings. The political comms agency used Scoro’s “detailed reporting and tracking capabilities” to boost their billable utilization and profit margins.

Sign up for a free trial of Scoro today to see how it can work for your own team.

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Even if you understand the importance of project profits, being tasked to find concrete ways to actually improve them can feel stressful.

But no worries—we talked to agency experts to learn how they’ve boosted their project profits.

Use their advice to help increase your own:

1. Centralize all project data 

Use a comprehensive agency management tool to keep all your project-related information in one spot. This approach saves time, increases profitability by reducing inefficient admin work, and, therefore, increases billable hours. 

It also simplifies tracking and measurement, making it easy to monitor your profitability at any given moment. So, you can stay informed and make proactive—not reactive—adjustments as needed to maintain your profit margins and hit financial targets. 

UK Consultancy Trust Impact knows the importance of centralized data firsthand. After testing out three different work management tools, Managing Director Matt Stevenson Dodd chose Scoro as their single source of truth.

He notes that, by using Scoro, the company avoided “ending up with lots of different software, all trying to do different things that we should really try and bring together.”

He adds that the customizable reporting dashboard is one of his favorite features:

I love the dashboard. We got all the things about cost, revenue, the average time it takes to convert, conversion rates—all sorts of things that are great for me looking at the business and where we are going.”

Matt Stevenson Dodd

Managing Director

Like Trust Impact, use the dashboard to monitor metrics that measure your projects’ performance and profitability. 

Click “New Dashboard” to create one from scratch. Or “New dashboard from library” to use a template. 

Then, add your desired widgets, metrics, and charts.

For example, for a quick snapshot of project profitability, set up a dashboard that includes: 

• A list of active projects 
• Project cost, revenue, and profit columns 
• A summary bar with the average project profit percentage 

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2. Regularly review and update costs 

Schedule quarterly and annual overhead cost reviews to keep your margins precise. 

As your business grows, your expenses will likely increase. If these cost updates aren’t reflected in your profit calculations, your margins will look healthier than they are.

This may lead you to make financial decisions based on profit that you haven’t really achieved. 

Beyond reviewing your expenses, keep things accurate with these recommendations from our in-house agency ops expert, Harv Nagra: 

1. Assess your labor costs each quarter and annually. They should accurately reflect your current overall expenses while still giving you a healthy profit margin. 
2. Integrate your updated labor costs into your project estimates and agency management system.

In Scoro, you can keep these costs up to date by using roles and role-based prices. 

Set up roles by going to “Settings” → “Sales and finance” → “Roles.” 

Then, click “New” to set up a new role. 

Once your roles are in place, you can update labor costs as needed by clicking “Settings” → “Work and projects” → “Labor cost.” 

Then, select the role you want to update and change its pricing. The platform will then apply the updated rates when calculating project costs and profitability on any future projects.

By reviewing and updating these costs regularly, you can maintain accurate profitability calculations before and during your projects.

3. Create accurate cost estimates 

Scope projects more accurately by including the cost of labor, bills, and expenses for each project phase in your quotes so you know exactly how much to charge in order to meet (or exceed) your margin targets. 

Projects that aren’t scoped accurately in terms of time or expenses tend to run over budget. Over-budget projects directly impact the bottom line, potentially turning a profitable project into a loss. 

Agency growth consultant Freia Muehlenbein of Be Reyt agrees, noting that failing to include all project-related activities in quotes can “impact your margins significantly and leave teams without dedicated time or budget for essential tasks.” 

She suggests collaborating with team members “to map out how long these activities typically take, then create a standard way of pricing and quoting with line items for client services, onboarding, etc.” 

Use Scoro to generate more consistent, accurate quotes that reflect all necessary project work. 

Break down the project into clear phases within the “Quote” builder.

Then, add line items for each deliverable, expense, and aspect of client work (such as project management or review meetings). 

Price your project deliverables using flat rates, per-item charges, or hourly rates. For time-based deliverables, Scoro automatically calculates the labor costs based on the role prices you’ve set. 

Not sure how long something will take? 

Look at the “Quoted vs. Actual” table from a previous, similar project. By reviewing this chart, you can make more accurate estimates for future projects. And improve your cost estimates. 

Head to the “Project” view. Then, click “Budget” → “Quoted vs. Actual.” 

Here, you’ll see what phases and deliverables you scheduled (in the far left column), how many hours you estimated (in gray in the “Quantity” column), and how many hours they actually took (in black in the “Quantity” column). 

Further reading: Project Cost Estimation: A Guide to Quoting More Profitable Projects

4. Consistently log your bills and expenses 

Update all bills and expenses throughout the project lifecycle instead of just at the end. This makes your financial data more accurate and improves your margins. 

This is something the Cosmonauts & Kings team focused on with Scoro: 

Thanks to Scoro, we can clearly see how each external provider or additional hour affects our profitability. Another major challenge was managing numerous spreadsheets to track key business KPIs and expenses. Now, Scoro automates this reporting.

Izabela Wisniewska

COO at Cosmonauts & Kings

To make sure you’re accurately tracking bills and expenses, start by adding them to your quotes. 

In Scoro’s “Quote” builder, click “Add row” to add a new deliverable (with labor costs) or an estimated bill or expense as a purchase order (PO).

For example, things like contracted work, equipment rentals, printing, paid ads placements, and travel.

Once the project is underway, go to the “Project” view for your project. Then, click “Finances.” Scroll down and click “New bill” or “New expense” to add new ones. 

And remember to convert any POs you added to bills once you pay them! If you don’t, you may end up having outstanding expenses listed that you already paid, which will make your profit calculations inaccurate. 

Scoro will automatically add all the costs you enter to different financial reports for your project, such as the “Quoted vs. Actual” table.

Here, you can quickly compare your total bills and expenses to what you quoted to get an accurate picture of costs and profits. 

Tracking costs as you go helps make sure there are no last-minute surprises that can derail your projects’ profitability.

Further reading: A Beginner’s Guide to Project Cost Tracking

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5. Monitor profitability throughout the project

Monitor profit throughout the project lifecycle, not just at the end. 

Why? 

Because project costs and revenue can change significantly throughout the project. And without real-time data, you won’t be able to catch financial issues until it’s too late. 

Skip the spreadsheets and use Scoro’s “Project list” view for quick, easy access to real-time profitability metrics. 

Under the “Projects” view, click “Project list.” Then, click “Filter” and add the following columns: 

• Income
• External costs
• Gross income
• Labor costs
• Project profit
• Delivery margin
• Average billable rate 

You’ll instantly see profitability data for all of your current projects. So, you can analyze: 

• Average labor costs for work completed 
• Total income from projects 
• Costs incurred
• Profit margins based on costs and income 

In addition, take a note from Colleen Kelley, Stratford Group President of Management Consulting, and use Scoro’s “bespoke dashboards” to help your company be “highly accurate on project profitability.”

Further reading: A Beginner’s Guide to Calculating Project Profitability

6. Track your team’s time

Analyze time tracking data alongside revenue and costs to calculate profitability per client. 

This allows you to identify your most valuable clients based on your invested hours and revenue. And adjust pricing, staffing, or your client roster to improve profitability. 

Brooklin Nash, Beam Content co-founder, recommends this approach based on his experience: 

Tracking time by each account, project, and deliverable has helped us get better visibility into the true cost, which in turn helped us provide more accurate quotes to potential clients.

In Scoro, you can track time in three different ways: 

• Logging time as you go with the time tracker
• Submitting retrospective time sheets  
• Scheduling events in your Scoro calendar for automatic logging 

For example, you can start tracking time using the timer from any page in Scoro. Click the stopwatch in the navigation bar. Then, select the task you’re working on and click the “play” button to start it. 

All tracked time is automatically added to the tagged project, which is then used alongside your hourly labor rates to calculate your total labor costs. 

Then, from the “Time” tab for your project, you can quickly see where your team is spending the most time. And how much that is costing you in labor. 

The “Budget health” tab provides a comprehensive overview of your project’s financial and time-related performance. It reveals whether you’re on track to meet your targets.

The “Budget” chart provides a visual representation of the project’s financial health, showing how the actual and forecasted costs compare to the budgeted amount. It also indicates the project’s profitability by displaying the forecasted profit and profit margin.

The “Time” chart, on the other hand, shows you how much time has been spent on the project compared to the budgeted time. This helps you avoid overservicing and keep profit margins healthy. 

Further reading: Time Tracking Best Practices For Teams

7. Switch to time-based billing for complex projects

If a project is very complex, switching to agile (hourly-based) contracts can reduce scope creep and make projects more profitable. 

With fixed-fee projects, it’s often difficult to estimate the scope and needed hours accurately. Which can lead to poor profit margins.

This is why On the Map Inc. CEO Kristaps Brencans recommends using agile project contracts:

With agile project contracts, clients are paying for allocated project hours rather than pre-priced projects. The project scoping is given in estimating hours, and then the client pays monthly for the upcoming/accomplished work.

For example, a fixed-fee project might quote $15,000 for a new website design. An agile contract, on the other hand, may offer 30 hours a month for $5,000 to complete the project.

You may estimate the project will take around 90 hours—three months, or $15,000—to complete. 

By invoicing based on actual time, you build in a buffer for scope creep. And reduce your need to estimate hours perfectly upfront.

This is ideal for projects where the scope isn’t clear when you don’t have much historical data for time estimates, or for making billing as precise as possible. 

Scoro makes time-based billing and invoicing easy. Go to the “Project” view. Then, click “Time” to see all time entries logged to that project. 

Next, look for all time entries with the gray “$” icon. This indicates the entry hasn’t been billed yet. Select all the ones that haven’t been billed and click “Create invoice.”

8. Kill off scope creep (as much as you can)

Establish a series of meetings before, during, and toward the end of your projects to make sure both team members and clients stay aligned. And document your discussions to have clear reference points. 

Not only does this keep your team on track, but it can also help reduce scope creep by confirming expectations and documenting agreed-upon deliverables. 

George Chasiotis of Minuttia shared how this strategy helps their agency: 

Getting everyone onboard (and ensuring you won’t have to go back to square one to make adjustments) is critical, especially for bigger, more complex projects. If you don’t manage to do this from the start, you’ll spend more time and go beyond your internal and external timelines, which will cost you money

This also has helped us significantly improve our profitability, ensure on-time project delivery, and make sure that people know what to do and enjoy doing it.” 

Use Scoro’s “Project” view to track everything related to your projects. 

Your “Project” view dashboard immediately shows you your used and remaining hours, used and remaining budgets, and project progress. 

Below, you can see and assign tasks, add new tasks, check on your project budget and finances, and more.  

Having everything in one place after the kickoff call and initial alignment keeps everyone on the same page as the project progresses. This helps prevent scope creep and overservicing to keep profit margins healthy. 

Further reading: A Beginner’s Guide to Project ROI (And What To Track Instead)

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9. Standardize your processes and workflows

Create Standard Operating Procedures (SOPs) for every major deliverable and project type you offer.

The SOPs should clearly outline the steps involved and the time and resources needed for successful execution.  

Accurate SOPs reduce confusion among team members (especially new ones) and help them deliver better work, faster.

You reduce quality errors and delays when your team has a clear roadmap to follow. So, you can strengthen your margins and end up with happier clients.

Once you define the key work involved in a common deliverable, use Scoro to replicate those steps every time you schedule that work using “Task bundles.” 

This feature lets you make templates out of recurring activities. You can quickly add them to any project as a set of tasks, saving you time and ensuring no project pieces are missing. 

Go to “Tasks” → “Task bundles” and click “+New.” Name the bundle, then click “Add.” 

Next, add as many tasks as you need to to the bundle by clicking “New task.” 

Now, you’ll see the task creator pop-up appear. Here, enter the planned duration of the task, the timeframe, the task name, the person or role responsible, and a task description. Then, click “Save.” 

10. Regularly review and refine your pricing

Analyze your pricing regularly (quarterly and annually) to ensure it aligns with your financial goals and the current market. This will help you stay competitive and avoid undervaluing your services. 

As agency growth consultant Muehlenbein notes: 

Your rates must reflect the cost of running your business and recovering your overhead, and lead to the margins required to reinvest in the business. You can run projects in the most effective way, but if your rates are too low, you still won’t make the profit you’re aiming for.

Start this process by reviewing the profitability of individual projects and services in Scoro. Go to the “Project list” and filter with “Status” → “Completed projects.” 

Then, click “Filter” and select “Income,” “External cost,” Labor cost,” and “Project profit.” 

The “Project profit” column quickly shows you which projects drove the highest and lowest profits and margins (percentage). 

From here, you can drill down into each project to see why it was or wasn’t profitable. 

Click on any project title. Then, click “Budget” and then “Quoted vs. actual” to see the income, cost, and profit generated by each project phase compared with your initial estimates. 

This will show you exactly where you need to adjust your pricing to improve profitability. If your costs have increased, your profit margins may be dropping compared to older projects. Drill into the services you’re offering to see exactly where margins are tight. Then, update your pricing accordingly. 

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There are many different ways to increase profits. The key is finding the right methods that work for your unique agency, clients, and projects. 

Use the tips we discussed as a starting point of trial and error to find what drives the best results for your team.

And no matter which methods you use to boost your profits, you can monitor your profitability at all times in Scoro. Not to mention, you can track much more than just profitability. 

Scoro’s custom dashboards let you see every agency metric you need at a glance. From your sales pipeline to billable utilization, you can see historical, current, and forecasted data. 

See how Scoro can help you build a more profitable agency with a 14-day free trial.

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While no plan is 100% foolproof, detailed project planning gives you and your team a clear roadmap to follow—one that outlines how you can meet your clients’ goals and your own.

Let’s take a closer look at the basics of project planning and how to create this actionable, single source of truth:

What is project planning?

Project planning means laying the groundwork of how the project will be done—defining the project’s who, what, when, and why.

The project planning process happens after the project has been approved and before the project officially kicks off. It builds on the high-level planning during your initial project quoting stage. 

From that high-level plan, you create a comprehensive, actionable guide that details the important info and steps needed to execute the project. 

What is a project plan?

A project plan is a comprehensive document that serves as a blueprint for the entire project, outlining the following key elements:

• Project scope: What the project will (and won’t) include
• Objectives: Specific, measurable goals for project success 
• Deliverables: The tangible products, services, or results your team should produce
• Tasks: Individual activities and steps required to complete each deliverable
• Timeline: A schedule outlining when each project phase and task should start and finish, when deliverables will be submitted, and key milestones
• Budget and resources: The estimated costs of all the people, equipment, software, and materials needed for the project
• Communication strategy: How and when you’ll update clients on project progress 

The project plan is a living document that should be updated throughout the project.

What are the benefits of project planning?

Project planning makes it much easier to execute projects. It gets your entire team on the same page about what will be done, when, and by whom. And establishes shared expectations with clients.

Project planning also offers:

• A clear roadmap: With everything outlined and in one place, your team knows exactly what to do and when. Which reduces missed deadlines. 
• A way to control costs: Your project plan includes a detailed budget so you can track costs and reduce financial overruns. And since project plans also streamline your team’s work, your labor costs reduce over time. 
• Better communication: By listing out key contact info and knowing your clients’ communication preferences, you can keep them in the loop without overloading them.
• Risk mitigation: Establishing shared expectations with clients before the project kicks off means you can align on the exact scope and budget from the beginning. So, you reduce the risk of scope creep, overspending, and overservicing—helping your projects stay profitable.

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Project plan example

Let’s say you work at a marketing agency completing a website redesign for a client. 

A very basic project plan might look like: 

Scope: 

• Scope includes: New website layout, new homepage, 10 subpages; new templates for feature pages, blog posts, the blog homepage, and product pages 
• Scope doesn’t include: Blog content, copywriting for any pages beyond the homepage and 10 subpages, and product images 

Objectives: 

• Implement the company’s revamped brand design and messaging across the site
• Increases homepage conversions by 2% 
• Increase page speed by 15% to deliver a more seamless user experience 

Deliverables: 

• New website homepage 
• New page design and copy for the:
  • About Us page 
  • Contact Page
  • Features Page
  • Pricing Page

(And so on)

• Features page template 
• Blog homepage template 
• Product page templates
• Blog post template

Tasks: 

• Create wireframes for homepage layouts 
• Implement new color scheme and fonts 
• Design homepage header image
• Write copy for homepage

(And so on) 

Timeline: 

• September 10th: Design team check-in meeting 
• September 15th: Submit wireframe homepage layouts for review
• September 17th: Submit homepage header image for review

(And so on)

Budget and Resources: 

• Internal Labor costs: $12,000 
• Internal team members: Designers (two), Developers (two), Project Manager (one), Copywriter (one) 
• Freelance labor costs: $1,200 
• Software costs: Figma, Webflow, Adobe Suite ($200) 

Communication: 

• Point of contact(s): John Smith, Marketing Manager
• One-hour Zoom call: Last Thursday of each month, 2:00 p.m.
• Weekly email updates to clients on Fridays

How to make a project plan in 9 simple steps

Now, here’s how to create a project plan of your own in nine simple steps:

1. Confirm the project scope 

Getting clarity on the project scope from the beginning allows you and your client to align on expectations. This will help avoid frustration on both ends down the road. 

Solidify the project scope asynchronously through email or Slack. Or review it live on a Zoom call. 

Even if your initial quote isn’t super detailed, you and your client should walk away from your scope review with a clear understanding of what is and isn’t included.

Say you listed a “Discovery” phase and quoted 30 hours. Explain to your client what work will actually go into completing that phase—and what work will be considered “extra” or out of scope.

Since the client has already seen the quote, there shouldn’t be too many adjustments here. But it’s better to double-check the scope now. 

Otherwise, you’ll either end up overservicing (and cutting into your margins) or missing work that your client assumed was included. 

2. Define project phases or services 

Once you’ve re-run the scope by your client, break it into defined phases (if you haven’t already done so). 

This makes it easier to outline the project timeline, deliverables, and tasks. 

Common project phases include:

• Ideation 
• Discovery 
• Design 
• Development
• Testing
• Launch

For service-based projects, clearly define each service (e.g., brand strategy, content creation) included in the scope. 

3. Create a Work Breakdown Structure (WBS)

A Work Breakdown Structure (WBS) is a hierarchical representation of all the work necessary to execute the project.

A WBS goes beyond the project scope and phases, listing out key deliverables and individual tasks.

With a clear WBS, you make sure all key steps and team assignments are covered.

And, with a clear view of everything required to finish the project, it’s easier to create a timeline and finalize your budget. 

After you list all the tasks needed to complete the project, group related tasks into different “work packages” under the relevant phase or deliverable.

For example, tasks such as “outline web content,” “write web content,” and “add content to the CMS” might all fall under the “Web Content” work package:

• Web Redesign
  • Web Content
    • Outline web content
    • Write web content
    • Add content to CMS

4. Estimate the time and resources needed for the work

Whether you use a WBS or a less granular approach, you’ll need to estimate the time each phase, deliverable, or task will take. And how many people you’ll need for each of them.

Why?

So you can establish a realistic timeline that aligns with your team’s capacity and labor budget. 

If you develop your timeline based on guesswork, you’re likely to overpromise to clients and end up with rushed deliverables or missed deadlines.

By estimating the time needed for each task or deliverable in advance, you can also accurately understand your labor costs. 

Start by verifying resource requirements based on the initial project cost estimates in the approved scope. 

What roles are needed to complete the work? 

For example, you might decide based on the deliverables that you will need: 

• 100 hours of design work
• 50 hours of copywriting work 
• 20 hours of project management 
• 150 hours of development 

Next, look at your team’s upcoming calendars and see who’s available in those roles to take on the work. 

If you don’t have enough internal bandwidth, you can adjust your timeline (in the next step) or make proactive plans to outsource certain deliverables.

In Scoro, you can do this directly from the “Bookings” tab in when viewing any project.

If you’ve set up a quote in Scoro, you can see tentative resource bookings by turning the quote into a project and heading to the “Bookings” tab. 

You’ll then see resource requirements (your team’s time) based on the deliverables and roles set in the quote. 

All bookings (purple slash boxes) are tentative until you confirm them. You’ll see tentative bookings assigned to Placeholder roles based on your Quote. 

For example, 50 hours have been assigned to the Project Manager and 30 hours to a Strategy Expert. 

By default, those hours are spread out over the project’s duration. If you know that work will happen during a specific project phase, you can click and drag the end of the booking to adjust when the work will take place. 

The green bars show the combined capacity of all team members within that role. 

So, in this example, booking a Project Manager for 2 hours per day puts your PM team at 25% capacity early in the project but 50% capacity in the middle. 

Knowing this, you may need to adjust the project timelines to suit your team’s availability or split work between multiple team members to avoid overloading any one team member. 

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5. Develop a project timeline

Now, take the deliverables and hours you just outlined and convert them into a clear project schedule. 

Without one, you’ll likely encounter resource conflicts that force your team to scramble, resulting in lower-quality deliverables and unhappy team members and clients.

Instead, define deliverable and task deadlines in advance and make sure they fit in well with existing workloads. 

You can do this manually by taking all your tasks and deliverables and adding them individually to a project management timeline. 

As you add them, include: 

• The task due date
• How long each task should take 
• When the task can be started (i.e., identify any task dependencies) 

Or you can speed things up with Scoro’s Gantt chart. 

When you convert quotes to projects in Scoro, it automatically adds all your listed phases, milestones, and deliverables into a Gantt chart in the “Project” view. 

To access it, click on any project and go to “Tasks” > “Gantt.”

Now, click “Name” and one of the three drop-down buttons to add any additional tasks, phases, or milestones, respectively. 

After you name a new entry, click the gray time column to set its estimated duration and click “Save.” Then, drag and drop it onto the chart wherever you need it. 

After you add everything to the chart, review it to make sure the timeline is feasible. And 

All deliverables and tasks fit within the assigned phases and estimated scope. 

If not, adjust the estimated timelines for bigger milestones and deliverables. Then, communicate any changes to the client well before the project kicks off.   

6. Assign team members to tasks based on skills and availability

Earlier, you determined which roles you needed and how many of them. Now, choose which specific team members you want to fill in those spots. And assign them day-to-day tasks. 

This proactive resource planning and resource scheduling helps you:

• Make sure all the key project parts are covered, preventing potential delays down the road from resource shortages
• Maintain balanced workloads on your team so they can be productive but aren’t overwhelmed or burnt out 
• Keep labor costs within or under budget

Many people manage these areas manually by cross-referencing individual calendars and messaging team members about their availability. 

But that approach is difficult to implement at scale. And it creates opportunities for errors, leading to unbalanced workloads and project delays. 

Instead, Scoro’s “Gantt” chart and “Planner” give you a centralized overview of everyone’s schedules.

So, you can quickly (and confidently) figure out who can take on which tasks and when. 

The “Gantt” chart is best for flexible planning. Whether the project is scoped out into bigger pieces or you just want to give your team more control over their week, use it to assign deliverables to complete within a specific timeframe. 

Go to “Projects” → “Tasks” → “Gantt” and look for unassigned project pieces that have a blank icon in the “Assignee” column. 

Click on that icon to open your team list. Now, hover over their respective profile pictures to see their available capacity (which Scoro automatically calculates). 

For example, the web development task above is estimated to take 120 hours. Kevin Harris has 135 hours available during that time frame, so he should be able to take on that task without any conflicts. 

To give Kevin the work, you would click on his name and hit “Assign.” And then repeat across the other tasks.

If you prefer more granular work planning for your team, go to the “Planner” view.

On the left sidebar, you’ll see all unassigned tasks across projects.

On the right, you’ll see your team members’ workloads on a daily, weekly, or monthly basis. 

To only see a specific project, select it from the “All Projects” dropdown.

You can also see:

• How full their schedules already are (the blue bar around their profile picture)
• Their current booked capacity (the percentage beneath their profile picture)
• Their remaining capacity (the hours listed in gray beneath their profile picture) 

To assign work, drag and drop the task card onto the day you want the work to be performed. Then, you’ll see the “Plan time” box that gives you three options for how to schedule the time: 

• Fill: Lets you fit the task into one day on the team member’s existing schedule
• Distribute: Lets you spread the task over multiple days
• Squeeze: Lets you push other tasks back to prioritize this one

7. Finalize your budget and cost-tracking system

Now that you’ve established your timeline, team, and tasks, review the project cost estimates from your initial quote to ensure that you’re still within budget.

Adjust your project budget accordingly so it’s as accurate as possible before you get started. 

For example, if your labor costs are too high, go back to your Gantt chart or Planner and assign some of the tasks to team members with a lower labor cost. This precise financial foundation will help you avoid overspending and cutting into your margins during the project.

You’ll also need to track actual costs against estimated costs. This will help you monitor spending, identify potential overruns early, and take corrective action to avoid reducing profits. 

The quote you created in Scoro can serve as your baseline budget, providing a clear starting point for cost tracking.

You can then use the “Budget health” chart for each project to monitor your spending.

This chart provides a visual snapshot of your project’s financial health, enabling you to monitor progress and make informed decisions.

It tracks key metrics such as:

• Profit & Profit Margin: Shows your projected profit and profit margin, giving you a clear picture of your project’s financial performance.
• Budget vs. Actuals: Compares your initial budget to your actual spending, highlighting any areas where you might be over or under budget.
• Forecast: Predicts your future spending based on current trends, allowing you to anticipate potential overruns and adjust your strategy accordingly.

You can find it by going to the “Budget” tab, and then clicking on the “Budget health” tab.

Under the “Budget health” chart, you’ll also find a breakdown of services showing the budgeted costs, actual costs, and forecasted costs for each specific service included in the project.

This breakdown provides a more granular view of your spending, allowing you to identify which services are contributing most to the overall cost and whether any are exceeding their allocated budgets.

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8. Create a client communications and reporting strategy 

Define how, when, and where to communicate project updates to your clients. 

When the client knows they’ll get regular updates—and knows where to find them—you build greater transparency and trust. And you can all stay on the same page and proactively work together to address any issues. 

Also, knowing the plan for communicating updates, requesting feedback, and reporting saves your team time—no more messaging each other to figure out who should contact clients (and when).

Consider discussing: 

• How often you’ll provide updates: Weekly tends to make sense for retainers, big projects with lots of moving pieces, and projects that require consistent client feedback. Otherwise, bi-weekly or monthly updates are usually enough to keep clients in the loop on important milestones. 
• Which channels to use: Slack, Microsoft Teams, email, Zoom—different clients have different preferences. 

You can also use Scoro’s “Customer Portal” to streamline client communications by giving them an access-based, shared workspace with you and your team. 

To set it up, go to “Settings” → “Customer Portal” → “Add new user.” Then, select their access level using the “Role” button (you can adjust access settings in the portal’s “Roles and Permissions” section).

Then, click “Save and send invitation.” 

Once the client accepts, they’ll be able to see a version of their project dashboard based on their access level. 

At a minimum, client dashboards usually include:

• Project progress
• A Gantt chart
• Planned and completed tasks
• Budget info

Clients can click on an individual task to see the files and work associated with it. If they need to review something, your team can tag them in a comment right on the respective task.

From there, they can review the file and leave feedback—all neatly organized within your Scoro dashboard. 

This way, everyone has access to the same information, work moves forward faster, and important communication and details are kept in the loop. 

9. Set up project monitoring processes

Once you have all the key project details laid out, define how you’ll monitor and measure project progress and success. And schedule regular project update meetings with your team to review your progress. 

This includes: 

• Establishing project KPIs and metrics 
• Determining how you’ll track task progress 
• Setting up regular (at least monthly) budget reviews 

All these tactics create more opportunities to identify and discuss any challenges. And to make necessary adjustments to your project before it gets off track. This will help you improve your profitability by avoiding overspending and overservicing. 

It’ll also help you deliver more on-time projects because you can proactively identify when project phases or tasks are falling behind schedule. And quickly get to the root causes and take corrective action. Like adjusting resources, reducing scope creep, or addressing skills gaps. 

Scoro’s “Gantt” tab makes it simple to monitor project progress in real-time. 

The vertical red line shows today’s date. So, you can quickly see if you’re on or off track with project progress. Any tasks that are grayed out are completed. 

For more details on in-progress tasks or phases, hover over the bar to see how many hours are estimated, completed, and overscheduled. 

Use this data to spot overservicing issues or backlogs. And connect with your team before delays start to impact deliveries and your profitability. 

To keep an eye on KPIs and financial progress, go to “Budget” → “Quoted vs. Actual.” 

Here, you can see how profitable each project phase has been, how long your team spent on each task, and how you’re progressing in comparison to your initial quoted estimates. 

The “Progress” bar uses blue for completed tasks and yellow for scheduled tasks, giving you a visual glance at how you’re progressing in each phase. 

Then, look at the “Quantity” column” to get details on the time spent, “Cost” and “Bills and Expenses” to see internal and external costs, and “Profit” to see your margins. 

This helps you see if you need to make adjustments to staffing, spending, or timelines to meet your financial and delivery goals. 

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Creating a project plan gives you a concrete roadmap that aligns everyone—your team, clients, and other key stakeholders—on what needs to happen to deliver a successful project.

Scoro’s custom dashboards make it even easier to measure success by tracking the KPIs that matter most to you and your unique clients. Choose from a variety of different widgets and metrics to create an easy-to-read home base that keeps everyone on the same page in real time. 

Ad Esse Consulting reaped the benefits of these adjustable dashboards, with Director Rhiannon Gibbs noting that the agency successfully shifted its focus “towards project execution and achieving outcomes.”

Scoro makes planning, monitoring, tracking, and communicating about your projects easy. Sign up for a free trial now and see for yourself.

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One concrete way to boost profitability directly is to improve billable hours. This increases the percentage of employee hours driving revenue for the business. 

We’ll explain billable hours, how to calculate them, and how to increase them.

What are billable hours?

Billable hours include any time spent on work activities that you’ll charge clients for. 

While exact definitions of “billable work” vary across industries and companies, those activities are always directly related to the client’s specific project scope.

Billable vs. non-billable hours 

Billable hours include any time spent on client work they’re paying for. 

For example: 

• Client meetings and communication
• Project research 
• Project planning and management 
• Creating final deliverables 
• Deliverable revisions 

Non-billable hours include any time spent on necessary work that isn’t directly billable to any one client. Examples of non-billable hours include: 

• Internal meetings and communication 
• Business development 
• Internal training 
• Attending conferences 
• Sales and marketing 
• Administrative tasks not related to a particular client 

Why tracking billable hours boosts project success 

Tracking each employee’s billable hours is the foundation of accurate billing. 

Without it, you can easily miss work (and time) that your client should be paying for, resulting in lower profits, delivery margins, and, often, an overextended team. 

Tracking billable hours helps projects in plenty of other ways: 

• Improves profitability insights: With accurate time tracking, you clearly see which projects give you the strongest return on your company’s investment. And know to focus on similar projects in the future to generate revenue more efficiently. 
• Helps you analyze team performance and workloads: Looking at each employee’s billable vs. non-billable hours lets you identify top performers, determine who needs to boost their billable hours, address unbalanced assignments, and make the best use of your team’s time and talents.  
• Gives you stronger data for future cost estimates: When billable hours are tracked accurately, you have more precise data on how long projects take. So, you can make more realistic timelines and labor cost estimates.
• Highlights cost levers: Analyzing billable hours helps you identify which tasks and projects consume the most time and resources. You can then take action, such as adjusting pricing models, focusing on different types of projects, staffing projects differently to reduce costs, or creating standard operating procedures (SOPs) to streamline workflows.

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Billable hours benchmarks

Measuring your team’s billable hours against general benchmarks shows you if you need to adjust any team assignments or improve SOPs to increase billable utilization. 

Billable utilization is the percentage of time your team or individual employees spend on work that directly generates revenue and can be billed to clients.

Calculate it with this formula:

Billable utilization = (Billable hours / Total Availability) × 100

For example, if team member Molly worked a 40-hour week and spent 30 hours on billable tasks, the formula would be (30 billable hours / 40 hours) x 100 = 75%.

This 75% shows that Molly spent most of her available time on revenue-generating tasks. And 25% of her time went to non-project work and breaks.

Billable utilization benchmarks vary by role. For instance, producers and individual contributors who generate deliverables will naturally have higher billable targets than, say, a manager who focuses more on business development and other non-billable tasks. 

How to calculate and track billable hours

Before understanding your team’s billable utilization, you need to track billable hours accurately. 

If your time tracking isn’t accurate, your utilization rates won’t be either. Which means you may over- or under-estimate your profitability and margins.

Here’s how we recommend doing it: 

1. Set your billable hourly rate

Your billable hourly rate is the amount you charge a client for an hour of billable work.

Here’s how to determine it: 

1. Calculate your Average Cost Per Hour (ACPH) 

Your ACPH is the sum of all your annual team costs (salaries, benefits, overhead, etc.) divided by your team’s total annual availability.

Just make sure you exclude time for non-billable tasks and paid time off. 

Say your team has 16,000 hours a year of availability. And the total costs for your team add up to $600,000.

Here, your ACPH calculation would be: 

$600,000 (annual costs) / 16,000 (annual availability) = $37.50 (ACPH)

2. Set your target delivery margin 

Your target delivery margin is the portion of your billable rate covering indirect costs not factored into your ACPH, such as one-off freelancer engagements and external expenses. It also covers your net profit margin. 

We recommend aiming for a 70% delivery margin to make sure you’re covering expenses and still turning a profit. If you expect high external expenses, increase the target percentage to avoid eating into your profits. 

3. Calculate your billable hourly rate 

Now that you know your ACPH and delivery margin target, use this formula to calculate your minimum billable hourly rate: 

Billable Rate = ACPH / (1 – Delivery Margin Target) 

Say a web design agency has a team with a combined ACPH of $60. They’re aiming for a 70% delivery margin.

Their billable rate would be: $60 / (1 – 0.70) = $200 per hour

This means the agency should charge the client at least $200 per hour to cover costs, achieve their desired profit margin, and account for non-billable time.

It’s easy to keep track of all your billable rates for different roles and team members in Scoro. 

First, set up role-based labor costs for your team.

Go to “Settings” → “Sales and finance” → “Roles.” 

Then, click “+New” to add a new role for your team. 

Name the role and add the “Selling price,” which is your minimum billable rate. Then, assign individual users to each role.

Then go to “Settings” → “Work and projects” → “Labor cost.” 

Find the role you just created. Click on the role to edit it.

And enter the hourly rate (ACPH) for this role.

Scoro will then automatically apply those rates to time entries and when calculating revenue and project profitability. 

Further reading: How to Determine Your Billable Rates: A Guide for Professional Services

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2. Define what’s billable and non-billable

Clearly categorizing billable and non-billable activities ensures your billing is consistent and accurate. 

You can either use a manual chart like this: 

Or use Scoro’s “Activity Types” feature for easy, quick logging. 

Go to “Settings” → “Work and projects” → “Activity Types.” Then, click “Create group.” 

Set the group name as either “Billable” or “Non-billable” activities. Then, click “Save.” 

Once both groups are set, click “+New” to add individual tasks or activity types to each group.

Name the activity (e.g., “Consulting”), then assign it to a group using the drop-down menu. Click “Save.” 

Now, when employees track their time in Scoro, they can just choose the corresponding activity from the correct category. 

3. Establish a time tracking system

The only way to accurately understand your team’s billable vs. non-billable hours is to consistently track time. 

Use a standardized time tracking system across your entire team.

Whether you use spreadsheets, time cards, or time tracking software, make sure your team can easily log their work to billable and non-billable categories. So you get a clear, precise view of how your team is spending their time.

Scoro offers three options for time tracking: 

• Real-time tracking 
• Retrospective logging 
• Automatic tracking based on individual calendars 

For real-time tracking, click the stopwatch icon in the header nav bar from any page in Scoro. A drop-down menu with recent tasks will appear. Simply click the play button to start tracking. 

You can also start time tracking from the task entry itself.

Go to “Tasks,” > select a task, click “Add,” and then click “Add time entry” or “Start time tracker.”

From there, your team can add a description and categorize the work as one of your pre-set activity types.

So, all of your employee’s activities are consistently assigned the right billable or non-billable label, giving you accurate data on productivity and profitability. 

If a team member prefers to log time in batches, they can use retrospective logging. 

Go to “Tasks” > “Timesheet,” then click into any square to log time for that task on any day. Tasks are automatically pulled in from the Calendar and Planner. 

If they don’t see a task they’ve worked on, they can just click “+New” and add the task and the logged time to the timesheet.

They can also track time from the “Calendar” view by creating a new event. This is best for meetings and other time-bound tasks. 

When the event is created, just click “Activity type” to assign the appropriate activity to the task. Time will be automatically logged based on the duration set in the calendar. 

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How to increase billable hours

Growing billable work means growing your profits.

However, increasing billable hours can be a challenge. You and your team are already busy. And figuring out how to dedicate more time to client work without burning everyone out can feel impossible.

Fortunately, we’ve found four key ways to increase the percentage of employee hours that are driving revenue—without overwhelming your team: 

1. Analyze your team’s non-billable hours

Tracking non-billable work helps you find places to reduce time spent on those activities that don’t bring in revenue. And as non-billable rates go down, you can boost your team’s billable utilization.

Cosmonauts & Kings discovered this first-hand. While the consultancy did track time before switching to Scoro, the team didn’t have a clear way to distinguish between billable and non-billable hours. 

As Strategy & BI intern Yunis Al-Mozany notes, after using Scoro, they realized their billable utilization was well below their target goal.

One of the biggest reasons was that they “were holding too many meetings, some of which were unnecessary and could be conducted differently.”

Like Cosmonauts & Kings, start by looking at how much time your team spends in meetings. 

Meetings are typically a big time-waster.

Microsoft found that employees say inefficient meetings are the “number one productivity disruptor.” (Having too many meetings is #3.) Worse, employees are spending three times as much time in meetings every week since 2020. 

Cutting down on and shortening meetings is an easy (and welcomed) way to give employees more time to spend on billable, profit-generating work.

Other non-billable tasks that commonly eat up a lot of time include: 

• Administrative tasks 
• Inefficient internal communication 
• Inefficient administrative processes, such as filling in manual timesheets instead of using timesheet software
• Internal training 

Whether it’s meetings or other activities, analyze non-billable hours to see what your team spends the most time on. And focus on making those areas more efficient to free up time for more billable tasks. 

2. Bill for all client-related work

Keep an eye on scope creep. And make sure you’re charging clients appropriately for client-related work. 

Even if the general scope of your project doesn’t change much, admin tasks like emails or Zoom calls can significantly increase over time. And if clients aren’t paying for those increases, you’re losing money.

So, if your team logs an excessive amount of small client tasks or the scope of the project expands, make sure you’re billing for all of that time.

Even if the tasks seem trivial, your company deserves to be compensated fairly for your team’s work. 

Like Soulteam owner Triinu Toomela, you might be surprised by “how many hours” those small tasks quickly add up to.

But by using Scoro to accurately capture that time, she notes that clients have been fine with the charges “because they can see how much work I am doing.”

3. Assign your team’s billable work in batches 

Group similar tasks together (e.g., research, design tasks, web development) to minimize context switching and improve your team’s focus.

Researchers from UC Irvine found that for every distraction or context switch, it took 23 minutes and 15 seconds for workers to get back on task. That non-billable time adds up on team members’ calendars.

By reducing context switching, your team can stay focused on completing revenue-generating work. They also get time back on their schedules, which would normally be spent getting up to speed on different tasks.

Scoro’s “Planner” gives you a clear view of your team’s availability, making it easy to fit related tasks together on their schedules. Just drag and drop tasks from the sidebar to an individual’s calendar. 

If you need to reorder work to group tasks more efficiently, drag and drop it on a different time slot or day. 

As Aava and Bang Design Team Lead Anna-Kaisa Reed notes, Scoro’s “Planner” lets her team deepen their focus and innovation.

Creative work requires careful time planning. When done right, it enables us to find the balance between staying organized, working uninterrupted, and thinking outside the box. With Scoro, we’ve been able to strike that balance.

Anna-Kaisa Reed

Art Director and Design Team Manager

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4. Review time reports regularly

Reviewing time reports is essential for accurate billing, consistent productivity, and project success. 

Ideally, review time reports weekly. This way, you can catch discrepancies early on, monitor project progress, and identify trends in billable and non-billable use quickly enough to make meaningful adjustments that protect your profits. 

Monthly reviews are also helpful for a broader analysis, like examining long-term trends and overall (not per-project) profitability.

For some smaller teams with long billing cycles, a monthly review might be enough to analyze trends and correct any issues before they impact profitability. 

As former Bombs Away Project Manager Tycho Derks explains, using Scoro to analyze their team’s tracked time helped them “improve time management 100%,” including eliminating all unplanned overtime. 

“Before implementing Scoro, we had no understanding of how we spent our time and money,” he says. “We had no processes in place, which meant people were often overwhelmed.”

Scoro’s utilization reports give companies like Bombs Away a clear overview of how teams are using their time. 

First, select “Days,” “Weeks,” or “Months” in the top right corner.

Then, click the “Filter” button to select either “Billable / client work” or “Non-billable / admin” work from the drop-down menu. 

Then, you’ll see a chart detailing your team’s time use. 

Hover over any timebox to see a breakdown of how those hours were spent. If you notice an employee has spent too much time on non-billable work, hover over the specific task or project to see exactly what’s taking up their time. 

For a deeper dive, use the “Billable vs. non-billable time by users” report. 

This report shows your team’s tracked billable and non-billable time over the past 30 days by default.

It allows you to see how much time each team member spent on non-billable work, drill down into what tasks ate up their time, and address inefficiencies to increase billable hours. 

Easily track and analyze billable hours with Scoro 

Tracking and analyzing billable hours requires a consistent method of categorizing tasks, an easy-to-use time-tracking system, and a clear way to analyze that data. 

Scoro brings all of these elements together—and more! With over 50 automated reports, Scoro makes it easy to analyze high-level and granular business data to help your team be more productive and profitable. 

Check them out now with a free 14-day free trial.

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Without them, you’ll find yourself guessing about your financial needs. Which leads to misguided sales targets, less profitable project pipelines, and overworked or underutilized employees. 

Stop the guesswork and learn how to use revenue forecasts to make data-driven business decisions. This way, you can support the company’s financial health. And your team’s ability to do their jobs well.

What is revenue forecasting?

Revenue forecasting is the process of predicting your business’s future income. It is typically done monthly, quarterly, or annually. 

With accurate revenue forecasting, you know whether you: 

• Have enough business lined up for future quarters
• Are hitting your growth targets
• Need to hire more people, outsource work to freelancers, or scale back your team 

A reliable revenue forecast is based on at least three key financial elements: 

• Your won contracts: Include future projects in your forecast for the months you expect to deliver the work (or receive the revenue). Tracking based on work delivery lets you forecast won contracts further into the future. Tracking based on received revenue strengthens the accuracy of your cash flow predictions. 
• Your sales pipeline: Include any proposals or in-progress contracts with potential clients. To avoid overestimating for any month or given quarter, distribute the revenue from these deals across the project timeline. You can also forecast based on win certainty (i.e., including 80% of the projected revenue for 80% of certain contracts, 50% revenue for 50% of certain contracts, etc.). 
• Your historical performance: Use past financial results and market trends to help shape your forecast as well. For example, if you normally earn 25% more revenue in Q4, factor that in—even if it’s not confirmed yet. The same goes for increasing or decreasing market demands. Including these helps you create a high-level view of your sales and resource needs.

Why is forecasting revenue important?

Forecasting revenue growth means you make more informed decisions that support financial health across your entire business. 

Accurate revenue forecasting helps you: 

1. Set realistic financial goals and plans: Forecasting helps you set realistic business goals. When you know what your future income looks like, you’ll know how much you have to spend and can better manage your cash flow, investments, and expenses. 
2. Sell more effectively: Your revenue forecast shapes how you approach sales targets, ensuring you set goals and pricing strategies to cover slower periods and scale back when appropriate. 
3. Optimize staffing and hiring: Your revenue projections help you determine when you’ll need people to ramp up on billable work. And when they can focus more on non-billable activities, like learning and development. So, you can make more effective decisions on hiring, outsourcing, or downsizing depending on your future needs and revenue. 

Revenue forecasting models for professional services

There are two primary models used for revenue forecasting: top-down forecasting and bottom-up forecasting. 

Top-Down Forecasting

Top-down forecasting is a broad approach that relies on your past financial performance, the total addressable market (TAM), your company’s market share, and other external factors to estimate revenue. 

A basic formula for top-down forecasting is Revenue = Market Size × Market Share Assumption. 

Imagine you run a marketing agency and want to predict how much money you’ll make next year. 

You’d start by looking at the TAM and your market share.

For instance, in 2022, US companies spent nearly $481 billion on marketing services. If you estimate that your agency captures about 0.5% of that market, then your estimate would be:

$481 billion (TAM) x 0.5 (your market share) = $25 million (your agency’s projected revenue). 

Of course, this is just a high-level estimate. You can refine the forecast further based on other market predictions, reports, and company insights. 

Say you only captured 0.5% of the market last year. But recently, a major competitor closed. So, it would make sense to increase the market share you plan to capture this year. And factor that into your revenue calculation.

Pros of top-down forecasting	Cons of top-down forecasting
Simple, high-level method	Can be inaccurate because it relies on general trends instead of business specifics
Good for long-term predictions and goals, such as annual planning	Often presents overly optimistic forecasting
Offers the ability to forecast without much internal data	Overlooks a number of important factors, such as resources available, sales pipeline, etc.

Bottom-Up Forecasting

Bottom-up forecasting is a more granular approach that uses concrete data to forecast revenue, such as signed deals, pipeline value, available resources, and planned expenses.

A basic formula for bottom-up forecasting is Revenue = Projected # of Sales x Average Sale Price.  

Say your agency’s average deal value is $10,000. And you’re on track to close 12 new sales in the next six months. So, your forecasted revenue would be $10,000 (average deal) x 12 (new sales) = $120,000.   

To achieve a more precise forecast, you could gather data across planned projects, including: 

• Projected total hours for each project  
• Known project costs, including labor costs and expenses
• Projected revenue of each contracted project 
• The average number of contracts for the given time period 
• Average revenue from past contracts or projects 
• The total pipeline value  

These numbers factor into your calculations to provide more clarity.

For example, you might subtract known project expenses from forecasted revenue to understand how much of your revenue is likely to be profit.

Or, if you don’t have projected data for future sales, you could use an average number of contracts for each quarter to forecast instead. 

But if you don’t have clear data on all your anticipated projects, you can use historical data to fill in the gaps. 

For example, if you expect to close three new website redesign projects that haven’t been scoped or quoted yet, use the average revenue from past redesign projects for your estimates. 

Pros of bottom-up forecasting	Cons of bottom-up forecasting
Greater accuracy because it’s based on your actual and historical data	Can be time-consuming to collect and analyze data
Good for short-term predictions, such as monthly or quarterly planning	Can be tricky to forecast long-term accurately (e.g over six months)
Helpful for companies with uncertain or fluctuating revenue since projections are based on concrete data	Not as helpful for setting long-term goals, as it focuses on internal data vs. broader market trends

Top-down vs. bottom-up: What’s the best?

Top-down and bottom-up revenue forecasting are both valuable. But offer different advantages:

Combine both approaches to get the best view of your financial future on both macro and micro levels. The top-down approach helps you set your long-term financial plan and goals. And the bottom-up approach helps you stay on track to meet them.

How to forecast revenue with Scoro

Revenue forecasting for service businesses can be tricky. 

You have to get data from many disparate sources (e.g., finance, accounting, sales, internal reports), then manually compile and analyze that data, and calculate your predictions from there.  

Revenue forecasting tools like Scoro can simplify—and even automate—this process. 

Scoro’s “Revenue report” takes a bottom-up approach and offers a real-time revenue forecast using data from your sales pipeline and current projects. 

Here’s how to forecast your own revenue with Scoro. 

1. Build your projects in Scoro  

Scoro makes revenue forecasting easy, as it collects and analyzes all of your current and planned project data in one place. 

Use Scoro’s Quote Builder to create project proposals and quotes. From here, Scoro will use the information you enter as the foundation of your projected revenue. 

When you create a new quote, use the “Estimated duration” box to tell Scoro how to distribute the projected revenue in your forecast. 

Then, click the grey box to the right to open a pop-up box. Here, use the toggle switch to choose whether you want to include pass-through costs in your revenue calculation. 

If you enable the toggle, pass-through costs (like outsourced services or materials) will be included in your total revenue. This is useful if you want a comprehensive view of all income generated by the project.

If you disable the toggle, only the profit margin from these pass-through costs will be included in your revenue. This gives you a clearer picture of your actual earnings after expenses.

For example, let’s say you’re managing a website design project for a client. You charge £5,000 for your design services and also pay $1,000 to a freelance developer to help with some coding tasks.

• Toggle disabled: Your total revenue would be $5,000 (your design fee), and your profit margin would be $4,000 ($5,000 – $1,000).
• Toggle enabled: Your total revenue would be $6,000 ($5,000 design fee + $1,000 pass-through cost).

Either way, Scoro automatically calculates project margin based on estimated pass-through and labor costs. 

Then, if you know your total revenue will be distributed differently (e.g., in two 50% payments, in full at the close of the project, etc.), manually adjust it under the “Revenue distribution” header:

Repeat this process across projects. And Scoro will instantly feed all this data into your “Revenue report.” 

2. Track your project budgets and progress 

Once a contract is finalized in Scoro, that project’s revenue is automatically tracked and categorized accordingly.

You’ll find a “Revenue” tab located under the “Budget” tab within each project, displaying:

• Earned revenue: Revenue earned based on work done so far 
• Recognized revenue: Revenue considered earned based on deliverables 
• Forecasted revenue: Remaining revenue expected by the end of the project

Keep these calculations accurate by tracking time spent on each project and project deliverables in Scoro. 

If you don’t, it’s easy to over-forecast your confirmed revenue. 

Say you have a website redesign project worth $100,000 that’s supposed to wrap up in July. 

In April, you’ve received $25,000 of that revenue. If you don’t have a way to track that separately, you might accidentally list $100,000 for the future revenue of the project in your forecast— but there’s actually only $75,000 left in future revenue for this project. 

When you track your project costs and hours using Scoro, everything is tracked and calculated automatically.

So, you can quickly see accurate revenue forecasts and clear project budgets and know where your cash is coming and going at all times. 

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3. Review the Revenue report regularly 

Review Scoro’s “Revenue report” monthly or quarterly. This allows you to see exactly how profitable you can expect to be and when and where you might need to strengthen your sales pipeline. 

Go to the Reports module.” Then, click “Revenue report” from the left-hand sidebar. 

There’s three main types of forecasted revenue you can see in the report: 

• Pipeline (Potential revenue): Estimated revenue from quotes in your sales pipeline (light blue) 
• Committed (Guaranteed revenue): Revenue from projects already won and in progress, based on the amount of remaining work (dark blue)
• Total Forecast: Sum of your pipeline and committed revenue (total bar height)

The total forecasted revenue is broken down by month in the bar chart. Underneath in the “Quote / Project” section, the monthly breakdown is based on each project or quote, showing you exactly where your revenue will come from. 

This can help you make more effective decisions about when to increase your pipeline and which quotes or projects to prioritize. 

You can also click the “Source” filter button to sort your chart by potential revenue (“Quotes”) or guaranteed revenue (“Projects”). 

Both types of forecasts are helpful. But the higher the percentage of quotes making up your forecast, the more careful you should be about making spending or hiring decisions based on that projected revenue. 

For example, if your forecasted revenue is 90% from quotes, there’s a good chance that you won’t bring in all of that revenue. But if your forecasted revenue is 90% from confirmed projects, that’s a stable prediction you can likely count on. 

Get stronger business insights with Scoro 

From adjusting sales targets to hiring needs, accurate revenue forecasting helps you make smarter business decisions to increase your profitability. 

Beyond Scoro’s Revenue report, use our customizable dashboards to support financial health and growth. From profit margins to project pipelines, display real-time data in one spot. Then, use the information to create a data-driven strategy that drives your business forward.

Start your free trial to see how Scoro’s revenue forecasting tools gives you more visibility into the data that truly matters.

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Why?

Beyond successfully managing your team and their time, you also need to manage project costs, including tracking your spending, labor rates, bills, and expenses in relation to your initial budget.

Let this guide be your roadmap to mastering project cost tracking and ensuring your projects are financially successful.

Key project costs to consider

There are two main project cost categories to consider: internal costs and external costs. 

Internal costs

• Labor costs (salaries, wages, employee benefits) 

External (Pass-through) costs 

• Bills (i.e., invoices from suppliers for services)
• Expenses (e.g., new products, licenses, advertising) 

As you make your budget and track spending, include both of these costs for accurate cost estimates. 

It’s easy to only think about labor costs when you’re building your project plan—you’re focused on who will do the work and how long it’ll take. But external costs can add up quickly and tank your budget if not accounted for early on. 

We’ll guide you through tracking internal and external costs below.

Why tracking project costs is important

Tracking project costs is critical for improving project profitability. It allows you to: 

• Stay within budget: Tracking your actual spending in relation to your planned budget lets you spot and fix any overspending before it gets out of control and starts diminishing your project’s return on investment (ROI).
• Maintain healthy project margins: Tracking costs means monitoring project profits in real-time. When you compare actual income and costs during the project to your original quotes, you can gauge if your project is on track to meet profitability targets. If not, you can proactively adjust—such as reallocating resources—to cut costs.
• Refine future cost estimates: Analyzing actual vs. estimated cost data across projects helps you identify trends and create more accurate project estimates in the future. So you can improve your ROI and margins. 
• Strengthen client relationships: Staying on top of your spending means giving clients transparent updates if needed, showing them exactly how you’re giving them value for their money. It also makes conversations around scope creep and pricing conversations less difficult since you have clear data to back it up.

How to keep project costs under control

Creating a standardized way to track project costs means you:

• Save time on budgeting and reporting
• Reduce calculation errors
• Gain a more accurate understanding of costs throughout the project 

Set yourself up for success with these four steps: 

1. Create a precise cost estimate 

An accurate cost estimate is the starting line for projects that are profitable. 

It serves as the foundation of your budget. So, the more accurate your estimate is, the stronger your budget will be. 

Creating a project cost estimate generally involves the following steps: 

• Define the project scope by outlining the deliverables and resources needed for the project
• Break the project into smaller phases to make the project more manageable and help you monitor budget as the project progresses
• Estimate the duration of each phase to give you a foundation for calculating internal labor costs
• Calculate internal costs by adding up the labor costs for all phases and deliverables based on the estimated hours for each phase
• Add in external costs by estimating bills and expenses you’ll incur at each phase of the project
• Check the delivery margins to make sure your estimated budget allows for healthy profit margins based on the projected costs and revenue
• Get approval on your final quote both internally and from your client

Avoid the manual hassle and inaccuracies of using a spreadsheet for your cost estimate. Use an automated work management platform like Scoro to save you time. And keep your estimate as accurate as possible.

In Scoro, click the “Quotes” tab in the main nav bar. Then click “+New” to start a new quote. 

In your new quote, add your project phases, deliverables, and estimated durations. If you know specific team members or roles who’ll complete the work, add those, too. Then, Scoro will automatically tally the internal costs based on set labor rates. 

Then, add in your external costs. Click “Add row” and then add a description, quantity (if needed), and price for any estimated bills or expenses. 

From there, Scoro will total your estimated costs and automatically calculate your profit margins.

Further Reading: Project Cost Estimation: A Guide to Quoting Profitable Projects

2. Establish your project budget

Now that your project quote is approved use it as the foundation of your project budget. This sets the financial baseline for your entire project. And gives you a clear number or financial range to track costs against. 

A baseline project budget also helps you monitor costs against your target margins. With a detailed budget in place, you know exactly how much you can spend (and when) before you start affecting your profits. 

The baseline budget in Scoro is established when you convert an approved quote into a project. The project budget is automatically created based on the financial details in the quote.

This baseline project budget can be found by clicking on any project within the “Project list” view. Then, click on

You can find this baseline project budget by following these steps:

1. Click on any project within the “Project list” view
2. Click on the “Budget” tab
3. Click on the “Budget health” tab

This tab provides an overview of the project’s budget health, including:

• Total budget: The total amount of money allocated for the project, aka your baseline budget
• Used budget: The amount of the budget that has already been spent
• Estimate to complete (ETC): The estimated cost to finish the remaining work on the project
• Estimate at completion (EAC): The total estimated cost of the project when it’s finished, calculated by adding the used budget and the estimate to complete

You can also monitor your project budget with the “Quoted vs. Actual” chart. 

In every column, the quoted amount is shown in gray, and your spending and income so far are shown in black. 

From here, see how your current labor costs, bills, and expenses stack up against your initial projections. Be sure to check the “Profit vs Quoted Margin” column to determine if you’re on track to meet your goals—or way off base.  

If your margin isn’t where it should be, drill down into any phase of the project or cost column to see where you’re overspending and decide how to adjust.

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3. Track and monitor costs and expenses in real-time 

Now that you’ve established a budget and kicked off your project, it’s time to keep track of project costs and protect your margins. 

As we previously discussed, focus on the two main cost categories: internal costs (e.g., labor) and external costs (e.g., bills and expenses). 

Traditionally, most businesses track internal costs manually. Employees track time spent on tasks in spreadsheets. Project managers track everyone’s different labor rates and continuously calculate costs based on labor rates and tracked hours. 

External costs are usually tracked completely separately in another spreadsheet or a financial management tool, which creates multiple spreadsheets and systems to pull cost data. 

As a result, some project costs usually slip through the cracks, resulting in higher-than-expected costs that weren’t budgeted for and lower profit margins.   

Instead, automate your cost tracking and management with Scoro. Keep real-time cost data in a single source of truth, saving you from preventable issues that impact your profits.

Here’s how: 

Internal Costs (labor)

Set labor rates for each team member individually or for specific roles. Go to “Settings” > “Work and projects” > “Labor Cost.” 

To set a labor rate for a team member, click their name, then enter their rate. 

Or click on a role to set a default labor rate for anyone with that title. This way, you can still make an accurate budget—even if you don’t know who’ll deliver the work yet. 

After you set your labor rates, Scoro automatically calculates your labor costs by multiplying your team members’ logged hours by their labor rates. 

Scoro offers employees three main ways to track their hours: 

1. Real-time tracking using the stopwatch 
2. Automatic tracking for calendar-based work (like scheduled meetings) 
3. Retrospective logging for daily or weekly logging

Real-time tracking is simple. Just click the stopwatch icon in the main header to start tracking time for any task or project. 

If employees have a lot of meetings or events, Scoro will automatically track time from their Scoro calendars. 

Go to “Calendar” and add any meeting, event, or project time block. Once it’s completed, Scoro will automatically add that time—along with the relevant project and client details—to employees’ timesheets.

Employees can also log time retrospectively using the “Timesheet” view. Just click on any day’s box for a relevant task. And enter how much time was spent on it. 

All tracked time and calculated labor costs flow directly into the project’s financial data. This information is reflected in the “Budget health” tab under the “Budget” section of the project.

As your employees log their time spent on project tasks (either through real-time tracking, automatic tracking, or retrospective logging), Scoro uses this tracked time to plot the “Actual” line on the Burn-up chart, showing the real rate at which your budget is being consumed.

The “Quoted vs. Actual” table will also show a breakdown of planned labor costs compared to actual labor costs, providing insights into whether you’re staying within your allocated labor budget.

Further Reading: The Best Ways To Track Employee Hours For Small, Medium & Large Teams

External Costs

In Scoro, external costs are divided into two categories: expenses (e.g., purchases) and bills (e.g., supplier costs). 

Add an expense in Scoro by clicking the “+” icon in the header. Then, click “New expense.”

Next, enter the relevant details, such as the vendor, invoice number, due date, payment terms, products or services, and taxes.

Remember to link the expense with the relevant project in the “Project” field! This tagging is how Scoro calculates your actual expenses against specific project budgets. 

To create a bill, click the “+” icon in the header. Then, click “New bill.” When you create a bill, you’ll add the same relevant details as with expenses. Again, remember to link it back to the relevant project for accurate tracking. 

Both expenses and bills are reflected in the project’s financial data. They contribute to the “Actual” costs displayed in the:

• Burn-up Chart: The chart visually shows the impact of external costs on the overall budget consumption
• Quoted vs. Actual Table: Compares the planned external costs to the actual costs incurred, helping you identify any discrepancies

4. Regularly review your budget against your actual costs

Compare your initial budget to your current spending rate and total on a weekly or monthly basis: 

• Weekly reviews are best when you’re working on fast-moving projects with many moving pieces like website remodels or content projects. 
• Monthly reviews are better for project managers focused on retainer clients and big-picture results such as brand redesigns or major marketing campaigns. 

Regular comparison helps you spot and quickly stop overspending, whether that’s reducing labor costs by reallocating resources, reversing scope creep, or firming up task deadlines.

And these insights help you avoid similar profit-eating problems in future projects.

If you’re not reviewing regularly, it’s easy to find yourself in a position where costs have gotten out of control—but you don’t have time to course correct. So, you end up with a lower (or even negative) ROI.

We know that keeping track of all your quoted vs. actuals is tough when you’re doing it manually and across different systems. 

You have to: 

• Review employee timesheets and calculate labor costs manually in spreadsheets
• Gather external costs from accounting software 
• Tally up labor costs and external costs (and hope your math is right)
• Review all these costs against different parts of your project budget 
• Calculate margins based on estimated costs and budgets (and, again, hope your math is right)

With automatic calculations, clear graphs, and a single source of truth, Scoro lets you skip all those steps. So, you can track your income and costs faster and more accurately, which helps you quickly address budget problems before your profits drop.

Again, use the“Quoted vs. Actual” table for this.

Here, you can see your: 

• Quantity vs. Quoted: The number of hours logged to the project in comparison to your initial estimate 
• Income to date vs. Quoted: Potential income to date based on revenue and completed activities compared to your expected income
• Invoices vs Quoted: The amount of invoiced work so far compared to your quoted budgets
• Cost vs. Quoted: Your total internal and external costs vs. your budgeted costs
• Bills and Expenses vs. Quoted: Your external costs for each phase of the project vs. your budgeted costs for expenses
• Labor cost vs. Quoted: Your internal costs for each phase of the project vs. budgeted labor costs based on expected time spent
• Profit vs Quoted Margin: the resulting profit after subtracting total costs from invoices to date vs. estimated margin based on budgets

Each of the rows shows the actual numbers in black. And your initial budgeted amounts are in gray. 

Simplifying project cost tracking and reporting with Scoro 

Project cost tracking is crucial to delivering profitable, on-budget projects. 

When you’re busy juggling projects in the queue, resource utilization, and trying to keep an eye on margins and budgets, Scoro makes it easy to track those project costs and budgets.

It also makes it easy to stay on top of all of those other project pieces in one place. 

From budgets and tasks to timelines and team schedules, Scoro’s “Project” view lets you see all those details (and more). Making project management seamless. 

Just take it from Soulteam owner Triinu Toomela, who’s used Scoro’s single source of project truth to address scope creep, standardize operations, and better support her employees. 

Check it out yourself with our 14-day free trial.

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But if you don’t have a handle on cost management, you’ll likely experience overservicing, delivery delays, and less profitable projects. 

Why? 

Without a proactive cost management approach, project budgets, time logs, and margins soon become inaccurate. 

Maintain healthier profits and simplify project cost management with our guide. 

What is project cost management?

Project cost management is the process of estimating, budgeting, tracking, and controlling a project’s costs. 

The goal is to keep project costs within your planned budget—or even lower, if possible. This way, you can hit your profit margin targets and keep clients happy.

Why project cost management is important

Project cost management is essential for project success. As the Project Management Institute notes, 35% of project failures are related to budget problems. 

It’s also key to maintaining healthy profit margins. Without effective cost management, it’s nearly impossible to accurately track where money goes and stays on budget, leading to dropping profits.

With good project cost control, you can avoid overspending. Tracking costs also gives you a wealth of solid historical cost and resource data, which helps you price future projects more accurately.

Effective cost management also helps: 

• Improve client relationships: A clear budget and cost-tracking plan make it much easier to manage finances and give regular updates to your clients. Being able to show how you’re using their money wisely helps build trust and keep clients returning. 
• Avoid end-of-project surprises: If you’re not tracking costs closely, it’s easy to get to the end of the project and realize you exceeded your budget. A project cost management plan helps you avoid unexpected costs and difficult client conversations at the end of the project. 
• Make informed decisions: By tracking actual project costs, such as labor, materials, and time, you can make better decisions about which future projects to take on, how to staff them, and what to charge.
• Grow the business: Higher project profit margins ultimately give higher-ups more money to invest in the business, hire top talent, and scale project onboarding. And when you manage costs well, you objectively demonstrate the value you bring to your organization. 

How to create a project cost management plan

Creating a project cost management plan before the project kicks off helps you accurately estimate and manage costs, avoid going over budget, and maintain your profit margins.

1. Build your project cost estimate

An accurate cost estimate is the foundation of your budget. And it sets clear expectations on how much each phase or deliverable of the project should cost. 

Follow these steps to build a precise estimate: 

Use Scoro’s quote builder to streamline this process and keep all your project data in one place. 

First, fill out the quote details and add each deliverable or phase to your quote. 

Then, click on “Quantity” to set the number of hours. And “Unit price” to set the labor cost. 

Next, add the role for each task, and Scoro will automatically calculate the total cost and your resulting margin. 

Next, add in your external costs.

For example, if you’re working on a design project, you might budget for an external writer for “Copywriting” and allocate funds for “Printing” costs.

Once your quote is ready, save it and then click “Send” to share it with your client.

Then, you’ll have access to a chatbox to message clients and get feedback on the quote in real-time.

2. Choose which team members will work on the project

Once you’ve chosen the general roles to fulfill each deliverable in your cost estimate, it’s time to assign specific people to that work. 

Consider each team member’s availability, labor rates, and skills to create a realistic plan that aligns with your cost estimate. 

Evaluate team members’ capacity to find people who can handle the workload based on their current schedule. 

If you give too much work to a team member (even if they have the right skill set), you risk delays and lower-quality deliverables.

And avoid assigning work to someone whose labor rates are over budget for the given project phase or deliverable. 

For example, if your budget for 10 hours of copywriting is $1,000, assigning it to a Junior Copywriter with a labor rate of $55 / hr. instead of your Head of Content ($125 / hr.) would make sense. 

This way, you still have the relevant skill set available but don’t risk burning through your budget and margins.

On the other hand, sometimes the cheapest resource is not the best choice. 

If you have five landing pages to design, you might have these team members to choose from: 

• Head Designer, $125 / hr.
• UX Designer, $110 / hr. 
• Junior Designer, $60 / hr. 

The Junior Designer costs less hourly. But if you know the Head Designer can create the web pages twice as fast with fewer revisions, it could be a better (and more profitable) use of skills for this project. 

Use Scoro’s “Bookings” tab to reserve time on team member’s calendars as you make your staffing decisions.

First, turn your quote into a project by clicking “Create project.“

Go to the “Bookings” tab within your project view. Here, you’ll see each project phase represented as a purple bar indicating the estimated number of hours required.

The quoted hours are automatically converted into tentative bookings.

• Green bars represent the overall utilization percentage for each team member or role across all projects.
• Purple bars represent specific bookings for this project. They either show a percentage of time per day or hours per day.
• Solid-colored bars indicate fixed bookings, while striped bars represent tentative bookings

Click the three dots next to a role placeholder booking and select “Assign user.” Choose a team member from the list with the appropriate role and skillset.

Scoro will automatically transfer the placeholder booking to the chosen user, visually updating the heatmap to reflect their updated workload.

This allows you to quickly assess their availability and make any necessary adjustments to the project timeline or resource allocation to prevent delays.

If you need to adjust the timeline of the work, just drag and drop the purple hours bar and see the capacity adjust automatically. 

From here, you can add additional team members to the work, or transfer it to someone else to build your team. This ensures you have the right team members available to take on the work.

Click on the bar to adjust the booking from “Tentative” (shaded colored bars) to “Fixed” (filled color bars) to reserve time on that employee’s calendar. 

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3. Set your budget

With your estimate approved and your team in place, it’s time to create your project budget. 

This is different from your project estimate. Your estimate is a high-level calculation of costs and resources that helps you and the client determine whether the project is a go. 

The project budget is a detailed plan for how the money allocated to the project will be spent. 

A budget aims to help you control spending and track your profits. It shows you if and when you’re at risk of excessive spending and why. Think of it as your financial game plan.

In general, there are three main types of budgets: 

• Fixed fee: Based on offering the client a flat rate for an agreed-upon scope of work (e.g., $50,000 to redesign the company website). This is best for projects where the scope is definite and you have a team who can efficiently manage the work.
• Time and materials: This is based on hourly rate invoices (e.g., $15,000 for the first 100 hours of work) and the cost of any expenses. It is best for projects with scopes that are more likely to change down the line. 
• Retainer: This involves the client paying a recurring fee (often monthly) in exchange for a set amount of work or services. It is best for ongoing work with a predictable workload.

Scoro lets you create any of these budget types directly from your quote.

Go to your approved quote, then click “Create Project.” 

The basics will already be pre-filled for you based on the quote. From here, add or adjust relevant project details. 

Your budgeted amounts for each phase or deliverable based on the quote are then imported into the “Project” view. 

Go to the “Budget” tab, then click “Budget health” to see the “Burn” chart. 

It shows the planned budget versus the actual and forecasted spending of a project over time. The report also estimates the total cost at the project’s completion.

If you click on the “Time” tab, you’ll see a burn-up chart showing the cumulative hours of work planned, the cumulative hours of work completed, and a forecast of the total work hours to be completed over time.

This allows you to track the project’s progress against the planned schedule and see if it’s likely to be completed on time.

Either way, you can track your project’s progress and budget in real-time. If you see that you’re forecasted to go over budget, you can adjust the project’s scope and price with the client or re-assign work to another team member to reduce costs or time. 

4. Decide how you’ll monitor project costs as the project progresses

Whether using a fixed fee, time and materials, or a retainer budget, you’ll get the most value from tracking costs throughout the project. 

If you create a budget but don’t monitor your real-time spending, it’s hard to tell if you’re overspending or still in the green. Thus, you could easily jeopardize your profit margins without realizing it. 

Focus on an approach that lets you easily and accurately: 

• Track your actual costs, including internal (labor costs) and external costs (bills and expenses) 
• Track time spent on each phase of the project 
• Categorize costs by project phase or task
• Measure project costs against budgeted expenses 

While tracking costs manually is possible, it’s a huge drain on your time (and brain power). 

First, you must collect receipts or expenses from your finance team or finance software (like Quickbooks or Expensify). Then, you have to sort out which expenses are related to your project and categorize them by project phase. Finally, you add up all the costs. And you repeat this process weekly or monthly.

Scoro simplifies things, letting your team track time and expenses automatically and quickly tag them to specific projects, clients, and tasks. 

Then, our software takes that data and automatically compares your estimated costs with your actual ones in the “Quoted vs. Actual” table. 

Go to the “Project” view, then click the “Budget” tab. There, you’ll find the “Quoted vs Actual” table.  

The Quoted number (black text) comes from your initial budget. The actual number (gray text) displays Scoro’s automatic cost calculations for your time and cost entries.

The “Progress” column shows how far along in the phase or deliverable you are. 

The blue fill indicates how much work is complete, the yellow shows how much work remains, and the gray shows the remaining time given your estimates. Hover over the progress bar to see each category’s exact hours or percentages. 

This way, you get a clear view of project spending compared to your initial budget and planned timeline and can quickly identify any potential issues and where they’re coming from. 

For example, you’ll want to investigate if your quoted costs for the Ideation phase are $4,000 but your actual costs are $3,800. 

Look at the Progress bar to see how much time you have left for this phase. If the Progress bar is only 50% complete, but you’ve already spent 95% of the budget on that project phase, you’ll know that you’re at risk of running over budget. 

From there, you can reassign work to another team member, adjust the project’s scope, or adjust the budget for each deliverable to better match the actual time spent. 

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Project cost management best practices

Now that you know how to build a project cost management plan, these best practices will help you strengthen your cost estimates and improve profitability:

Regularly review and monitor project costs

Tracking your project costs is only helpful when you review them regularly. 

For most projects, we recommend reviewing your project costs weekly. However, if you’re working on a project with a longer timescale and less happening week-to-week, monthly may be enough. 

The key is to review your costs regularly enough to be able to make changes before you begin overspending. This way, there’s still time to adjust your tactic or scope to keep projects profitable. 

Remember to review external project costs, such as supplier bills and expenses. If you’re using Scoro, monitor them directly from the Project view under the “Finances” tab. 

Scroll down to see invoices and quoted amounts. Then, click “New bill” or “New expense” to track external costs. 

Then, you can also see them reflected in the “Quoted vs. Actual” table under the “Bills and Expenses” column. 

2. Analyze completed projects to learn where you went wrong (and right)

Once a project is complete, a postmortem review can help you understand its biggest wins (and mistakes). Apply these practical insights to future projects to strengthen your profits and workflows.

Head back to the “Quoted vs. Actuals” table to look at: 

• How much time you scoped for each phase vs. how much time was actually spent on each one 
• How much you spent on external costs and how that impacted your final costs 
• Which team members were the most and least expensive  
• What your overall profit margins were for each phase 

For example, if the “Ideation” phase was profitable (e.g. $750 in profit) but the “Delivery” phase was not (e.g., $600 over-budget), you could consider adjustments to future projects like: 

• Scoping more time for the delivery phase 
• Allocating more of the budget to the delivery phase vs. the ideation phase 
• Outsourcing more of the delivery phase work to lower internal labor costs 
• Using a different team member for delivery tasks to lower costs or speed up delivery

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3. Use historical data when creating cost estimates

If you frequently track and review your completed projects, you’ll accumulate a wealth of historical data to use for future project planning. 

For example, let’s say you’re scoping and creating a cost estimate for a website redesign project. 

In Scoro, go to the “Projects list” view and use the “Tag” filter or the search bar to find other website or rebranding projects from the past. 

Then, click on any of those projects to get historical data on: 

• How long each phase of the project took 
• Who worked on different deliverables 
• What your costs for each phase were 
• How profitable the project was overall 

This will allow you to create more accurate cost estimates for future projects by using real, tracked data instead of best-guess estimates. Making it easier to quote and deliver profitable projects.  

4. Add a contingency fund to your project

A contingency fund reduces the risk of going over budget. It serves as a “buffer” that factors in potential scope creep, delays, or other issues that can impact project finances.

It doesn’t prevent these things from happening. But it minimizes their effect if they do happen because you have a safety net of additional funding built in from the start.

In general, a contingency fund of 20% of your project budget is a good starting place. 

You can build this into each phase of your project estimate and budget, or write it in as a separate line item. 

For example, if you estimate that the “Ideation” phase of your project will take 50 hours, you might put in 60 hours for it on your estimate as a 20% contingency. 

You can estimate each phase of your project and then use a separate “Contingency Fund” line item to add 20% of the entire estimate.  

If you use a separate line item, it can help signal to the client that changes in scope may incur additional costs and make the client more aware of changing the scope. 

5. Add project and account management fees to your quote

Budget 15% to 25% of your total project time for project and account management, including: 

• Client meetings
• Admin work 
• Planning and scheduling project work 
• Analyzing project data 
• Monitoring project performance and execution 

This work takes up a significant part of the project, yet it’s often underestimated and overlooked in estimates. 

The result? 

Your project goes over budget without you even realizing it.

To avoid this, add an additional line item to your quotes that accounts for “Project Management.” If you’ve budgeted 100 hours for the total project, your project management line should budget 15-25 hours. 

Then, assign the project management row to your project manager role, or even the specific PM who will be managing the project. Scoro will automatically calculate their labor rate based on the estimated hours, and add this total cost to your scope and budget. 

This transparency also helps clients know where their budget is going and emphasizes the time and effort you’ll put into the partnership.

Streamline project cost management with Scoro 

Mastering project cost management, from creating accurate estimates to monitoring costs, is key to maintaining profit margins and keeping clients happy. 

And Scoro makes it simple to monitor costs across all your projects. Keep an eye on individual ones with our Quoted vs. Actuals table. And use the Project List view to see what’s happening across the board. 

This way, you can identify big-picture financial trends and problems that need to be addressed. And use it as a frame of reference to monitor your cost management progress.

See how one consulting agency used Scoro’s project budgets to track costs, avoid overservicing and improve profit margins. 

Then, try it out for yourself — sign up for our 14-day free trial and streamline your project cost management.  

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Make the most of your team’s time and talent with our billable utilization guide, which covers how to calculate billable utilization, its biggest benefits, and how to improve it.

What is billable utilization?

Billable utilization is the percentage of time your team or individual employees spend on work that directly generates revenue and can be billed to clients. 

For example, direct project tasks like writing, coding, and designing are considered billable hours. However, activities like company meetings, training, and business development fall under non-billable hours.

You calculate billable utilization using this formula:

Billable utilization = (Billable hours / Total Availability) × 100

For example, if your team member Molly has a 40-hour work week and spends 30 hours on billable tasks, the formula would be: (30 billable hours / 40 hours) x 100 = 75%

This shows that Molly spent most of her available time on revenue-generating tasks. And had 25% of time remaining for non-project work and breaks.

Billable utilization vs. resource utilization

Billable and resource utilization are essential metrics for understanding your team’s productivity, but they measure different things.

Billable utilization focuses on the percentage of time employees spend on client-facing tasks that directly generate revenue.

On the other hand, resource utilization encompasses all the work your employees do, both billable and non-billable.

This can include internal meetings, training, administrative tasks, and other activities that contribute to the company’s overall functioning, even if they don’t directly bring in revenue

Let’s say a software developer spends 30 hours a week coding for a client (billable) and 10 hours on internal tasks (non-billable).

• Billable Utilization: 75% (30 billable hours / 40 total hours)
• Resource Utilization: 100% (40 total hours / 40 total hours)

This shows that while the developer is fully utilized, only a portion of their time directly contributes to revenue.

But which utilization metric should you prioritize?

It depends on your goals:

• Profit-driven: Focus on billable utilization to identify revenue growth opportunities.
• Productivity-focused: Start with resource utilization to optimize workflows and prevent burnout.

Ideally, you should track both metrics for a complete picture of your team’s performance and financial success.

Why you need to track billable utilization rates 

Even small adjustments to utilization rates can significantly improve your company’s profitability and revenue. 

Here are a few reasons why:

To improve your resource allocation  

Tracking billable utilization optimizes resource allocation by revealing who’s overloaded and who has capacity. 

For example, if designer Sarah consistently bills 90% of her time while Mark bills only 60%, it’s a red flag. 

Reassigning some of Sarah’s tasks to Mark helps prevent her burnout and ensures projects are staffed efficiently. If Sarah’s workload is sustainable despite high utilization, consider hiring to avoid future bottlenecks. 

However, in Mark’s case, the root cause of his low billable utilization should be investigated. It could be inefficient processes, unclear priorities, a skills mismatch, or personal issues impacting his engagement and productivity.

To support your company’s sales pipeline

Use historical billable utilization rates to predict how much work team members can take on in the future.

If forecasts show low billable utilization, that’s a sign that you need more projects in the queue. If not, you’ll miss opportunities to bring in more revenue.

By proactively planning your capacity, you can help Sales target clients whose needs best match your team member’s unique skills and experience.

For example, after looking at the past three months of billable utilization rates for your developers, you determine that 70% is a realistic rate to target for the next quarter. 

With this data, you can work with your sales team to target clients who require development services, ensuring that your team’s skills are fully leveraged.

On the other hand, if your designers are already forecasted at 75%—80% utilization rates for the next quarter, you can also show Sales this data to prevent onboarding more web design clients.

To improve your capacity planning

Billable utilization data can also help you set realistic timelines and scope new projects in alignment with your team’s actual capacity. 

For example, if a client requests a tight deadline, review your team’s billable utilization data before committing. If key members are already heavily booked, you can propose a more realistic timeline upfront, avoiding the need for later renegotiations and potential client dissatisfaction.

This proactive approach avoids overpromising, resulting in stressed-out employees, rushed tasks, and client friction.

Instead of overloading your team, balance workloads to maintain a buffer for unforeseen events like sick days or complex tasks.

Billable utilization benchmarks

You need to know which billable utilization rates to target to determine whether you’re over or underbooking team members.

In general, professional services billable utilization benchmarks vary based on roles:

Understanding and improving your billable utilization benchmarks for different roles can significantly impact profitability. 

Let’s illustrate the impact of different billable utilization rates on profitability with two agencies:

• Agency A: 50% billable utilization
• Agency B: 60% billable utilization

Both agencies have the same capacity (10,000 available hours per year), delivery costs ($300,000), and average billable rate ($100/hour).

Here’s how that difference in billable utilization plays out:

A seemingly small 10% difference in billable utilization leads to a substantial difference in profitability. Agency B’s gross profit is $100,000 higher than Agency A’s because its employees spend more time on billable work.

5 best practices to accurately track billable utilization

Discover five essential best practices to ensure your utilization tracking is precise and actionable:

1. Define billable and non-billable activities

Clearly define billable and non-billable activities for your team so they can accurately capture their billable hours. And make sure everyone knows which tasks fall under which category. 

In Scoro, you can do this by setting up “Activity types.” Your team members can link tasks, events, and time entries with the predefined activity types to easily label billable vs. non-billable work. 

Go to “Settings.” Then, under the “Work and projects” column, click “Activity Types.” Click “Create group” to add your new category.

Add the group name (e.g., “Billable/client work” or “Non-billable/internal work) and click “Save.”

Next, click “+ New.” 

Now, you can enter individual activities within your billable and non-billable categories. Type in the task in the “Activity Type name” box. Choose your category from the “Activity type group” drop-down menu. And select the related product (service). Then, click “Save.”

Note: If you want to bill your clients based on activity type, link it with a product/service. This way, all relevant information on the product/service is automatically filled in on the sales invoice.

Repeat for all the activity types you want to include.

As you add activity types, you’ll be able to view them in one list:

2. Use a project management tool with integrated time tracking

A time tracking system allows your team to easily track and categorize their time so you can accurately monitor and analyze billable utilization. 

For example, Toggl, Harvest, and Timely are popular employee time tracking tools. But using stand-alone software means adding yet another tool to your tech stack.

Scoro offers four different methods of time tracking, giving each team member flexibility to pick a method that fits with their working style: 

1. Real-time tracking with a timer
2. Real-time tracking with documented tasks 
3. Retrospective logging from timesheets
4. Automatic tracking through calendar entries

The stopwatch timer icon lets team members start time tracking from any page. They click the play button to start tracking time on a logged task. Or they can add a new one. 

They can also start tracking in real time from their “Task list” within the “Tasks” module. Hover over the stopwatch information and click “Start time tracker.” 

Employees can also log time retrospectively using the “Timesheet” view. 

From there, they can see scheduled tasks and events. And the amount of time spent per day on each task. 

To add time, they must click on the box for a specific task or event on any day. 

The last option is for team members to track time automatically using events in the “Calendar” view. When they book a meeting slot or focus time in their Scoro Calendar, the time is automatically added to their timesheet report.

Bonus tip: To ensure everyone categorizes their work accurately, no matter how they track time, add “Activity type” to your “Mandatory and unique fields” settings. 

3. Monitor billable utilization regularly

Ideally, you’ll review billable utilization before, during, and after projects to continuously identify trends, underperforming areas, and opportunities for improvement. 

With Scoro, you can easily track billable utilization and get the real-time visibility your team needs to ensure profitability. 

Scoro’s “Utilization report” creates utilization rates based on your team’s time logs and a default eight-hour workday setting. 

To change anyone’s default availability, go to “Settings.” Click “Availability.” under the “Work and Projects” column. Then click “+ New.”

To change a team member’s working hours, click in any date box and uncheck any days as needed. 

Then, use the “From” and “Until” date boxes at the top to set this capacity for a certain period. You can also check the “Indefinite” box to make it the default schedule.

Now that everyone’s capacity has been updated, go to the “Reports” module and click “Utilization report.” 

By default, Scoro’s “Utilization report” displays the resource utilization rate, including billable and non-billable hours. 

To see the billable utilization rate specifically, you must filter the data to show only logged hours associated with the billable activity types and tasks you previously defined in the settings.

This will show your team’s daily, weekly, or monthly billable utilization rates, which should typically be lower than your overall resource utilization rates, as it doesn’t include non-billable work like administrative tasks or internal meetings.

Each box “fills up” with colors corresponding with workloads:

• White: How much billable capacity a team member has left
• Green: How many billable hours a team member has used while staying within their capacity limit
• Red: How many billable hours a team member has used while going over their capacity limit

If a team member has a lot of white space in their heatmap boxes, you’ll need to find more work for them. See if you can move some tasks from an over-utilized team member (red box) to their workload. Or look for new projects to take on to fill out your team’s workloads. 

4. Analyze non-billable time

Don’t overlook the importance of understanding how your team spends non-billable hours. Ideally, for client-facing roles, this should account for no more than 20-25% of their total time. If it exceeds this benchmark, it’s time to investigate.

For example, you might have a few employees who consistently have low billable utilization rates. 

By examining their non-billable time, you could discover they’re spending a significant portion of their day on administrative tasks or attending unnecessary meetings. Addressing these issues frees up their time for billable work, boosting their utilization and the agency’s overall revenue.

Scoro’s “Detailed report” can help you pinpoint these areas for improvement and optimize your team’s productivity.

Go to “Reports.” Then click “Productivity,” 

And select the “Billable vs. non-billable time by user” report. 

Then, apply the following filters:

• Grouped by (1st): Select “Users”
• Grouped by (2nd): Select “Activity type groups”
• Data columns: Click “View” and check “% of total”

You’ll see a chart of all tracked billable and non-billable hours, broken down by team member.

Now, click on “Non-billable / admin” (or your chosen category for non-billable time) under any team member’s name. This reveals a detailed breakdown of their non-billable tasks, showing you exactly how their time is spent – whether on vacation, in meetings, productive business development, or inefficient admin work.

This granular view helps you pinpoint areas for improvement. For example, if you see excessive time spent on low-value admin tasks, you can explore ways to automate or streamline those processes, freeing up your team’s time for billable work.

5. Forecast billable utilization using historical data 

Analyzing your team’s booked time is crucial for accurate capacity planning and preventing overbooking.

Scoro’s “Utilization report,” accessible by clicking on the “Reports” module followed by “Utilization report,” provides a forecast based on both confirmed and tentative bookings, offering a comprehensive view of your team’s projected workload.

Make sure you have selected “All bookings” in the “Utilization” drop-down menu. This includes both confirmed and tentative bookings, providing a comprehensive view of your team’s projected workload.

Then, use the date picker to select a timeframe (such as “Next 90 days”) to analyze.

This will show you a prediction of each team member’s utilization level for the upcoming weeks.

Tips to improve billable utilization

Once you understand, benchmark, and monitor your billable utilization rates over time, it’s time to focus on improving those numbers to increase profitability. 

Here’s how: 

1. Make sure you have enough work

Problem: Billable utilization rates are low because there’s not enough work for your team’s capacity 

Solution: Boost your sales pipeline to build out your team’s roster of projects 

Not having enough work for your team results in low utilization. And less revenue and profits. 

To fix this, actively monitor your organization’s sales pipeline. This way, you can find opportunities to help ramp up sales and take advantage of your team’s availability.  

Head to the sales “Pipeline” view in Scoro. Here, you can see the number of active quotes and where each deal is in the sales process. 

Click “View” and then “Summary bar” to select the high-level data that is most useful for analyzing your pipeline health. Like: 

• The average quote amount 
• The margin of all quotes combined
• The average margin across quotes
• The average age of each quote 

Keeping this high-level data in the summary bar can give you valuable insight into the value and timeline of your sales process. This allows you to make smarter decisions about the number of quotes you need to send to generate the appropriate amount of work. 

You can also use the “Revenue report” to spot future slumps or spikes in your potential revenue. This gives you a heads up on when your team members might need more time or external support to complete high-priority billable work. And when it makes more sense to add more projects to the queue.

Go to “Reports.” Then, select “Revenue.” 

Then, set the following filters: 

• Set “Source” to “Quotes”
• Set “Quote status” to “Active quotes” 
• Set the “Date range” to the future time period you’re analyzing

2. Set clear productivity expectations and billable utilization targets

Problem: You’re the only one focusing on billable utilization.

Solution: Set clear target utilization rates.

Improving billable utilization rates is a team effort. Everyone, from core contributors to managers and executive teams, needs to be on board. 

For example, a 75% annual utilization target is a good goal for individual contributors, but how does that break down on a daily or weekly level, considering holidays, vacations, sick leave, and so on? 

Setting a clear target for your team, such as “Spend no more than 1 hour per day on non-billable work,” is a much easier goal to track and measure. This can help you hit your overall utilization targets. 

3. Assign the right people to projects

Problem: Your billable utilization rates are all over the place—with some team members overworked and some  underutilized 

Solution: Match your project requirements to the strengths of your available resources to optimize efficiency, quality, and utilization. 

When setting up new projects and assigning tasks, assign the right people to the right projects. 

Consider skills, experience, and upcoming availability to ensure adequate utilization while maximizing efficiency.

In Scoro, you can easily view team members’ availability by role. Simply select a specific role from the “Role” drop-down menu in the “Utilization report” and click “Utilized” > “Remaining” to see upcoming availability in hours. 

4. Automate tasks and workflows

Problem: Your team is spending too much time on non-billable work 

Solution: Identify repetitive, time-consuming tasks that can be automated to free up more time for billable work 

Some non-billable work is inevitable. However, you should regularly monitor your team’s non-billable time and tasks to identify inefficiencies and streamline workflows. 

One way to make your team more efficient is to use triggers and actions within Scoro to automate repetitive processes and workflows, such as notifying team members of task progress or changes. 

To set up a trigger, go to “Settings” -> “My Settings” -> “Triggers and Actions.” 

Then, click “+New” to design your new trigger. Or start with one of Scoro’s pre-made templates. 

First, you’ll name your trigger and choose when to trigger the action. 

For example, you might want to automatically notify relevant team members when one of their task deadlines changes. Select “Task,” then “Modified,” and set the condition to “Deadline: is modified.” 

Then, set the conditions. 

For example, you might only want to notify them about changes to high-priority tasks. You can set the conditions by clicking the “and it matches…” tab and choosing the appropriate conditions from the drop-down menu. 

Finally, you’ll choose your action. In this case, you might select “notify in Scoro” and send the notification to the assignee. Then, hit “Save.”

Make optimizing billable utilization easy

Without the right tools, keeping track of everything you need to calculate and track billable utilization accurately is challenging. 

That’s why so many agencies only calculate it quarterly or even annually—which is too late to make changes to improve productivity and profitability.

Skip the hassle and stay on top of real-time utilization with Scoro’s end-to-end agency management software. 

Our user-friendly platform gives you a clear view of how your team spends their time. This helps you make proactive decisions to keep projects on track and clients and team members happy.

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You might be struggling with accurate cost estimates. 

They’re the foundation for setting realistic budgets, avoiding costly overruns, and ensuring your projects stay on track financially. 

In this article, we’ll explain everything you need to know about project cost estimation—from what it is and different types of estimates to step-by-step instructions and expert tips for accuracy.

What is project cost estimation?

Project cost estimation is the process of estimating the money, time, and resources needed to complete a project. This means examining closely the cost of your team’s time and effort, the materials you’ll need to buy, equipment costs, and any other expenses that pop up along the way.

These estimates then shape your pricing, project plans, and project budgets.

By accurately estimating project costs upfront, you can:

• Allocate resources and plan timelines more effectively
• Avoid overspending
• Stay on track to end each project with financial gains—not losses

More accurate project cost estimates also support better client relationships. Knowing how much you’ll need to charge at the start means you don’t need to have mid-project conversations saying you’ll need to bill more, which isn’t fun for anyone. 

And your team is more likely to deliver on time when working from a project timeline informed by data instead of best guesses.  

Types of cost estimates to consider

There are two main types of estimates to know: ballpark estimates and statement of work (SOW) estimates. You need both to accurately estimate project costs, as the ballpark estimate is the foundation of your SOW estimate. 

Ballpark estimate 

A ballpark estimate is a rough, high-level estimate given when a prospect or client needs to know how much a project will cost them, but you don’t have enough information to provide a detailed quote. 

This can be especially helpful if you’re working on a new project. Or with a client in a new industry. 

For example, if a client approaches you with a project idea, you might give them a ballpark estimate of $80,000 to $140,000 based on your experience with similar projects and any high-level details the client provides. 

This estimate gives the client a general idea of the project’s cost so they can decide whether to proceed.

Statement of Work (SOW) Estimate

Once the client agrees to move forward based on the ballpark estimate, you prepare a detailed Statement of Work (SOW). 

The SOW estimate builds off the ballpark estimate, serving as your granular framework for project execution and monitoring. 

This is where you work with your client to define the project specifics, like the project scope, deliverables, timelines, and the final pricing estimate. In the next section, we’ll walk you through exactly how to create an SOW estimate.

The SOW estimate helps your team determine realistic financial targets. Once you’ve got the specific project deliverables laid out, you’ll have a clear idea of how much your company stands to make. And from the start, you’ll know you’ll need to balance costs and resources to maintain that specific revenue goal and profit margins. 

Here’s an example of a cost estimate that could be put together for rebranding project.

How to accurately estimate the cost of a project

It’s ok if your ballpark estimate is just that—a rough idea of the project costs.

However, to keep projects profitable and meet your target financial goals and KPIs, your SOW estimate needs to be as exact as possible. 

And for that, you need up-to-date project data.

Remember, though, no project estimate can be 100% accurate. There will always be some small (or large) change, obstacle, or unexpected event during a project. 

However, the best defense against the effects of these changes is to take the following steps to create detailed, data-centered project cost estimates.  

To follow along with the steps, sign up for a free Scoro account (no credit card needed).

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1. Break down the project scope into deliverables or phases

Once you clearly understand the project scope, sort those deliverables or outcomes into smaller steps to make it easier to estimate specific costs and resources needed. 

For example, estimating the resources needed to “write five new landing pages” is much easier than “redesigning the website.” 

Other specific deliverables could include: 

• Audit the existing website to determine outdated content for revisions
• Meet with the client to review site mock-ups (once a week)
• Outline the new site structure 
• Update the overall site design to align with the client’s new brand aesthetic

For teams that use more granular planning, creating a detailed Work Breakdown Structure (WBS) can be a helpful way to define project deliverables. 

Once you know what work needs to be done on your project, you can create a cost estimate using a tool like Scoro.  

Here’s how:

Click the quickstart “+” button in the header. Then, click “New quote.” 

Next, create or choose your client in the “Client” dropdown. Then, adjust the other fields, such as due date, quote name, currency, etc.  

You should end up with something that looks like this:

Next, scroll down to the “Product | Description” section and click “Add subheading” to add a new phase or deliverable to the project.

If you want to add extra notes or details, type them in the “Subheading notes” bar. 

Then, click “Add row” to add products and services under that phase or deliverable. You can either add a new one or choose from the existing list. 

For example, you might split a rebranding project into:

•  A “Discovery phase” focusing on research and strategy  
• A “Delivery phase” that involves tangible assets like copywriting and design work 

2. Estimate the duration of each deliverable or phase 

Listing how long different project tasks should take helps you make more accurate cost predictions. 

Use the estimated task length to estimate the labor cost rather than making an instinctive guess that might be inaccurate.

Scoro provides a single source of truth for your historical data, making it easier to estimate the time different tasks will take. 

Go to the “Reports” module and click on “Detailed report” under the “Work” section.

Then, make sure you apply the following filters to the “Detailed report” from the drop-down menus:

• Date range: “All dates”
• Project: Select any project you want to review
• Status: “All events | Done | Completed” 
• Grouped by: “Activity types”

Then, based on activity type, you’ll see all completed tasks for that project, along with the estimated (Planned) and actual (Duration) time duration. 

Once you determine the time needed, add the total hours for each task or deliverable into your quote’s “Quantity” field. 

3. Calculate the cost of each task and deliverable

Calculate the cost of each task by multiplying the estimated time each task will take by the selling price of that product or service. 

In Scoro, you can set your quote to use “role prices” or “service prices.” 

“Role prices” are perfect for billing for hourly labor for employees, for example, when your design team is going to spend 20 hours working on new landing page mockups. 

“Service prices” are best for distinct products or services, such as printing costs or leading a workshop. 

With role prices, Scoro automatically calculates total costs based on the length of time and team members’ stored hourly labor rates.

Add the estimated hours in the “Quantity” box. Then, in the “Cost and provider info” box, choose a specific team member or role placeholder. 

Scoro will then calculate your unit price and margin based on your saved labor rates.

If you don’t want to show your client all the math and the breakdown for each phase or deliverable, only use the “hide rows” checkbox to display the totals.

4. Add external costs 

In addition to internal labor costs, most projects have external costs (also known as pass-through costs) that must be budgeted for. 

If you don’t include these costs in your initial project estimate for these costs upfront, your profit margins and revenue will take a hit later on. 

External costs generally fall into two main categories:

1. Supplier bills: Invoices from external vendors
2. Project expenses: Out-of-pocket expenses incurred by your team, such as equipment rentals, travel costs, printing charges, etc. 

If you know some of your external costs, tie them back to the relevant project phases or deliverables they support. 

In Scoro, you can easily manage these external costs by adding them directly to your quote as line items. Select “Outsourced product or service” and specify the supplier to reflect these expenses accurately in your estimate.

5. Calculate the total project cost estimate

Now, add up your internal and external costs to determine the total project cost estimate.

In Scoro, your total cost is calculated automatically as you enter products and services. 

You can view the cost for each phase or service of the project by ticking the “Group prices” box. 

Scoro will then display:

• The total cost for each phase, including services and external costs
• The margin for each phase (and individual service) on the right-hand side

At the bottom of the quote, you will then see the following info:

Total Cost:

• In-house Delivery Cost: The expenses incurred for using your company’s internal resources and staff

• Outsourced Delivery Cost: The expenses incurred for using external vendors or contractors

Total Margin:

• In-house Margin: The profit generated from the in-house portion of the project

• Outsourced Margin: The profit generated from the outsourced portion of the project

Additional Options:

• Tax: You can include applicable taxes in the final price
• Discount: You can offer a discount to the client, which will be reflected in the total price

Now, if your delivery margin isn’t as high as you need it to be, go back to your line items and adjust staff, prices, or other expenses to boost it. 

Your company may have a target delivery margin—or minimum delivery margin—for all your quotes. If not, a 55% – 75% delivery margin is a good benchmark to aim for. 

6. Get your quote approved internally

Make sure relevant stakeholders in your org review your final project cost estimate before you send it out. 

Getting another set of eyes on your quote can help check for accurate quoting (especially from someone more experienced), catch and correct errors, or provide sign-off.

7. Share the estimate with your prospect or client 

Now, it’s time to send out your SOW estimate to make sure you and your prospect or client are on the same page. 

Being as detailed as possible about the scope, deliverables, and costs is key to setting clear expectations that keep your team and client working well together.

Once you’ve finished with your project cost estimate in Scoro, save it. Then, choose from one of three ways to share it:

• Sending a PDF directly through Scoro 
• Download a PDF
• Share it via a collaborative link 

If you want to help shorten the closing cycle, the “Share” button sends a collaborative link. Use the “Share” page’s chatbox to message clients, get feedback on the quote, and review together in real-time.

Once you’ve sent your quote, keep track of it in your “Pipeline” module.

Here, you can see the number of quotes you’ve sent. And where each deal is in the sales process.

Once a client approves the SOW estimate, drag and drop it into the “Confirmed” column and use the quote data to automate project planning. 

Manage projects from cost estimation to close with Scoro 

Accurate project cost estimates are the foundation of profitable projects. 

Scoro makes building on that solid starting point easy by automatically turning your quotes into project plans.

As your projects progress, stay on track to meet your profit goals with our customizable dashboard. View your project spend, tasks, timeline, resource utilization, and more in real-time. And quickly get ahead of issues that can impact your bottom line.

Start your free trial to see how Scoro helps you work smarter, not harder at every stage of the project tracking process.

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In this guide, we’ll walk you through 16 key agency metrics and KPIs to know and track to improve your agency’s profitability. 

Financial metrics

Financial metrics are critical for your agency to understand income, revenue, profit, and costs. If you’re new to tracking metrics, these are good ones to start with. 

1. Total revenue 

Total revenue is the amount your agency earns from client projects and services in a given period before accounting for any expenses or costs.

It is calculated by summing up all the invoices you send to clients in that time period.

For example, if you invoiced three clients in Q1 for:

• Client A: $180,000
• Client B: $45,000
• Client C: $25,000

Your total revenue for Q1 would be $250,000 ($180,000 + $45,000 + $25,000).

Tracking total revenue is crucial because it shows how much money flows into your agency. It provides a top-line view of income before you factor in any costs.

However, tracking revenue and invoices can be a messy process. Accounting software is often disconnected from other company tools, making this metric difficult to find. 

All-in-one agency management tools, like Scoro, make it a lot easier. 

In Scoro, click the “Reports” module from the top header menu. 

Here, you’ll see a list of reports you can use for your agency. To filter them to see the total income, click on the “Summary” report under the “Financial” section. And then, select the period you want to review.

This report will show a breakdown of invoices (revenue) versus expenses for all projects over the selected time period. It will also display the gross income generated, broken down by month and quarter.

Further Reading: Detailed Financial Report in Scoro

2. Gross income

Gross income is the total income minus pass-through costs (bills and expenses). 

For example, let’s say you have $250k of total income. You have $40k in bills (equipment and licenses) from those projects and $10k in expenses (such as contractor costs). 

$250k income – $40k bills – $10k expenses = $200k in gross income 

Gross income is crucial to understand how much you’re actually earning. If you only look at total revenue without considering pass-through costs, you may overestimate your agency’s financial health and profitability. 

For example, if an agency has $1 million in revenue, but $500,000 goes to contractors and expenses, their gross income is only $500,000. The agency has much less money to cover salaries, rent, and other operating costs than its total revenue implies.

In Scoro, gross income is calculated automatically, so you can skip all the calculations and get the necessary data. 

You can look at the same “Summary” report.

You can also view gross income in Scoro by project by going to the “Project list” view in the “Projects” module.

In the “Data columns” dropdown, check “Gross income.”

The total gross income is displayed and broken down by project. This can help you understand which projects generate the most income after accounting for expenses. 

For each project, there are two amounts shown:

• The quoted amount (displayed in grey)
• The actual amount (displayed in black)

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3. Labor cost 

Labor cost is the amount a company spends on each worker per hour.

To calculate an employee’s hourly labor cost: 

Hourly Labor Cost = (Annual Salary + Benefits + Other Costs) / Annual Hours Worked

For example, let’s say you have a group of employees with the following costs: 

• Annual salary: $90,000 
• Benefits: $7,500 
• Trainings and other costs: $7,540 

Each employee costs your agency $105,040 annually.

Assuming they work 2,080 hours per year (40 hours per week for 52 weeks), their hourly labor cost would be:

$105,040 / 2,080 hours worked = $50.5 hourly labor cost 

This means that every hour the employee works costs your agency $50.5, regardless of whether that time is billable to a client.

Labor costs are essential for calculating delivery margin, understanding how much each project costs you internally to deliver, and calculating profit accurately. 

In Scoro, you can set custom labor costs for each employee or role to calculate a more accurate delivery margin. 

First, input the hourly labor costs for each team member by clicking “Settings” in the top right-hand corner, followed by “Labor cost.” 

You can enter a default hourly rate for your team, by role, or by individual team member.

Scoro will calculate project labor costs using your team’s hourly rates when tracking time against project tasks.

Further Reading: Setting Up Labor Rates in Scoro

4. Delivery margin

Delivery margin shows you the percentage difference between your profit and gross income. 

The formula to calculate delivery margin looks like this:

Delivery Profit Margin % = ((Gross Revenue – Delivery Costs) / Gross Revenue) x 100

Where:

• Gross Income = Total Revenue – Pass-Through Costs 
• Delivery Costs = Internal labor costs (payroll)

Let’s say your agency had $300,000 in gross income for a project after subtracting $75,000 in pass-through costs from $375,000 in total billings.

To complete that project work, you incurred $180,000 in delivery costs.

Using those numbers, here’s how we calculate the delivery profit margin:

• Gross Revenue = $300,000 Delivery Costs = $180,000
• Delivery Profit Margin % = (($300,000 – $180,000) / $300,000) x 100 = 40%

So, in this example, your agency spent 60% ($180,000) of the $300,000 gross revenue on internal delivery costs, leaving 40% ($120,000) as profit.

Of course, tracking your delivery margin is crucial because no business can exist without making a profit. 

A good delivery margin to aim for is 55% – 75%. This range indicates efficient pricing and cost management and helps ensure profitability. 

Further Reading: Calculating Agency Margins: A Beginner’s Guide

Delivery margin can also help you understand profitability on a project level, allowing you to make data-driven decisions about which types of projects and clients drive the most profit. 

If you’re calculating all of this manually, there’s a lot of numbers to keep track of: 

• Total income
• Gross income
• Pass-through costs 
• Labor costs 

Scoro automates this process. To find your delivery margin in Scoro, return to the “Project list.” view.

To view your project portfolio and individual project delivery margins, check the “Delivery margin” option from both the “Data columns” and “Summary bar” dropdowns

Now, you’ll see the delivery margin automatically calculated in total (via the “Summary bar” at the top) and broken down by project with actual vs. estimated numbers (in the Project list below). 

5. Average billable rate 

Average billable rate is the hourly rate your agency charges clients for work directly related to their projects. It clearly shows your agency’s average hourly earnings for billable work.

To calculate your average billable rate, divide your total billable revenue by the total hours worked.

Average Billable Rate = Total Billable Revenue / Total Billable Hours

For example, if your agency billed $100,000 for 800 hours of work across all projects in a month, your average billable rate would be:

$100,000 / 800 hours = $125 per hour

Knowing your average billable rate is crucial because it directly impacts your agency’s income and bottom line. If your rate is too low, you might not make enough money to cover expenses, pay your team well, and invest in growing your agency. 

Again, you can view this from your “Project list” in Scoro.  

Make sure the “Average billable rate (actual)” is checked in the “Summary bar” dropdown and the “Average billable rate” is checked in the “Data columns” dropdown.  

You’ll see these metrics automatically calculated for you in total (via the “Summary bar” at the top) and per project. 

In the above example, the overall “Average billable rate (actual)” of 107.02 USD, as shown at the top, looks reasonable when considering all the projects together.

However, when looking at the individual project details, the “Fixed Price Project (example)” under Client A has a surprisingly low “Average billable rate” of only 51.90 USD per hour.

Armed with this information, you can make more informed decisions about which types of projects to pursue to maintain and improve profitability.

6. Overdue invoices 

Overdue invoices are the total amount owed that hasn’t yet been paid.

You can’t pay your bills, employees, or other expenses without a steady cash flow. No matter how profitable your projects are or how healthy your pipeline is, you won’t be able to survive long without incoming cash.

In Scoro, keeping an eye on your overdue invoices is super easy. 

Go to the “Invoices” module and then the “Invoice list” view. From here, use the “Status” dropdown filter and select “Outstanding” and “Partially received” invoices. 

Then, use the “View” dropdown and ensure that “Outstanding sum” and “Overdue sum” are checked in both the “Data columns” and “Summary bar” dropdown. 

You’ll see a list of outstanding invoices or payments in the “Summary bar” and table below.

7. Forecasted revenue 

Forecasted revenue is the amount of (recognizable) revenue you expect to earn over the coming months. 

Recognizable revenue refers to the value of revenue based on the amount of work done, not the total project or engagement value. 

For example, you’ve signed and kicked off a $200,000 project, invoiced upfront for $25,000, and held a kickoff meeting. 

Does that mean you’ve done $25,000 worth of work so far on the project?

Of course not. 

So, your recognizable revenue here isn’t $25,000. Instead, it’s probably more like $250, the billable amount allotted for a kickoff call. 

Revenue forecasting ensures that your team is on track to hit targets and profit margins while allowing you to change strategies or tactics to improve revenue and profit targets in the future. 

Analyzing revenue forecasts manually can be challenging, so we’ll show you how to do it simply in Scoro. 

To see the overall revenue forecast for your company, look at the “Revenue” report, which combines information from two places:

1. Quoted projects you haven’t started yet. These are potential future revenue opportunities.
2. Ongoing projects you are currently working on. This is revenue you are actively earning by delivering services.

Further Reading: Revenue Recognition and Forecasting in Scoro

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Operational metrics

Operational metrics help you monitor your team and how effectively you use each member. Here are the key ones to track for increased profitability. 

8. Team utilization % 

Team utilization percentage is a backward-looking metric showing the percentage of an employee’s total capacity spent working. 

It can be calculated using the following formula: 

Utilization % = [total tracked hours] / [total capacity] 

Where:

• Total Tracked Hours = The total number of hours logged/recorded by your team members for billable project work
• Total Capacity = The total number of available working hours

For example, most of your team members may have 40 hours of capacity each week. In the last week, a team member who logged 32 hours was 80% utilized. However, another team member may have tracked 38 hours, which means they were 95% utilized. 

Understanding your team’s utilization percentage gives you a clear picture of team efficiency and productivity. If you can improve your utilization percentage, you can often improve delivery margin and profitability, so analyzing your utilization is crucial. 

You can view team utilization from the “Utilization report” in Scoro. 

To view utilization percentages, use the time filter to sort by “Last 90 days.” Each team member’s utilization percentage is automatically calculated based on tracked time.  

9. Utilization forecast 

Utilization forecast shows you how available vs. booked your team is in the future, expressed as a percentage. 

Utilization forecast can be calculated with the following formula: 

[total booked hours] / [total capacity] = utilization percentage 

Where:

• Total Booked Hours = the number of hours/tasks your team is already booked or scheduled to work on
• Total Capacity = The total number of available working hours  

For example, if a team member has 40 available hours each week for their capacity, and in the upcoming week, they have 20 hours already of scheduled work, then you can see that they’re currently 50% utilized. They already have 50% of their time booked and 50% available for work. 

You can calculate utilization forecasts for individual team members and your team. Tracking your team’s utilization will help you see who can take on more projects, who’s overworked, and how productive your team is. 

Scoro shows you your utilization forecast via the same “Utilization report.”

You can use the date filters in this report to examine future utilization. For example, select “Next 90 days” to see forecasted utilization over the coming three months.

This green bar shows how each employee is utilized by week, their total booked hours, and their percentage utilization.

If an employee is forecast to be overutilized (>100%) for a future week, the status bar will turn red. This red overutilization indicator allows you to quickly identify employees who may be overbooked and reassign work as needed to rebalance utilization.

10. Time usage by projects 

Time usage by project measures how much time your team has spent working on each individual project over a given period. 

Understanding your time usage by project lets you quickly see which clients or projects are being neglected or overserviced. 

In addition, you can see exactly which project phases or tasks are eating up your team’s time, which allows you to scope future projects more accurately. 

Your team will need to track their time and assign it to the corresponding projects to calculate time usage by projects.

Scoro’s “Detailed” work report compares the estimated time for each project against the actual time your team spent working on it.

To access this report, follow these steps:

1. Click on the “Reports” module in Scoro’s main navigation.
2. Under the “Work” section, select the “Detailed report“.
3. In the first “Grouped by” drop-down menu, choose “Projects“.
4. In the second “Grouped by” drop-down menu, select “Tasks/events“.

This will then display a breakdown that shows you the following for each project and its associated tasks/events:

• The estimated number of planned hours for the project and tasks initially
• The actual number of hours your team members logged while working on that project and its tasks

Project management metrics

Project management metrics give you insight into your agency’s efficiency, productivity, and project-level profitability. 

11. Project profit 

Project profit is the amount your agency earns from a specific project after accounting for all associated costs. 

Typical project costs include:

• Labor costs: Your in-house delivery cost is based on the hours logged for each task and project and the employee’s hourly labor rate. 
• Pass-through costs: Expenses from third-party suppliers, contractors, products, services, and any reimbursable costs incurred by employees to deliver a project billed directly to the client.

You can use the following formula to calculate project profit: 

Project profit = (project revenue) – (pass-through costs) – (labor costs) 

If a project has $50,000 in revenue, $10,000 in pass-through costs, and $25,000 in labor costs, then: 

Project Profit = $50,000 – $10,000 – $25,000 = $15,000

Understanding project profit highlights which projects are the most profitable for your company, not just those bringing in the most revenue. 

Similarly to agency gross income and delivery margin, when looking at project profit, it can be easy to overestimate the value of certain projects without considering the total costs of delivering them.

In Scoro, project profit is calculated automatically for you, and you can view it easily from the “Project list.” 

Go to “Project list” in the “Projects” module. Then, select selected “Project profit” in the “Summary bar” and “Data columns” dropdowns. 

Now, you’ll see a list of all your active projects, the total project profit calculated across all projects (in the summary bar at the top), and per project (in the table view below). 

12. Project budget vs. actual costs 

Comparing your project budget to actual costs helps you track whether a project is progressing within the planned budget or if costs are exceeding expectations. This comparison is crucial for maintaining healthy profit margins. 

Imagine your agency takes on a branding project with a budget of $15,000:

• Estimated labor costs: $10,000
• Estimated pass-through costs: $5,000

During the project, you track the actual costs:

• Actual labor costs: $12,000
• Actual pass-through costs: $4,500
• Total actual costs: $16,500

Comparing the budget to the actual costs:

• Budget: $15,000
• Actual costs: $16,500
• Difference: $1,500 over budget

The project exceeded budget by $1,500 due to additional labor hours required. Not ideal.

If your projects consistently exceed budget, you may need to reevaluate pricing, time estimates, or scope to maintain healthy profit margins. 

In Scoro, you can see project budget vs. actual costs through the “Quoted vs Actual” table. Go to a specific project view, click “Budget,” then “Quoted vs. Actual.” 

Here, you’ll see a breakdown of each project phase and budgeted costs, revenue, actual costs, and profit. Actuals are shown in black, while quoted amounts are in gray text. And at the bottom of the page, you’ll see the total amounts for the full quote.

13. Planned vs. actual time 

Planned vs. actual time is a metric that compares the estimated time allotted for a project to the actual time spent working on and completing that project.

Tracking planned vs. actual time is important for several reasons, including:

• More accurate estimates lead to more profitable projects
• Delivering projects on time improves customer satisfaction
• Identifies and reduces scope creep

To calculate planned vs. actual time, compare the estimated time for each project task or phase to the actual time spent. 

For example, if you estimated 20 hours for a design phase, but it took 25 hours, your planned vs. actual time for that phase would be:

• Planned time: 20 hours
• Actual time: 25 hours
• Difference: 5 hours over the estimate

Within Scoro, the “Gantt” chart view offers a visual representation of project task durations, allowing you to compare the initially estimated time against the actual time invested by your team.

To access this view, go to the “Projects” module, select a specific project, then go to the “Tasks” section and choose the “Gantt” tab. This will display a Gantt chart outlining your tasks and the project timeline.

The progress bar for each task provides a visual cue on how the task is advancing compared to the planned duration. The progress line will turn red if the time exceeds the estimated hours. 

By hovering over the task name, you can quickly view the breakdown of the estimated time, the time already completed, and any overtime accrued so far. 

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Sales metrics

Sales metrics show you exactly how much value your pipeline has and what value you can reasonably win based on historical data. These three sales metrics are critical for agencies of all sizes.  

14. Value of deals expected to win 

The value of deals expected to win is exactly what it sounds like. This shows you the amount of deals you expect to win and the total revenue. 

This metric helps you predict whether you’re on track, off track, or even exceeding your sales targets.. 

Let’s say your agency has a total pipeline value of $500,000 for the upcoming quarter. You’ve categorized your deals based on their likelihood of closing:

• $200,000 in deals with a 75% or higher chance of closing
• $150,000 in deals with a 50-74% chance of closing
• $100,000 in deals with a 25-49% chance of closing
• $50,000 in deals with a less than 25% chance of closing

In this case, the value of deals expected to win would be $350,000 ($200,000 + $150,000), as based on your historical data and current pipeline status, these deals are 50% or more likely to close.

Essentially, this metric allows you to forecast whether you will hit, exceed, or fall short of revenue goals. It enables you to adjust resource allocation proactively—whether ramping up sales or delivery capacity—to align with your projected revenue picture and maintain profitability.

Scoro’s “Pipeline report” will help you monitor this metric based on your sales goals and predictions. You can define closing probability rates for each stage in your pipeline and set an estimated closing date for each deal. 

Go to “Reports,” then “Pipeline report.” 

The “Pipeline report” shows your predicted future sales based on the information you provide about your deals. 

You control this data:

1. For each deal in your pipeline, you estimate when you think it will likely close by setting an expected closing date.
2. You also define the probability percentages for deals closing at each stage of your sales process.

The report then calculates and displays weighted sales projections for upcoming months using these closing date estimates and probability rates you assign.

To better understand the value of deals expected to win, you can use the “Status” filter and sort by “Scoping” and “Proposal” (for example) to view only those stages that are likely to convert.

Now, you can see exactly where your pipeline stands and where to focus your energy to ensure profitability for upcoming months.

15. Value of closed deals 

The value of closed deals is the total value (or revenue) of closed deals over a given time frame, such as a month, quarter, or year. 

This is the next stage in your pipeline after “expected to win.” Similarly, it gives you a great look at whether you’re under-target, over-target, or on-target and what you might need to do to adjust and ensure profitability and on-time project delivery. 

Let’s say your agency has closed the following deals in Q2:

• Project A: $75,000
• Project B: $50,000
• Project C: $30,000
• Project D: $20,000

The total value of closed deals for Q2 would be $175,000 ($75,000 + $50,000 + $30,000 + $20,000).

If your Q2 revenue target were $150,000, this would indicate that you’re over-target by $25,000. On the other hand, if your target was $200,000, you’d be under-target by $25,000 and may need to adjust your sales strategies or pipeline management.

This metric can be seen in numerous places in Scoro, but the “Quotes” view is the most detailed. 

Go to “Quotes” from the top menu and view the “Quotes list,” which will show you all of your agency’s created quotes. 

Sort by “Status: Confirmed” and then choose the date range you want to analyze, for example, “Current quarter.” 

Now, you’ll see a list of all confirmed quotes for this quarter and high-level and per-project data for each. 

The “Summary bar” at the top shows the value of closed deals in the “Sum” data point. This is the total value of all closed deals in this period.  

16. Sales conversion rates  

Sales conversion rates show the value or number of deals won compared to the total number of deals, expressed as a percentage.

You can use the following formula to calculate the conversion rate: 

Sales Conversion Rate = (Number of Deals Won) / (Number of Total Deals) x 100

Where:

• Number of Deals Won = The deals that successfully closed/converted to sales over a given period.
• Number of Total Deals = The total count of deals that either won or lost/did not convert over that same period.

For example, you’ve made 10 deals over the last quarter. Of those, you’ve won 3 and lost 7, which means your conversion rate is 30%. 

Understanding your conversion rates allows you to better estimate pipeline forecasting by predicting the percentage of deals that will close. It also allows you to set more accurate sales targets. 

If you know you’re likely to convert only 30% of your deals, you can target the right number of outreach pitches to hit the needed conversions for profitability and ideal utilization. 

This holds for every stage of your sales process. You can calculate conversion rates for: 

• How many outbound calls convert into leads 
• How many leads convert into prospects 
• How many quoted proposals convert into confirmed sales

In Scoro, you can track your conversion rate by adding the “Ratio metric” to your “Sales dashboard” to easily calculate this value based on issued quotes with successful deals.

To do this, you’ll go to your dashboard and click “Add to dashboard.” Then, click “Ratio metric.”

Then, select “Browse bookmarks library.”

Followed by “Sales” > “Sales conversion rate.”

You’ll then see your sales conversion rate on your dashboard.

Keeping track of your agency’s key metrics 

Measuring, calculating, and monitoring these metrics can be difficult and time-consuming. 

With an all-in-one agency management tool like Scoro, you can create custom dashboards that give you and all of your key stakeholders automatic, at-a-glance views of every key metric and data point that are updated in real-time. 

No more pulling data manually, updating spreadsheets or constantly updating your executive team. 

Track your agency metrics with Scoro

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