New: Manage Project Spending With Team Cost Rates and Billable Rates
Your Team Members play a vital role in growing your business—and they deserve to be paid for all that hard work! But when it comes to profitability, labor cost is also one of the biggest components of a project’s expenses to consider. And without knowing precisely how much you need to bill your clients to remain profitable, you’re bound to mismanage project spending and leave money on the table.
To help maximize your profitability, FreshBooks lets you set Team Cost Rates and Billable Rates.
This gives you more control over your profit margins, so you can make more informed decisions and grow your business faster.
What Are Team Cost Rates and Billable Rates?
Team Cost Rates are how much you pay your Team Members, while Billable Rates are how much you charge clients for their work. Setting these rates helps you better manage profitability on projects by balancing the money you spend against the money you make.
How Do Team Cost Rates Work?
Team Cost Rates can be set for all Team Member roles. Once set, a Team Cost Rate will be used globally for all projects. And if you need to update it? The new rate will be applied to future projects.
How Do I Set Team Cost Rates?
To set your Team Cost Rates, either:
- Go to the My Team section, click a Team Member, and click Set Cost Rates, or
- Go to the Projects section, edit or create a Project, and click Set Cost Rates.
How Do I Determine Team Cost Rates?
The easiest way to calculate how much a Team Member costs your business per hour, is to add their gross annual pay, related expenses, and overhead, then divide by however many billable hours they work each year.
Here’s an example of one way to make that calculation:
- Add gross annual pay; plus
- Team Member expenses (benefits, insurance, vacation pay, payroll taxes, remittances, bonuses or other incentives); plus
- Overhead (office rent, computer equipment, cell phone expenses, internet, uniforms etc); divided by
- Total number of hours the Team Member will be billing out to clients per year.
Because it’s impossible to bill for every hour of every day, it’s important to divide by billable hours to ensure healthy margins that will absorb any kind of downtime (admin, commuting, work shortages, etc).
How Do Billable Rates Work?
Your Billable Rate allows you to apply a unique rate for yourself, Admins, Managers, Employees and Contractors on all time entries in your account.
How Do I Set Billable Rates?
Simple! To add or edit Billable Rates:
- Click My Team and choose a Team Member.
- Click Set Rates, then add or edit in the Billable Rate field as needed.
- When you’re done, click Save to apply the new rate.
Why Should I Use Team Cost Rates and Billable Rates?
Setting Team Cost Rates and Billable Rates puts you in control of your numbers and helps maximize project profitability by allowing you to:
- Determine how much Team Members cost your business per hour so you know exactly how much to bill for
- Pick the right Team Members for the right job, depending on what numbers you need to hit
- Avoid lost profits or any kind of financial surprises at the end of a project
- Develop a stronger understanding of project spending to make more informed business decisions moving forward
- Grow your business faster by knowing exactly how much profit you’re making every step of the way
If You Need Help, FreshBooks Is Here
If you have any questions about Team Cost Rates or Billable Rates, a team of Support Rockstars is ready to help you out. Contact them here.