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How to Calculate Billing Rate

Harvest simplifies calculating billing rates by offering detailed reports and flexible billing options, ensuring profitability and precision.

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What should you charge per hour?

Most freelancers and consultants dramatically undercharge. This calculator accounts for what most people miss: non-billable time, taxes, and overhead.

$
Accounting for vacation, holidays, sick days
60%
Most freelancers can bill 50-70% of their time. The rest goes to admin, marketing, proposals, and learning.
$
Software, insurance, equipment, accounting, taxes beyond income tax, etc.
Your break-even rate $0
Recommended rate (+20% buffer) $0
Billable hours per week 0h
Equivalent daily rate $0

Start tracking your billable hours

Walk through the entire flow below. Start a timer, check your reports, and create a real invoice — all in three clicks.

Go ahead — start tracking!

One click and you're timing. Try it right here: start a timer, add an entry, edit the details. This is exactly how it feels in Harvest.

  • One-click timer from browser, desktop & mobile
  • Works inside Jira, Asana, Trello, GitHub & 50+ tools
  • Duration or start/end — your call
  • Day, week & calendar views to stay on top of it all
  • Friendly reminders so no hour gets left behind
Acme Corp
Website Redesign
Homepage layout revisions
1:24:09
Content Strategy
Blog calendar planning
1:30:00
SEO Audit
Technical audit report
0:45:00
Brand Guidelines
Color system documentation
2:15:00
Logo Concepts
Initial sketches round 1
1:00:00
Today's total 6:54:09

Understanding Billing Rate Calculation

Calculating a billing rate is essential for ensuring profitability in service-based businesses. It involves determining the cost of delivering a service and adding a profit margin to establish what clients should be charged. A typical approach is to divide total annual costs by total annual capacity, then adjust for a target delivery margin. This calculation ensures that the rate covers not only employee pay but also operating costs and a profit margin.

For example, if your total annual cost is $100,000 and you work 2,000 billable hours yearly, a target delivery margin of 20% suggests setting an hourly rate of approximately $62.50. This ensures the business remains profitable while covering all expenses. It's crucial to account for industry-specific tax rates such as VAT in the EU or GST in Canada, as these can significantly impact the final billing rate.

Key Factors in Setting Your Billing Rate

When setting a billing rate, it's important to consider various factors that can influence pricing strategies. These include employee roles, project types, and the impact of non-billable hours. Non-billable hours can account for a significant portion of time spent, affecting overall income. Businesses often find that ignoring these can lead to a 15-20% loss in billable income.

Harvest helps in managing these variables by enabling the tracking of both billable and non-billable hours. This feature allows businesses to more accurately calculate the true cost of their services and adjust billing rates accordingly. Additionally, Harvest supports different billing methods such as Time & Materials and Fixed Fee, allowing for flexibility depending on the project type.

Harvest's Role in Optimizing Billing Rates

Harvest offers comprehensive tools to optimize billing rates by providing detailed reporting and flexible billing options. With Harvest, businesses can export time reports that include each employee's hourly rate, allowing for precise calculation of billing rates based on specific roles and contributions. This is particularly beneficial for companies with diverse teams where each member's work value differs.

Furthermore, Harvest integrates with various apps like QuickBooks and Xero, making it easier to sync financial data and ensure that billing rates align with accounting records. This integration streamlines the invoicing process, reduces errors, and ensures compliance with industry standards, making it a reliable choice for businesses looking to refine their billing strategies.

Adapting Billing Rates for Different Scenarios

Businesses often need to adjust billing rates based on the client or project type. Factors such as the complexity of work, urgency, and client expectations can demand different pricing strategies. For instance, projects with tight deadlines might justify a higher rate due to the increased demand on resources.

Harvest assists in these scenarios by supporting varied billing methods tailored to project needs. This capability enables businesses to apply time-and-materials billing for ongoing projects or fixed-fee billing for well-defined scopes. Such flexibility ensures that businesses remain competitive while meeting financial goals, making Harvest an invaluable tool for dynamic pricing.

Billing Rate Calculation with Harvest

Discover how Harvest simplifies billing rate calculations with detailed reporting and flexible options to ensure profitability.

Screenshot showing Harvest's billing rate calculation tools.

How to Calculate Billing Rate FAQs

  • To calculate your billing rate, divide your total annual costs by your total annual capacity, and then adjust for your target profit margin. This ensures your rate covers all expenses and includes a profit.

  • Consider factors like employee roles, project types, and non-billable hours. Harvest helps track these, providing insights to adjust rates for profitability.

  • Harvest provides tools to track billable and non-billable hours, allowing for accurate billing rate calculations. It offers detailed reports and integrates with accounting software for seamless financial management.

  • Yes, Harvest supports various billing methods, such as Time & Materials and Fixed Fee, allowing businesses to adapt billing rates based on project needs and complexity.

  • Non-billable hours can significantly affect income, potentially leading to a 15-20% loss in billable income. Harvest tracks these hours, helping businesses adjust their billing rates accordingly.

  • Harvest integrates with accounting tools, ensuring your billing practices are compliant with industry regulations, including VAT and GST requirements.

  • Common payment terms include "Net 30," "Net 60," and "Due on Receipt." These terms specify when payment is due, typically within 30 to 60 days after invoice issuance.