How to Track Project Profitability in FreshBooks
Quick Summary
FreshBooks gives freelancers, agencies, and small business owners a clear, real-time view of how much money each project actually makes. Project profitability lets you assess the financial success of your non-internal projects. It helps you oversee team performance and monitor time and expense tracking. These insights support smarter business planning and decision-making. In this article, we’ll walk through exactly how the feature works, which plans include it, how profit is calculated, and how to read the reports so you can make smarter decisions about pricing, staffing, and which clients to prioritize.
What Is Project Profitability in FreshBooks?
Why Does Tracking Profitability Matter for Small Businesses?
Every project consumes time, money, and team resources. Without a clear picture of income versus costs, it’s easy to assume a project is successful simply because the client paid the invoice. However, hidden costs such as overtime, expensive subcontractors, or unbilled hours can quietly eat into margins. Therefore, having a dedicated profitability tool helps business owners spot problems early, before they become recurring losses.
FreshBooks addresses this directly. The Project Profitability feature gives a full breakdown of a project’s income, costs, and profits. As a result, instead of guessing, you get hard numbers showing whether a project is worth repeating, needs repricing, or should be dropped altogether.
Which FreshBooks Plans Include This Feature?
Not every FreshBooks subscription includes profitability tracking. Project Profitability features such as capacity, cost rates, project estimates, project expense markup, and profitability reports are only available on the Premium and Select plans. Consequently, if you’re on a Lite or Plus plan and want access to this data, you’ll need to upgrade.
For context, the Premium plan is priced at $19.50 per month and includes everything from the Plus plan plus bill and receipt data capture and project profitability tracking. Given the depth of financial insight provided, this upgrade is often worthwhile for businesses managing multiple active projects simultaneously.
How Does FreshBooks Calculate Project Profitability?
What Counts as “Income” in a Project?
Income in FreshBooks isn’t just money that’s already landed in your bank account. The billed income figure includes all invoice revenue, regardless of invoice status, along with income from flat-rate projects. It also captures unbilled project revenue, time entries, and expenses. The report excludes sales taxes, except for taxes associated with rebilled expenses. This gives you a forward-looking view, not just a snapshot of cash already collected.
How Are Costs Calculated?
On the cost side, FreshBooks pulls together everything your team spends to deliver the work. Costs include all team members’ costs, calculated as time tracked multiplied by their cost rate, plus expense costs covering billed, unbilled, and non-billable expenses, not including markup, with sales taxes excluded. This means that even if you don’t bill a client for every hour worked, that time still factors into your true cost picture.
How Is Profit and Profit Margin Determined?
Once income and costs are known, the math becomes straightforward. Profit represents the difference between income and costs. Profit margin indicates the percentage of income that remains after covering those costs. The calculation uses the formula (Income − Cost) ÷ Income × 100. If a project incurs costs without generating income, the report displays a dash instead of a percentage.
| Metric | What It Includes | Formula |
|---|---|---|
| Income | Billed and unbilled invoices, flat-rate projects, time entries, expenses (excluding most sales tax) | Sum of all billable activity |
| Costs | Team time × cost rate, plus billed/unbilled/non-billable expenses (excluding markup) | Sum of labor and expense costs |
| Profit | Net financial result of the project | Income − Costs |
| Profit Margin | Percentage of income retained as profit | (Income − Costs) / Income × 100% |
How Do You Set Up Project Profitability Tracking?
How Do You Set Team Member Cost Rates and Capacity?
Before profitability numbers mean anything, FreshBooks needs to know what each team member costs per hour and how much they can realistically work. Capacity is the number of billable hours a team member is expected to work weekly, and this figure is used to calculate the utilization rate on the Team Utilization report. Setting this up accurately ensures the profitability calculations reflect your actual business operations rather than rough estimates.
How Do You Track Expenses Within a Project?
Next, expenses need to be logged and assigned to the correct project. Importantly, rebilling an expense back to a client on an invoice is optional, meaning a project can have both non-billable and billable expenses at the same time. This flexibility allows you to track internal costs (like software subscriptions) alongside client-billable costs (like travel or materials) under one project umbrella.
How Do You Access the Profitability Graph for a Project?
Once time entries and expenses are logged, viewing profitability is simple. The profitability graph can be accessed by selecting the Profitability tab next to Hours Logged within a project. From there, FreshBooks visually displays the relationship between income, costs, and profit over the life of the project.
What Reports Help You Analyze Profitability Across Projects?
What Is the Profitability Widget?
For a quick, dashboard-level overview, FreshBooks offers a summary tool. The Profitability Widget provides an at-a-glance breakdown of incomes, costs, profitability of projects, and unbilled hours. This is useful for business owners who want a daily snapshot without diving into detailed reports.
What Is the Profitability Summary Report?
When you need to compare multiple projects or clients side by side, the Profitability Summary is the right tool. The Profitability Summary offers an overview of overall profitability across clients and projects for quick comparison. This makes it easy to spot which clients consistently deliver strong margins and which ones may need a pricing conversation.
What Is the Profitability Details Report?
For a deeper dive into a single project, the Details report breaks things down further. The Profitability Details report shows how services and expenses affect a project’s profitability. The Profitability Summary report compares profitability across projects. Additionally, selecting a service takes you to a Time Entry Details report filtered to that client or project, while selecting an expense takes you to an Expense report filtered to the relevant date range or project.
| Report | Best Used For |
|---|---|
| Profitability Widget | Quick daily overview of income, costs, profit, and unbilled hours |
| Profitability Summary | Comparing profitability across multiple clients and projects |
| Profitability Details | Drilling into a single project’s services and expenses |
How Can You Use Profitability Data to Improve Your Business?
How Do You Identify Underperforming Projects?
Once reports are running regularly, patterns start to emerge. For example, a reviewer using the tool noted that it helped them understand which projects were making money and which were running over budget, making financial planning much easier for project-based businesses. Subsequently, by tracking project costs proactively, adjustments to expenses or billing rates can be made before a project becomes a loss.
How Does Time Tracking Tie Into Profitability?
Time tracking is one of the most important inputs into the profitability formula, since labor costs are calculated from logged hours. According to the same review, users recorded hours directly in the platform, enabling them to bill accurately, monitor time allocation across tasks, and identify ways to work more efficiently. Therefore, encouraging your team to log time consistently directly improves the accuracy of your profitability reports.
How Does This Help With Pricing Decisions?
Ultimately, profitability data isn’t just historical record-keeping — it’s a planning tool. By analyzing project profitability, business owners can make informed decisions to maximize their agency’s financial performance, understanding which projects, clients, and types of work generate revenue and which do not. Furthermore, FreshBooks provides project managers with real-time updates on income, expenses, and overall financial health, eliminating the need for manual tracking and helping teams make informed financial decisions effortlessly.
Conclusion
Tracking project profitability shouldn’t require spreadsheets, guesswork, or a finance degree. With FreshBooks, the entire process — from setting cost rates and capacity, to logging expenses and time, to reviewing income, costs, and margins — happens within one connected system. By regularly checking the Profitability Widget, Summary, and Details reports, you can quickly identify which projects and clients are most valuable, where costs are creeping up, and where pricing adjustments are needed. Ultimately, FreshBooks turns profitability from an end-of-year surprise into an ongoing, actionable insight that supports smarter business decisions throughout the year.
Frequently Asked Questions
Yes. Project Profitability features including capacity, cost rates, project estimates, project expense markup, and profitability reports are only available for Premium and Select plans, so accounts on lower-tier plans won’t have access to these tools.
Absolutely. Rebilling an expense back to a client on an invoice is optional, which means a project can have both non-billable and billable expenses, so internal costs are still factored into your overall profitability picture.
The Summary report compares profitability across multiple projects or clients, whereas the Details report gives a detailed breakdown of a single project’s profitability by services and expenses. Use the Summary for a big-picture comparison and the Details report when investigating one project specifically.
