Keep tight control over your finances

They say "more money more problems", and it's for a reason. Losing track of various expenses, billable time records, and breaching a project budget is one of those things we thought could never happen to us. And yet!


It's a harsh economy out there. Kind to few, cruel to many. Customers require higher quality at a more reasonable price, and costs need to disintegrate. No wonder businesses are obsessed with profitability! It's all about working smarter. Picking the right niche, specializing in what you're best at, and providing services at a competitive price that allows you to make a profit. And it's not enough to find the balance and never think about it again.

Every business and freelancer needs to keep their eyes and ears open to the market while scanning their income and costs at all times. The tank is full of sharks, and to stay afloat, it's necessary to become and remain profitable. To do that, a good information system and the right tools will come in handy. Digital agencies generate an average net profit margin in the 10-15% range.

New project on the table: to accept or not to accept?

In a challenging world full of unpredictable circumstances and instability, it's hard to say no to an offer. But sometimes, that's exactly what you need to do.

Consider your resources

There are two dimensions when you're assessing your resources: short-term and long-term. The former usually refers to a period of up to a year, and the latter is considered for events occurring after that.

So, let's say you have a team of three, and you've been offered a new project that requires at least seven employees, including two with a set of skills your team doesn't possess. The question is, should you decline the offer or accept and ask for a delayed start so you can gather the necessary people?

Check your calendar

The same goes for current commitments. If you're already fully booked, you could choose to expand the team or postpone the project's start date, depending on how many projects you'll be working on in the upcoming months.

These decisions are also affected by the client's urgency. If they can't wait for extra staff and time, they'll need to take their requirements elsewhere.

Is it worth it?

When your schedule doesn't even allow vacations and your company is prospering, you'll think long and hard before trying to squeeze in another client, no matter how important they seem to be. On the other hand, one would think you should accept anything that falls into your lap when business is slow.

But should you? What if you fill up your calendar with low-value projects that ask for high efforts, and an excellent opportunity appears on the horizon? Your team will already be busy, and you'll have to decline or ask for more time, meaning you could lose a great chance.

We're not saying you should sit idly while waiting for a great opportunity to create itself out of thin air. But it would be best if you didn't waste all the talent and time on clients who are not worth it either.

Does the client fit the shoe?

Who said clients are the only ones who pick and choose? Freelancers and agencies have the liberty to do that as well. If you feel like the project or the client don't fit your company's culture, you're free to say no. One word of advice, though: be nice about it.

You never know which door(s) you're closing, and the last thing you need is a bad reputation. So, politely refuse the offer, stay open for collaboration, and make sure you give a valid reason. For example: you're too busy at the moment and can't tell when you'll be able to fit them in; currently, you don't have the right set of skills to complete the project properly; you're considering a change of direction for your business, and their project is not on it, etc. Whatever you come up with, it shouldn't drive other potential clients away in the future.

You don't like the project

A perfectly fair reason to reject a client is that you don't want to work on their project. Here's why that's good for them: when you don't like what you're working on, you're less likely to do it right; you may lack the motivation to finish on time; someone out there might be more eager to work on the subject and could do a better job.

All in all, one man's trash is another man's treasure. What one person may consider worthless could be highly prized or valued by someone else. Don't forget what we said before: be nice about it. No one likes being rejected or dealing with rude people.

Real-life feedback from our customers

Improve the way you work with ActiveCollab Project Management and additional features.

A big part of my role working as a producer for our clients and also as a business owner is managing budgets, so it’s really useful for me to be able to track the time that’s being put into projects.

Sarah Griffin

Sarah Griffin

Managing Director and Producer
Flyte Creative Media

Our billing process got significantly easier because we can use ActiveCollab to create bills based on tracked time records or fixed budgets.

Michael Friedrich

Michael Friedrich

Managing Director and Producer

Many different teams have discovered ActiveCollab positive sides. Read it all in customer stories

How to track your profitability in ActiveCollab

A short guide on how to make the most of the tool meant to help you out with the teams' assignments.

Create a project

We know we sound like a broken record, but really, you can create as many projects as you like in ActiveCollab, no matter which plan you choose! Go to Projects > New Project, and insert all the necessary details (that you can change later).

When creating a new project, make sure to click the "Show more options" button. You'll find the options to enable budget, time, and expense tracking and choose the budget type.

Select a budget type

Depending on what you agreed upon with your client, choose between "Fixed budget" and "Time and expenses". Non-billable projects are usually used for internal purposes.

Fixed budget

The fixed sum is the one you set with your client for the entire project. The amount entered when creating the project is the one you'll invoice later and is treated as income.

All the expenses and billable tracked time will be considered the project's cost. As tasks develop and your team pours in hours of labor, the costs will rise, and you should keep an eye on them.

If you set up budget alerts, you won't have to check every week how much you've spent and how much you have left. When you enter the fixed sum, a bell will appear right next to the currency. Click it to add as many budget alerts as you need.


Choosing this option means setting a target budget but using it only as a reference. Tracked billable hours and added expenses are the ones that will be invoiced to a client.
It would be helpful to set the status of time and expense records as billable by default and make sure no one forgets to tick off the "Task is billable" checkbox. This way, you'll make sure to charge all your time records.

Send an invoice

Go to Invoice > New Invoice, insert the Client company name, and select the items you'd like to bill. Choose between the three options:

  • Free-form invoice,
  • Invoice based on tracked Time and Expenses in projects,
  • Invoice fixed budget projects,

based on the type of project you'd like to invoice. If you select the second option, you'll be able to choose between all uninvoiced entries and those ranging from a certain period of time.

What do I need to work on?

We already mentioned you could set up budget alerts when creating a project, but you can also make default alerts for all projects. Go to System Settings > Time and expenses > Default budget alerts, and add as many as you like. Don't forget to save changes when you're done!

It's like having a personal assistant

You can check the status of your project at any time by clicking the "Project info" button. There you'll find the target budget info and always be aware of if and how much space you have left or if you're breaching the budget.

Also, you'll be able to view the project's income, cost, and profit. Income is the sum of all billable expenses and time records multiplied by the hourly rate you've set up for each job type for that specific project. Cost is the sum of time records multiplied by the internal hourly rate that you can set up per employee. Set up or change the internal rate by going to People > Select a person > Change rates and capacity. Profit is simply the difference between these two sums, and it shows how much you'll have left once the client pays and after you cover your team's share.

Financial measures of a company's health

Most companies never calculate them, but financial ratios can signal issues way before they become burning red flags.

Profitability ratios

Profitability ratios

Assess a business's ability to generate earnings relative to its revenue, operating costs, balance sheet assets, or shareholders' equity over time, using data from a specific point in time.

Liquidity ratios

Liquidity ratios

Determine a debtor's ability to pay off current debt obligations without raising external capital. Liquidity ratios measure a company's ability to pay debt obligations and its margin of safety by calculating metrics, including the current ratio, quick ratio, and operating cash flow ratio

Solvency ratios

Solvency ratios

Measure an enterprise's ability to meet its long-term debt obligations and often used by prospective business lenders. A solvency ratio indicates whether a company's cash flow is sufficient to meet its long-term liabilities and thus measures its financial health.

Operating efficiency

Operating efficiency

A company's operating efficiency is key to its financial success. Operating margin is one of the best indicators of efficiency. This metric considers a company's basic operational profit margin after deducting the variable costs of producing and marketing the company's products or services.