Introduction to Financials

In this section, you’ll set up the rates and costs that power your consulting firm’s financial insights in Operating.

Written By Matti Parviainen

Last updated About 16 hours ago

Introduction to Financials

By defining how much you charge clients (budgets for fixed-price projects and rates for time & materials work), how much your team costs (cost cards), and the expenses your projects incur, Operating helps you forecast project profitability and track revenue with accuracy. This enables your team to make smarter staffing decisions, price projects with confidence, and spot financial risks early.

Whether you're planning a fixed-fee engagement or a time & materials project, your financial setup lays the groundwork for:

  • Accurate profitability forecasts

  • Clear revenue projections

  • Transparent margins on each project or client

  • Better alignment between sales, delivery, and finance

Let’s walk through how to configure your rates and costs.

Rates

Set a global average rate as the baseline

You want to set a global average rate as the baseline, if there’s no other more specific rate or a project budget set to replace it.

Use a recent average hourly rate — you can ask your CFO or controller if they know what it's been lately. This should be the rate your clients are typically charged for your team’s time.

With this, you’re able to have a forecast that’s “roughly right” on an aggregate level with minimial effort.

Create a base rate card for your team to use.

Even if rates are often configured on the client level, you might want to set up some basic rate cards, e.g. for each of your different offices or countries, for people to have options to choose from quickly. You

Decide: do you want to have a big up-front effort?

If it’s important for you to get rates right across your ongoing project portfolio, set the rate cards for each of the ongoing projects and ask account managers to keep client-based rate cards up-to-date.

Easier start: set the rates for new projects as they come, you will eventually get it right

Make it a must-do for people creating new projects to set the rates as you’re creating the team setup. This is the moment in time when it’s easiest. You probably have the proposal at hand, and prices haven’t changed yet.

Costs

Read more on setting up cost rates for project margin and profitability calculations under cost rates & project profitability.

Expenses

Beyond time, projects pick up costs like travel, software licenses, and subcontractor invoices. Recording these as expenses keeps your project margins honest and lets you bill clients for costs you pass through.

Each expense can be:

  • Billable or non-billable. Billable expenses add to what you invoice the client; non-billable ones still count toward project cost and margin.

  • Marked up. Expense categories carry a default markup, so a pass-through cost can be invoiced at cost plus a percentage. Categories also control receipt requirements and default billing behavior.

  • Attributed to a vendor, so you can see what you’re spending with each supplier.

To plan ahead, add planned expenses — expected future costs — so they appear in your profitability forecast before the actual cost lands. You can also set expense budgets to plan and track expense spend within a project.

→ Understanding expenses in Operating

→ How To Add Expenses (incl. Expense budgets)

→ How To Set Up Expense Categories And Vendors

Communicate: why getting rates right matters

Explain to your sales team and project managers how this makes reporting and steering the business easier. Show them which capacity, revenue, and profitability forecasts are used in recruitment / investment decisions and what material you share with the board of directors.

People may not realise how much effort it takes to do these reports and forecasts manually whenever they’re needed.

Create as many rate cards as necessary

You may follow a very strict pricing strategy or negotiate them for each case separately. If you’re more liberal about rates, then you will end up creating lots of client- or project-specific rate cards. Don’t worry.

Using an existing rate card as the basis speeds things up nicely.

Good luck! Let’s make lots of money.

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