Everhour separates billable rates from internal costs, while this page explains revenue before profit.
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A revenue calculation answers one narrow question: how much income did the sale, project, product line, or billing period produce before subtracting COGS, operating expenses, income tax, or owner draws. For a service project, that usually starts with billable hours multiplied by the agreed rate, plus fixed fees and billable reimbursements, minus discounts, credits, and returns.
The result is not profit. U.S. small-business tax reporting separates gross receipts or net receipts from later cost layers. Gross profit is net receipts after returns and allowances minus COGS. Most service businesses with no merchandise income factor use net receipts as gross profit, then subtract ordinary business expenses to reach net profit.
Use a formula that matches the way you charge the customer: `revenue = billable units × price per unit + fixed fees + billable extras − discounts, refunds, and allowances`. For hourly work, the unit is an hour. For products, it is a unit sold. For retainers, it may be a fixed fee plus overage hours.
Example: a design project bills 67 hours at $155 per hour, adds a $1,200 fixed kickoff fee, and applies a $500 client discount. The hourly portion is $10,385. Total project revenue is $11,085 before COGS, payroll costs, software costs, sales commissions, income tax, or owner compensation.
Sales tax can distort revenue if you treat every customer payment as income. The United States has state and local sales taxes, not a federal VAT or national sales tax. Product revenue calculations need jurisdiction-specific handling because tax rules change by state, city, product type, and buyer category.
Buyer-imposed state or local taxes that a seller must collect and remit generally are excluded from gross receipts or sales. Taxes imposed on the seller and collected from the buyer are included in gross receipts. For cleaner project analysis, keep customer revenue, collected tax, discounts, and reimbursed expenses in separate fields instead of one cash-received line.
A one-off revenue calculation is enough when you need a quick quote check, a single invoice estimate, or a top-line number for a small project. A spreadsheet can handle the math if the billing rate, quantity, discount, and tax treatment are clear and the project will not repeat.
A managed workflow becomes necessary when revenue depends on dated billable rates, per-person rates, project overrides, custom task rates, or recurring billing review. Everhour separates cost and billable rates, preserves dated rate history, and prices billable work by project, member, or task, so revenue and margin reports stay tied to the hours that produced them.
This content is for general information only, may not be fully up to date, and is provided without any warranty or liability.
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Revenue is income before subtracting costs. Profit is what remains after the relevant cost layer. Gross profit equals net receipts minus COGS. Net profit for a sole proprietor is business income minus business expenses, and that net profit or loss flows from Schedule C to Schedule 1 of Form 1040.
Discounts, refunds, returns, and allowances reduce net receipts because the business did not keep that full selling price. A project billed at $12,000 with a $900 discount produces $11,100 of net receipts before COGS and other expenses. Track discounts separately so the original selling price and actual revenue remain visible.
Buyer-imposed state or local sales taxes that the seller collects and remits generally are excluded from gross receipts or sales. Taxes imposed on the seller and collected from the buyer are included in gross receipts. U.S. businesses need jurisdiction-specific sales-tax handling because the United States has state and local sales taxes, not a federal VAT.
Revenue alone is not enough for break-even analysis. Break-even units equal fixed costs divided by sales price per unit minus variable cost per unit. That denominator is contribution margin per unit, not gross profit. You need a fixed-versus-variable cost split before the break-even result means anything.
A service business usually starts with net receipts from billable work, fixed fees, and billable reimbursements, after discounts and allowances. Most service businesses with no merchandise income factor use net receipts as gross profit, then subtract business expenses to calculate net profit.
Everhour separates internal cost rates from client-facing billable rates, with per-person defaults, per-project overrides, and dated rate changes. Teams can price billable work by project, member, or custom task rate, then use reports to compare revenue, labor cost, and profit by project.
Set billable rates, date changes, and project overrides in Everhour so tracked time flows into revenue and margin reporting without rebuilding the calculation by hand.
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