The profitability report (Reports > Profitability) shows high-level company profit and detailed breakdowns across clients, projects, tasks, and teams so you can make informed decisions about your business. 

We understand that not everyone calculates profit in the same way, so this article covers some of the common questions you may have about how the profitability report in Harvest works.

Who can view the profitability report?

Only people with Administrator permissions can view the profitability report, and because the profitability report uses data that already exists in your Harvest account, no new information is being revealed to Administrators.

Does the profitability report use invoiced amounts for revenue calculations?

In most cases*, the profitability report does not use invoiced amounts to calculate revenue. Right now, our profitability report calculates revenue based on tracked time (for Time & Materials projects) or your set fee amount (for Fixed Fee projects).

*In the case where the invoiced amount for a Fixed Fee project is larger than the fee set for the project, we'll use the invoiced amount instead of the project fee amount for the project revenue. 

How do different project types appear on the profitability report?

Time & Materials projects on the profitability report

• Revenue for Time & Materials projects is defined as the billable amount that results from (billable hours x billable rates) + billable expenses.
• Cost for Time & Materials projects is defined as (time tracked x cost rates) + expenses (billable and nonbillable).
• We show the revenue and cost amounts for Time & Materials projects based on the dates when time is tracked to the project. 

Fixed Fee projects on the profitability report

• Revenue for Fixed Fee projects is determined by taking the fee* set for the project and dividing it by the number of days included in the start-to-end dates entered for the project. This gives a per-day revenue amount, which is then multiplied by the number of days in the fixed fee project's start-to-end date range that fall within the timeframe being viewed on the profitability report.
  
  *In the case where the invoiced amount for a Fixed Fee project is larger than the fee set for the project, we'll use the invoiced amount instead of the project fee amount for the project revenue.
  
• Cost for Fixed Fee projects is defined as (time tracked x cost rates) + expenses (billable and non-billable).
• The revenue and cost amounts for Fixed Fee projects may not always align in the charts because the revenue is split evenly across the project lifespan, while the costs are based on when time is tracked to the project. 

Non-billable projects on the profitability report

• Because non-billable projects do not generate revenue, you'll only see costs for non-billable projects on the profitability report.
• Cost for Non-billable projects is defined as (time tracked x cost rates) + expenses (billable and non-billable). 

What sort of accounting does the profitability report use?

The data we gather in Harvest allows us to calculate gross profit. Our approach is consistent with the accrual style of accounting and not cash-on-hand accounting.

How can I account for additional costs like employee benefits or overhead so the report is more reflective of real costs?

We can only use the information available in Harvest to make our calculations. For most customers, this includes data like tracked time, hourly billable rates, hourly cost rates, billable and non-billable expenses, and fixed fees (for Fixed Fee projects).

We do not have data that may be tracked outside of Harvest, unless you’ve built those costs into your rates. For example, we don’t know your specific operational or overhead costs, exact employee salaries, etc. 

As a workaround, some customers build those external costs into the rates they have in Harvest. For example, a person’s cost rate could be a combination of how much you pay them, plus an estimated amount to account for operational costs. 

We have Fixed Fee projects that recur monthly. How can we best set these up to gain insight from the profitability report? 

Harvest doesn’t currently support a monthly recurring Fixed Fee project. However, if you know the project’s start and end dates, you could create a single project and set the total project fees to capture the total amount you plan to invoice over the lifespan of the project.

For example, if a project is set to run for one year and you plan to invoice $1,000/month, you could set the total project fee at $12,000. Each month, when you invoice this project, Harvest will automatically pull all uninvoiced project fees onto the invoice, but you can manually edit the amount to only capture the amount you plan to bill at that time. 

If you don’t know the start and end dates for a Fixed Fee project, or the project is set to run indefinitely, you could use an approximate end date or maintain a separate project for each month. In this case, you can duplicate an existing project each month to save some time. 

How do multiple currencies work on the profitability report? 

It’s possible to bill a client in a currency other than the account’s default currency. For example, the account’s default currency is USD, but you can bill a client in CAD. However, cost amounts can only be tracked in the account’s default currency. 

When looking at projects on the profitability report that bill in a currency other than the account’s default, you’ll see only cost amounts or only revenue amounts, depending on the currency filter selected on the report. 

If the report is filtered by the account’s default currency, the report will only show cost amounts for projects that bill in a currency other than the default currency for the account. If the report is filtered by USD but the project bills in CAD, you’ll only see cost amounts in USD on the report. This is because Harvest doesn’t perform currency conversions, so there isn’t currently a way to account for cost and revenue amounts between two different currencies. 

If the report is filtered by the project-specific currency (in the above example, CAD), then the report will only show revenue amounts, but not cost amounts.