How to Use TMetric for Project Profitability: A Practical Guide for Agencies
Most agencies discover a project was unprofitable about three weeks after it ended. By then the hours are gone, the invoice is sent, and the only thing left to do is absorb the loss. That delay is not unusual: the average budget overrun surfaces 3.5 weeks after it starts leaking money, and 68% of agencies find out too late to fix anything.
This guide walks through setting up TMetric so you can spot problems while they're still fixable. By the end, you'll know how to track budgets, monitor margins, and catch problems early.
What project profitability actually means in TMetric
Before setting anything up, it helps to understand what TMetric is actually measuring. Project profitability comes from a few pieces of information working together, rather than one number on its own.
The first is tracked time, the hours your team logs against the project. Then there's billing, which determines how that work is charged to the client. Next comes the project budget, whether that's set in hours, project fees or hours per person. Finally, there are costs, which show what it takes to deliver the work.
Bring those together and you get a much clearer picture of how the project is performing. Instead of waiting until the project is finished to work out whether it made money, you can see how things are changing as work is being logged.
Once you understand what TMetric is measuring, the next step is setting it up so those numbers actually mean something.
Setting it up, step by step
Here's the setup process. It should take about twenty minutes from start to finish.
Step 1 — Create the project and set the budget
Alt text: TMetric project settings showing billing options, budget configuration, hourly rates, and budget alert threshold.
Go to Projects and create a new project for the client. While you're setting it up, choose how you want to budget it. TMetric gives you three options: Total project hours, Total project fees, or Hours per person.
and create a new project for the client. While you're setting it up, choose how you want to budget it. TMetric gives you three options: Total project hours, Total project fees, or Hours per person. For most fixed-fee jobs, budgeting by project fees usually makes the most sense. If you're billing by the hour, Total project hours is often the simpler option. If you've already estimated the work, you can also use Estimate Budget instead of entering everything manually.
Step 2 — Set up billing
Alt text: TMetric Edit Project screen showing Time & Materials billing, project rates, and configurable work type hourly rates.
Next, decide how you'll bill the project. If it's a Time & Materials project, TMetric lets you charge using a Project rate, Person rate, or Work type rate. If different people bill at different rates, Person rate is usually the easiest way to see what's actually coming in. For fixed-price work, switch the project to Fixed Fee instead.
Step 3 — Turn on budget alerts
Before you leave the project, turn on budget notifications. Pick a threshold that gives you enough time to step in if the project starts getting close to its limit (about 70% to 90%). The exact number depends on how your team works, but the important thing is getting the warning before the budget is gone, not after.
Step 4 — Add the team
Add everyone who'll be working on the project and make sure they log their time against it from the start. If you're using Person rate billing, this is also where you'll set each person's hourly rate. It doesn't take long, but it's the kind of setup that's worth getting right because all your reports depend on the time being logged properly.
Step 5 — Build a weekly review habit
Alt text: TMetric Projects Summary report with tracked time, billable percentage, budget progress, revenue, and costs.
Once the project is underway, get into the habit of checking Reports → Projects Summary every week or month. It brings together your total tracked time, billable time, billable amount, costs and budget progress in one place. Spend ten or fifteen minutes reviewing it every Monday and you'll usually spot issues before they become expensive.
With the setup out of the way, the next question is how to read the data and know what it's telling you.
Understanding your project data
Now that everything is set up, it's time to look at what the numbers are actually telling you. Here is what the Projects Summary gives you in detail.
| Metric | What it tells you |
| Total hours | The total time logged against the project. |
| Billable % | The share of tracked time that can be invoiced. If this starts falling below what you planned for the project, it's worth finding out why. |
| Amount | The value of the billable work recorded so far. |
| Costs | What it has cost to deliver the work. Compare this with Amount to understand your margin. |
| Budget progress | How much of the project's budget has already been used. |
Take a simple example. Say you've got a $1,500 fixed-fee project. The report shows 35% of the budget has been used and 85% of the logged time is billable. Nothing there would immediately worry you.
Now imagine the budget is still at 35%, but the billable percentage has dropped to 55%. That's something worth digging into. Maybe the team is spending more time in internal meetings. Maybe the client has asked for a few extra rounds of changes.
While the report won't tell you exactly what's happening, it will point you to the project that's worth investigating before a small issue turns into an expensive one.
Three signs a project is starting to drift
Here are the first signs that a project needs attention.
First, billable time keeps falling. If less and less of the team's time is billable, it's worth looking into. Maybe the client is asking for extra revisions. Maybe the team is spending more time in internal meetings. Either way, you're putting more effort into the project without bringing in more revenue.
Watch for scope creep. Research shows scope creep can erode 5–15% of a project's margin, and a falling billable percentage is often one of the first signs.
Second, the budget is disappearing faster than you expected. If budget progress feels out of step with where the project should be, stop and review what's left. A small course correction now is much easier than explaining an overrun later.
Third, one person is logging most of the hours. On a fixed-fee project, that's often a sign to take a closer look. Maybe the estimate was off. Maybe the work isn't spread evenly across the team. Whatever the reason, it's better to catch it early than discover it when the project is finished.
Finding problems early is only part of the picture. The same data can also help when it's time to talk to the client.
Using the data in client conversations
The information you've been tracking also makes client conversations much easier. When everyone is looking at the same numbers, it's much easier to talk about scope, budgets and timelines without the conversation becoming subjective.
If a project has grown beyond the original scope, exporting the report to PDF gives you a clear record of the time logged, the budget used and the value delivered so far. Instead of saying, "this project is taking longer than expected," you can show exactly where the extra time has gone.
The same report is just as useful when it's time to talk about increasing the budget or reviewing a retainer. If a project consistently needs more time than it was originally priced for, you've got the history to explain why. You're not asking the client to take your word for it, you've got the data to back up the conversation.
Today, only 20% of agencies track profitability at this level, which means most walk into these conversations with opinions rather than evidence. If you've been reviewing your Projects Summary report consistently, you're walking in with something much more useful.
Conclusion: The whole system, in one afternoon
Keeping track of project profitability doesn't have to be complicated. Set the budget, choose how the project will be billed, turn on budget alerts and review your project data every week. Once that's in place, you've got everything you need to spot problems before they turn into write-offs.
That's where the value comes from. Teams that track budgets in real time report fewer overruns, while agencies with healthy utilisation tend to grow profits faster. TMetric doesn't create those results by itself, but it does make it much easier to see what's happening while there's still time to act.
The easiest way to get started is with your next project. Set it up properly from day one, review it every week and see what the numbers tell you. If you don't already use TMetric, you can create a free account and try the same workflow for yourself.
