Job costing
How to price a CA engagement without guessing
Most firms quote a fee from memory — what they charged last year, what the client will accept — and only find out the margin, if ever, at year-end. The fix isn't a bigger spreadsheet; it's costing the engagement the same way a factory costs a product: from the labour that goes into it.
Here's a method you can apply to any engagement, from a GST retainer to a statutory audit.
Start with a real hourly rate, from CTC
The single biggest pricing mistake is treating staff time as free. It isn't — every hour a team member spends has a cost, and the honest way to find it is from their cost-to-company (CTC).
A simple, defensible rule: divide annual CTC by the working hours in a year (roughly 2,000 after leave and holidays) to get an hourly rate. A team member on ₹6,00,000 CTC costs about ₹300 an hour. Do this per person, because a partner's hour and an article's hour are not worth the same.
Add the overhead the hour really carries
Labour isn't the whole cost. Rent, software, travel to client sites, electricity and admin all have to be recovered across the hours your team bills. Total your annual overhead, divide by your annual billable hours, and you get an overhead rate to add on top of each person's CTC-based rate.
Skip this and every engagement looks more profitable than it is — until the overheads land in the P&L and the 'profit' disappears.
Set the costed hours against the fee
Now estimate the hours the engagement will take, by person, and cost them: hours × (CTC rate + overhead). Add any direct costs — a sub-contractor, a filing fee, travel. That total is what the engagement costs you to deliver.
Put the fee you intend to charge next to it. The gap is your margin. If it's thin or negative, you found out before you quoted, not after you delivered — and you can adjust the fee, the scope, or who does the work.
Keep the money away from the people doing the work
Costing only works if people are honest about hours, and people are honest about hours when the numbers aren't a performance review. Keep fees, costs and margin visible to partners and hidden from staff. The team should see the work and log the time; only the partners see the money.
Where firms quietly lose margin
Recurring retainers priced years ago and never revisited. Audits where the juniors' hours ballooned and nobody noticed. 'Small favours' for good clients that were never scoped. Costing every engagement — not just the big ones — is how these surface while you can still do something about them.