The inputs, the formula, and what is deliberately excluded.
Margin is the number most firms in this category cannot see clearly, so it is worth being precise about how it is arrived at and what it deliberately leaves out.
At the engagement level:
The work is in how revenue and cost are derived.
On time and materials, revenue is billable hours logged against the engagement, each multiplied by the applicable bill rate.
On fixed price, revenue is the agreed contract value.
Hours logged against the engagement, multiplied by the cost rate of the person who logged them.
Cost rate means what that person costs your firm per hour worked. For an employee it is typically salary plus employer taxes plus benefits, divided by expected working hours. For a contractor it is usually the rate you pay them.
This point is easy to miss and it matters more than it sounds.
Non-billable time spent on a client engagement is real cost. An engineer spending Friday fixing something you will not invoice for still costs you Friday. A margin calculation that only counts billable hours on both sides will overstate profitability on exactly the engagements that are going wrong, because troubled engagements are where non-billable hours pile up.
Firm overhead is not allocated to individual engagements. Rent, management salaries, tooling, sales and marketing, and anything else not directly attributable to delivering a specific engagement sits outside the engagement-level number.
So an engagement showing 40 percent margin is not putting 40 percent in the bank. It is contributing 40 percent of its revenue toward overhead and profit.
That is the right default. Allocating overhead to engagements requires a methodology, every methodology is arguable, and the arguments obscure the thing you actually want to compare, which is whether this engagement is performing better or worse than that one.
Expect a gap, and expect it to be fine. Three common causes:
Timing. Synthelio reflects hours as they are logged. Accounting reflects revenue as invoiced and cost as paid. On any engagement spanning a month boundary these will not match.
Scope. Engagement margin measures one piece of client work. Accounting measures the whole business, including everything that never touches an engagement.
Unlogged time. If a third of your team logs hours a week late, your margin is a week stale and optimistic, because unlogged hours are unrecorded cost.
That last one is the real dependency, and it is worth stating bluntly: every number in the P&L module is downstream of whether people log their time. No amount of reporting sophistication compensates for a team that logs on Friday afternoon from memory.
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