Effective Margin

Definition

Effective margin is the actual profit a CPA firm earns from a client after accounting for all real costs — including write-offs, unbilled overtime, complaint management, and liability exposure — not just the billed revenue. Unlike gross revenue, effective margin reveals whether a client relationship is truly profitable once hidden costs are factored in. A client billing $5,000 annually but consuming 20 hours of unbilled dispute resolution may carry a negative effective margin.