The markup that lives in your head.
What you pay a contractor and what you bill a client sit in two different systems for most agencies, reconciled by hand once a month. That gap is where margin quietly goes missing.
How the gap forms
The pay rate lives in a contract or a spreadsheet. The bill rate lives in a proposal. Nothing connects them, so the margin is recalculated every month by whoever is doing the invoicing — usually from memory, usually correctly, occasionally not.
It gets worse with exceptions. A discounted month, a rate rise that took effect mid-project, an overtime arrangement for one sprint. Each is reasonable on its own and each is a thing that has to be remembered at invoice time.
What it costs
Not usually a disaster — a few percent, spread thin enough to be invisible. An hour billed at last year’s rate, a discount applied a month after it expired, a contractor whose rise never reached the client invoice. Nobody notices any single one.
The fix is structural
Hold both numbers on the same record and derive the invoice from them. Then the margin is not a calculation anyone performs; it is a consequence of the rate on the record and the hours that were approved.
Exceptions need to be exceptions. A one-month override should be visible and should expire, rather than being a rate edit that somebody has to undo. Ours carries an amber flag until it is reset for exactly that reason.
What to check this month
Take the three largest contractors, find the pay rate and the bill rate for each, and confirm the invoice you sent reflects both. If that takes more than five minutes, the numbers are in the wrong place — whatever software you are using.
The door is open.
Thirty days free for a team, free forever for one person. If it does not replace at least three things you pay for, do not keep it.