This article explains what Capacity means in Magnifi, how it is calculated, and how the key Capacity functions — Capacity Defaults, Labour Drivers, Annual Capacity, Monthly Capacity, and Capacity v Income — connect to each other.
It also defines important terms such as Productivity, Recovery, Sell Rate, and Demand, and clarifies how Capacity helps service-based organisations assess whether they have enough capacity to meet income targets.
Use this guide when you want to:
• Understand the concept of Capacity and how it underpins forecasting.
• See how data flows from Capacity Defaults through to Capacity v Income.
• Clarify key terms such as Productivity, Recovery, and Sell Rate.
• Measure whether your team’s available hours and rates can meet income demand.
• Model Capacity in service businesses where labour drives revenue.
Capacity represents the total income-earning potential ($) of your Direct employees based on their available hours, productivity, recovery, and sell rates.
For service organisations, people generate income — not products — so understanding capacity is critical to forecasting whether income targets are achievable.
In short, Capacity shows what your team can earn, before comparing it to what you plan to earn (Demand) in Capacity v Income.
Magnifi calculates Capacity using a consistent formula across all Capacity pages:
Available Hours (Base): Standard working hours less leave.
Available Hours (Total): Adds paid overtime to available hours.
Billable Hours: Portion of total hours that are both productive and recoverable.
Formula: Total Available Hours × Productivity % × Recovery %
Sell Rate: Average hourly charge rate.
Derived from Capacity Defaults or entered per employee.
Overall Formula:
Capacity ($) = (Available Hours × (1 + Overtime %) × Productivity % × Recovery %) × Sell Rate
In Annual Capacity, both public holidays and leave are deducted under Available Hours.
In Monthly Capacity, public holidays are deducted under Work Hours while leave is managed separately in the Leave tab.
Productivity %
The proportion of total working hours spent on productive (billable) activities.
Adjust under Annual or Monthly Capacity.
In Monthly Capacity, vary productivity month by month to reflect seasonal changes or employee ramp-up periods.
Set the default under Capacity Defaults.
Recovery %
The proportion of productive time that is successfully billed or recovered as income.
Low recovery does not always mean inefficiency — it may reflect under-quoting or scope changes.
The default value is controlled under Capacity Defaults and can be edited at the organisation or divisional level under Annual or Monthly Capacity.
Example: An employee works 100 productive hours but only 85 are billed.
Recovery = 85 %.
Sell Rate
The average charge-out rate per billable hour.
Set default Sell Rates in Capacity Defaults (organisation or division).
Override per employee in Annual Capacity.
Vary monthly in Monthly Capacity to model rate changes.
Overtime %
Represents paid overtime as a % of normal working hours.
Enter default overtime in Labour Drivers → Gross Wages.
If updated in Annual Capacity, Magnifi automatically syncs the change to Labour Drivers.
Leave %
Represents standard annual leave as a % of working hours (e.g. 7.69 % for 4 weeks).
Set the default in Capacity Defaults.
Can be overridden per employee in Annual or Monthly Capacity.
Capacity planning helps you answer the key question:
Do you have enough capacity to meet demand?
Understanding Capacity allows you to:
• Confirm that income targets are achievable.
• Plan staffing levels and resourcing.
• Identify surplus or shortage early.
• Test the impact of changing productivity, recovery, or rates.
• Set clear and measurable employee targets.
The Capacity pages in Magnifi are designed to flow left-to-right — from setting your default assumptions through to comparing your projected capacity with demand.
Step 1 – Capacity Defaults: Set default assumptions for productivity, recovery, sell rate, overtime, and leave. → Establish baseline inputs for all employees.
Step 2 – Labour Drivers: Define your employees, hours per week, and classification (Direct or Overhead). → Supplies employee data for capacity calculations.
Step 3 – Annual Capacity: Calculate yearly capacity using fixed assumptions. → Shows Capacity Hours and Capacity $ by employee.
Step 4 – Monthly Capacity (optional): Vary assumptions by month for more detailed projections. → Shows Monthly Capacity $ and Capacity Hours.
Step 5 – Capacity v Income: Compare projected Capacity ($) to projected Income ($). → Shows whether you have enough capacity to meet demand.
Capacity Defaults → Annual and Monthly Capacity (One-way)
Provides baseline Productivity %, Recovery %, Sell Rate, Overtime %, and Leave %.
Labour Drivers → Annual Capacity (One-way)
Supplies employee details, hours, and classification.
Annual Capacity ↔ Monthly Capacity (Two-way)
Annual data flows into monthly projections; monthly updates can feed back when “Monthly” basis is selected.
Monthly Capacity → Capacity v Income (One-way)
Provides total Capacity Hours and Capacity $.
Capacity v Income (Read-only)
Compares projected Capacity ($) to projected Income ($) to highlight surplus or shortfall.
Tip:
When the Monthly Calculation Basis is selected, any updates in Monthly Capacity automatically refresh the totals in Annual Capacity.
You can also view an annual Capacity v Income analysis directly from the Annual Capacity page.
For industries where income includes both labour and materials (e.g. construction, manufacturing):
Flag relevant income accounts as Capacity Building under Chart of Accounts.
Calculate an overall Sell Rate = Total Income ÷ Total Billable Hours.
Enter this rate in Annual or Monthly Capacity to project total team capacity.
Use this projection for workforce planning, even if labour income isn’t reported separately.
The Capacity v Income page compares your projected Capacity ($) to your projected Income ($).
While it’s titled Capacity v Income in Magnifi, it effectively measures whether your business has enough capacity to meet demand.
If Capacity > Income, you have surplus capacity (potential under-utilisation).
If Capacity < Income, you may need more staff, higher productivity, or higher rates.
Projected Income is drawn from accounts flagged as Capacity Accounts under Chart of Accounts.
Why don’t all employees appear in Capacity?
Only Direct employees (and contractors marked as Direct) are included. Overhead employees are excluded from Capacity projections.
What’s the difference between Productivity and Recovery?
Productivity measures time spent on billable work; Recovery measures how much of that work is actually billed.
How is Capacity different from Income?
Capacity is your potential to earn; Income is your target or result. Comparing them highlights whether targets are achievable.
Do changes flow automatically?
Yes — Magnifi maintains live data links between Defaults, Labour Drivers, and Capacity pages.