I still consider myself a hobby quilter who does custom work every now and then, but as I gradually get busier I am trying to get in a business-groove in case I decide to go that way.
I definitely do not charge enough for my time, but here is how I do it: I charge a fixed cost fo the labor of making the quilt (in which I include design time, shopping/internet time, and all constructiuon time) to which I add the "real" cost of materials (actual invoiced amounts, including sales tax and shipping, pro-rated if I don't use all of the fabric or thread I bought). I ask the purchaser if they want their scraps back, explaining that they have paid for that fabric. (Many people who do not quilt do not want them back and are happy for me to keep them, which I consider a perk of the job!) I give back yardage, or don't charge for it.
If I am using fabric from my stash for which I don't have a purchase price I go with current market value minus about 10%. I keep track of bobbins of thread used and use that number to calculate how much thread was used (since I frequently use many different thread colors in any given project). I charge current market value for the thread, even if it came from my thread stash. I do not try to factor in electricity, wear and tear on my machine or other overhead. I do charge for needles! (Especially on heavy projects that break them.)
I have been keeping a running total of materials purchased for the last three years so I have a fairly good idea of what stuff costs and can give customers a reasonably accurate estimate up front - but I learned the hard way not to give an inclusive price for a project, because material costs can vary so widely, and you cannot count on getting just the right fabric at a sale price!
I keep all of my receipts, I make out a formal invoice for every job, and I have recently started setting out a contract before any work is done just to be sure we are all on the same page.
Hope this helps, and good luck getting your business up and running!
Alison