for ConnectWise

Profitability by Client
Stack-rank your clients on profitability to you over any time frame you choose

This report stack-ranks your clients based on profitability to your practice. You can have this report gather data from any date-range that you select. Drill-down to details on agreements for each client (and further into invoices and time entries). (Click the image to see a larger version)

PURPOSE

The purpose of the Profitability by Client report is to allow you to understand which of your clients are most profitable over the timeframe that you have selected. In this case, “profitability” really means “contribution margin”, which is the incremental dollars that you receive based on having this client on-board. The Contribution Margin shows the dollars that each client generates to cover your fixed expenses like engineer salaries, rent, etc.

 

WHY IS THIS IMPORTANT?

It is important to know which clients are generating the most profit so that you can protect and even deepen the relationship with those clients. Conversely, it is important to also know those clients that are generating the LEAST amount of profit, so that you can restructure the arrangement with those clients.

 

REPORT ITEMS

Contr Margin – Contribution Margin (revenue less direct costs) for each company, each invoice, and each line item of each invoice sent out during the selected time period.  Contribution Margin shows you the incremental “net operating profit” available to cover your fixed costs.  Contribution Margin is calculated BEFORE you have paid your engineering team, since for Management Accounting purposes engineering salaries do not vary directly with sales revenue, so we consider engineering salaries to be a “fixed cost” in the short term.  You’ll see that we “allocate” the engineer salary costs separately via the “W2 Cost” and “Net After W2” calculations.

Contr Margin % – (shown as a percentage just to the RIGHT of Contribution Margin) Shows the percent of your Total Revenue (i.e. Sales) that end up as Contribution Margin (Funds remaining from revenue after you have paid your 3rd party vendors that are outside your organization).  For example:  If your CM% is 57%, that means that you make 57 cents on every dollar of sales after you have paid your external 3rd party vendors.  (Note:  This is BEFORE you have paid your internal engineering staff.)

Net after W2 – (found under Contribution Margin)  Shows the dollars that you have remaining after you have paid your 3rd party providers AND “paid” your engineers (by allocating their compensation to each client based on the number of hours they worked FOR that client during the selected time frame).

Net after W2 % – (shown as a percentage just to the RIGHT of “Net after W-2) Shows the percent of your Total Revenue (i.e. Sales) that end up as “Net after W2” (Funds remaining from revenue after you have paid your 3rd party vendors that are outside your organization AND allocated the W2 cost of your engineers to each client based on their hourly cost and number of hours worked).  For example:  If your “Net after W2 %” is 29%, that means that you make 29 cents on every dollar of sales after you have paid your external 3rd party vendors and allocated the W2 cost of your engineers on an hourly basis.

Revenue – Sales revenue for each company, each invoice, and each line item of each invoice sent out during the selected time period.

Service Revenue – (found under Revenue)  Total revenue generated by “labor-only” items invoiced to clients.  By default, this field shows revenue generated by “Time and Materials” (T&M) revenue. You can have this figure ALSO include revenue from Fully Managed and Block Time agreements by adjusting the “Internal Labor Product Types” control (upper-right hand corner of the report) to include product types you have defined such as “Fully Managed” and “Block Time” (for example).  You can see ALL of the “Product Types” you have defined in ConnectWise by clicking the “…” button next to the Internal Labor Product Types drop-down menu.

Cost – Direct costs accrued for each company, each invoice, and each line item of each invoice sent out during the selected time period.

W-2 Cost – (found under Cost)  Shows the costs of your engineers, allocated to each client based on:

  • Hourly Cost of EACH engineer (as defined in the ConnectWise Member screen)
  • How many HOURS your engineers spent working for THAT client

Hrs Actual – “Hours Actual”. Total number of hours actually worked for this client for this period.  Includes ALL hours posted against client accounts, even if they are marked at “non-billable”.  This is done because you have to pay that engineer’s compensation every hour, even if they did not charge the client for their time (but they DID do work for that client during that time).

EHR – “Effective Hourly Rate”.  This is the Contribution Margin (Revenue minus external 3rd party costs) divided by the number of hours worked.  This shows how much “incremental profit” is being generated for each hour worked with this client from both “labor” offerings as well as 3rd party bundles (like antivirus or remote backup).  Note that EHR is calculated BEFORE you have “paid” your engineers by allocating their costs on an hourly basis.

W-2 Cost / Hr – “W-2 Cost per Hour” (found under EHR)  Shows the average hourly cost of the engineers that did work for this client.  If senior engineers do more work for this client versus “less senior” engineers for a different client, this calculation will show you the allocated “cost” of your engineering talent to provide an hour of engineering time.

Mgd CM – “Managed Contribution Margin” (green) This is the Contribution Margin (revenue less direct costs) you have received for Fully Managed (flat fee for unlimited time) contracts this month. Since Fully Managed agreements may include a bundle of related services (as “Additions” on the agreement), you may see several invoice lines and even some direct costs associated with a Fully Managed agreement.

(Managed) Net after W2 – “Managed Net After W2”. (found under Managed Contribution Margin)  Shows the dollars that you have remaining after you have paid your 3rd party providers AND “paid” your engineers (by allocating their compensation to each client based on the number of hours they worked FOR that client during the selected time frame) for Fully Managed agreements.

Mgd Rev – “Managed Revenue”. (green)  This is the total revenue you have received for Fully Managed (flat fee for unlimited time) contracts this month. This figure does NOT include any sales taxes.

Mgd Hrs – “Managed Hours”. (green)  Total number of hours actually worked for this client for this period on Fully Managed agreements.  Includes ALL hours posted against client accounts, even if they are marked at “non-billable”.  This is done because you have to pay that engineer’s compensation every hour, even if they did not charge the client for their time (but they DID do work for that client during that time).  Throughout the current month, the amount of revenue you received on this invoice will stay static, but the hours will go up as the engineers “service” this client (and “Mgd EHR” will go down).

(Managed) W-2 Cost – (green; found under Mgd Hrs)  Shows the costs of your engineers, allocated to each client based on:

  • Hourly Cost of EACH engineer (as defined in the ConnectWise Member screen)
  • How many HOURS your engineers spent working for THAT client on Fully Managed agreements

Mgd EHR – “Managed Effective Hourly Rate”.  (green) This is the Contribution Margin (Revenue minus external 3rd party costs) divided by the number of hours worked on Fully Managed agreements.  This shows how much “incremental profit” is being generated for each hour worked with this client from both “labor” offerings as well as 3rd party bundles (like antivirus or remote backup).  Note that EHR is calculated BEFORE you have “paid” your engineers by allocating their costs on an hourly basis.  NOTE: This will DECREASE throughout the month as the revenue stays static but the number of hours worked on a Fully Managed contract increases.

(Managed) W-2 Cost / Hr – “Managed W-2 Cost per Hour”. (green; found under Mgd EHR)  Shows the average hourly cost of the engineers that did work for this client on Fully Managed agreements.  If senior engineers do more work for this client versus “less senior” engineers for a different client, this calculation will show you the allocated “cost” of your engineering talent to provide an hour of engineering time.  NOTE:  If your “Managed EHR” is LESS than your “Managed W2 Cost per Hour”, then you are LOSING MONEY on this Fully Managed agreement.  In that case, you may want to consider:

  • Raising the price of the contract to the client
  • Restricting/controlling/managing the number of hours worked on this contract in any given month
  • Restrict which engineers work on THIS contract to lower-cost engineers

Prepaid $ – “Prepaid Revenue”. Revenue that you have received this month for service contracts that have a “limited” number of hours included, such as Block Time agreements.

Prepaid Hrs – The number of hours that your engineers have spent servicing pre-paid agreements related to this invoice (including fixed fee, monthly block, annual block, etc.)

(Prepaid) W-2 Cost – (blue; found under Prepaid Hrs)  Shows the costs of your engineers, allocated to each client based on:

  • Hourly Cost of EACH engineer (as defined in the ConnectWise Member screen)
  • How many HOURS your engineers spent working for THAT client on Prepaid (i.e. “block”) agreements

T&M Rev – “Time-and-Materials Revenue”.  Shows the amount of revenue invoiced for service hours not covered by an agreement.

(T&M) Net after W2 – “Time-and-Materials Net After W2”. (found under T&M Revenue)  Shows the dollars that you have remaining after you have paid your 3rd party providers AND “paid” your engineers (by allocating their compensation to each client based on the number of hours they worked FOR that client during the selected time frame) for time not covered by any agreement.  NOTE:  If you have your engineers record time against YOUR COMPANY (i.e. for internal projects, etc.), then the W-2 cost of that time will be reflected in this figure (and  it may look like you are losing money on your T&M practice).  To REMOVE internal hours from showing up on this report, click on the “Exclude” button (upper-right of the report, right next to “Companies Excluded” indicator), then select to EXCLUDE your company from the report.

T&M Hours – “Time-and-Materials Hours”. (brown) Number of hours of “time-and-materials” work done in the selected time frame.

(T&M) W-2 Cost – (brown; found under T&M Hrs)  Shows the costs of your engineers, allocated to each client based on:

  • Hourly Cost of EACH engineer (as defined in the ConnectWise Member screen)
  • How many HOURS your engineers spent working for THAT client on items NOT covered by an agreement

T&M EHR – “Time-and-Materials Effective Hourly Rate”.  (brown) Since by definition there are no “3rd Party Costs” to T&M work, this figure shows you how much “incremental profit” you earn per hour on Time-and-Materials work not covered under an agreement.  Note that T&M EHR is calculated BEFORE you have “paid” your engineers by allocating their costs on an hourly basis.

(T&M) W-2 Cost / Hr – “Time-and-Materials W-2 Cost per Hour”. (brown; found under T&M EHR)  Shows the average hourly cost of the engineers that did work for this client on items NOT covered by an agreement.  NOTE:  If you have your engineers record time against YOUR COMPANY (i.e. for internal projects, etc.), then the W-2 cost per hour of that time will be reflected in this figure (and  it may look like you are losing money on your T&M practice).  To REMOVE internal hours from showing up on this report, click on the “Exclude” button (upper-right of the report, right next to “Companies Excluded” indicator), then select to EXCLUDE your company from the report.

Product CM – “Product Contribution Margin” (purple) Contribution Margin (revenue less 3rd Party Costs) that you have earned on products, typically hardware and software sales made outside of any agreement.

(Product) CM % – “Product Contribution Margin percentage”. (found under Product CM) Shows the percent of your Total Product Revenue (i.e. Product Sales) that remain after you have paid your 3rd party vendors that are outside your organization to acquire those products.  For example:  If your Product CM% is 14%, that means that you make 14 cents on every dollar of product sales.

Product Revenue – Sales Revenue on products sold on this invoice.

Paid – The amount that you have already received in payment from clients over the selected time frame.

(Paid) Days to Pay – The average number of days between the invoice date and the date that the payment is received from the client.

DRILL DOWN TO SHOW AGREEMENT (AND “NO AGREEMENT”) SUMMARIES
Click on “Lexmark” to see agreements for that client

Profitability by Client 23Sep2015 AGREEMENTS

 

DRILL DOWN TO SHOW INVOICES FOR THIS AGREEMENT
Click on the agreement name to show invoices for that agreement

Profitability by Client 23Sep2015 AGREEMENTS INVOICES

DRILL DOWN TO SHOW LINE ITEMS FOR THIS INVOICE
See the details of each line on the invoice

Profitability by Client 23Sep2015 AGREEMENTS INVOICES LINE ITEMS

DRILL DOWN TO SHOW WHERE THE LINE ITEM SHOWED UP IN YOUR FINANCIAL SYSTEM
See where this line item was mapped to your Profit & Loss Statement

Profitability by Client 23Sep2015 AGREEMENTS INVOICES LINE ITEMS GL

 

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