This report shows Contribution Margin (i.e. Sales less direct Cost of Items Sold) over the last 12 months, including work already done this month but not yet billed, as well as an estimate of service work that WILL be done this month (based on historical trends). Contribution Margin is compared to your estimated Fixed Costs (costs that are not DIRECTLY attributable to the sale of an additional hour of service or product).
WHY IS THIS IMPORTANT?
This report gives an “early look” if you will be profitable this month. When Contribution Margin exceeds Fixed Costs, you are profitable. If it appears that your contribution margin is falling short of expectations, it should prompt you to:
- Accelerate sales projected in future months into this month.
- Make sure all engineering time is being recorded.
- Make sure engineers are spending their time on billable work.
- Make sure engineers are spending the right amount of time on “fully managed” contracts (and not TOO much).
- Make sure that dispatch is keeping engineers productive by helping them schedule their time.
- Make sure that all eligible invoices HAVE been released and send to clients.
- Look at your Fixed Costs to determine if there are items that can be reduced from overhead.
Fixed Cost est – an estimate of your monthly “Fixed Costs” (salaries, rent, utilities, etc.). This information is entered as a parameter to the report. Note that “Fixed Costs” are those costs that you would STILL incur next month if you did absolutely NO work and sold NO product. So this includes salaries for all personnel on salary (including engineers), facilities costs, utilities, etc.
Product Contr Margin – Contribution Margin (Sale price less Cost of Product Sold) for each month. Automatically calculated from the invoices (which include both Sales Revenue and the Cost of that product. This includes hardware, software or 3rd party services that you are reselling.
T and M Revenue – The amount of labor services provided for each month that was not covered by a contract (i.e. “Time and Materials” services).
Anticipated to Bill – The amount of T&M services that you have NOT YET performed, but (based on historical averages) that you WILL perform for the remainder of this month. This entry shows up as a dotted line on the current month to provide a “projection” of how the month will likely finish.
Time to Bill – Amount of T&M service that HAVE ALREADY PERFORMED but have NOT yet billed. This item always shows up on the most current month (since any time NOT billed yet would be billed THIS month).
Prepaid Revenue – Shows the amount of sales for contracts that include time where the time does not carry over into follow-on months, but it paid in advance of providing the service.
Managed Contr Margin – Represents sales of Fully Managed services which charge a “flat fee” amount where this is NO limit to the amount of service labor provided.