Rates, costs and targets

Profitability, margin and utilisation are only as good as the rates behind them. These live in Settings > Reports, on the Rates and targets and Cost rates tabs. Administrators and people who manage Finance can change them; Finance managers see only these money tabs.

Hourly rate without a contract#

Go to Settings > Reports > Rates and targets.

• Default rate: what billable time is worth, before VAT, for a customer with no contract in force (£85 by default).
• Customers with their own rate: use Add a customer... to give a customer a different rate.

Customers with a contract are not charged this: their time beyond the contract's included hours counts at the contract's overage rate.

Targets and how revenue is counted#

On the same tab:

• Utilisation target: logged time as a share of expected hours (75% by default). It is the dashed line on the overview.
• Billable target: billable time as a share of expected hours (60% by default).
• One-off work counts as revenue: When accepted (the month the customer accepts the quote) or When invoiced (the month its draft invoice is first exported to Xero).
• Contract fees are called: the service name for contract fees when recurring revenue is split by service ("Support contracts" by default).

Click Save under each card.

Fixed costs#

Some costs of serving customers are not recorded anywhere else, such as a tool you license per device. Add them under Fixed costs.

1. Click Add a cost.
2. Give it a name.
3. Choose how it is charged: per device, per Microsoft 365 licensed user, or per customer, and the monthly amount.
4. Choose who it applies to: every customer with a contract in force, or one customer.
5. Save it.

Use the switch on each cost to pause it, and the ... menu to change or remove it.

Cost rates#

Go to Settings > Reports > Cost rates. A cost rate is what an hour of someone's time costs you: salary, employer costs and overheads, however you work it out.

1. Under Default cost rate, click Add a rate, enter the hourly cost and the date it applies from, and an optional note.
2. Under People, click + beside anyone whose cost differs from the default and add their rate and date.

Each change keeps its date, so earlier months keep the rate they had. A rate applies from its date until the next one; time logged before someone's first rate uses that first rate, because most MSPs set rates after the fact. Click 2 rates (or similar) to see a person's history.

Warning: Time logged by someone with no rate at all costs nothing, which makes margins look better than they are. The Reports overview lists anyone missing a rate.

How the figures are worked out#

Revenue#

Revenue follows your invoices, so it agrees with the Xero export:

• Contracts: each month's fee (part months pro rata by days) and the contract's recurring lines. Quarterly and annual lines count in the month they are charged.
• Licences billed: contract lines that bill licence subscriptions.
• Time billed: overage beyond included hours at the overage rate, and billable time for customers with no contract at their own or the default rate.
• Expenses rebilled: approved expenses and mileage marked to rebill.
• One-off work: accepted quotes' one-off items after discount, before VAT.

Cost#

• Licences: each licence subscription's monthly cost at the time, from the licence change log.
• Staff: every minute logged against the customer at the person's cost rate on the day.
• Expenses: approved expenses and mileage, less VAT reclaimed.
• One-off: the accepted quote's one-off cost.
• Fixed: your fixed costs above.

Margin is revenue less cost, and margin % is margin over revenue.

Utilisation#

Expected hours come from each person's working pattern (Settings > Scheduling, else your working hours), less bank holidays, office closures and approved leave. Utilisation is logged time over expected; billable % is billable time over expected. People counted are everyone on the scheduling roster plus anyone who logged time in the period.

Recurring revenue#

MRR on a day is every contract in force that day at its full monthly fee, plus its recurring lines at their monthly equivalent (a quarterly line a third, an annual line a twelfth). ARR is MRR x 12. Each closed month's MRR is stored, so editing an old contract later does not rewrite history.