View profit (or loss) at the client level
Overview
The Client Profitability Report is part of a report series to help agencies view profit/loss at the client level for a specified period. The report calculates client profitability by analyzing direct labor and overhead expenses and calculating indirect expenses based on the agency's P&L.
Steps:
- Navigate to ACCOUNTING > General Ledger > General Ledger Reports
- Click on Client Profitability Reports to reveal the reports for that series.
- Click Client Profitability Report.
Cost calculation options
Your selection in the following areas impacts how client profitability is calculated: Direct Labour, Overhead Allocation, and Monthly Hours Cap.
Direct Labour
The Direct Labour Cost can be calculated in one of three ways
- Time Entry Cost Rate - This is the Employee Cost Rate applied at the point of time entry. For example, if an employee entered time in January and the Client Profitability report is being run for the full calendar year, the January time entry would be costed at the Employee Cost Rate that applied in January, based on the Hourly Cost Rate in the Employee record at that time.
- Employee Current Cost Rate - This is the Employee Cost rate that is current. Using the example above, the Employee's time entry in January would be costed at the Employee's current cost rate, so if the Employee's cost rate had been changed since January, it would apply the current rate, not the rate when the time was entered in January.
- Indicative Cost Rate - This is the cost rate set in the Indicative Hourly Cost Rate field for the Task Type. Task Types in Accountability are agency-defined and can represent a specific role or actual project tasks.
Overhead Allocation
Overhead can be applied based on the Client's Percentage of Direct Labour or the Client's Percentage of Total Revenue
Cap Monthly Hours
By default, uncapped hours are used in calculating client profitability. This means that submitted hours exceeding standard hours as defined on the employee record are included in the Direct Labour Cost calculation. Click on the option to Cap Monthly Hours to smooth out the cost rate based on the standard hours allowed.
Reporting options
Client display
Choose from:
- Client
- Master Client
- Custom field on the Client record (if any)
Report Format
Choose the level of detail:
- Summary - shows client-level detail
- Detail - breaks out billings and revenue by account and direct expenses by department and employee.
Column definitions
- Total Billings - the total client Billings for the reporting period.
- Total Revenue - the total Revenue for the report period.
- Total Direct Labour - the total hours recorded by the various employees on the client during the reporting period, cost on the selected report cost rate.
- Total Direct Overheads - the total of any costs charged directly to the P&L and coded against the specific Client on the entry. For example, if a Taxi cost was charged to Taxi Expense in the P&L, and the Client Code was specified on the entry, the cost would show as a Direct Overhead for that client.
- Total Direct Expenses - the addition of 3 and 4 above, i.e., Total Direct Labour and Total Direct Overheads.
- Gross Profit - the difference between the 2 and 5 above, i.e., Total Revenue and Total Direct Expenses.
- Indirect Labour & Overhead Allocation - The system will first calculate the total Indirect Labour and Overhead.
This is the difference between the total Profit before Tax for the Office/s for the reporting period, identical to the Profit before Tax in any of the Profit & Loss Reports run for the same Office/s for the same period, and the Total Gross Profit, being the sum of 6 above, i.e., the calculated Gross Profit.
The system will then apportion the total Labor and overhead by the client based on the selected overhead allocation methodology.
If the % Direct Labour Overhead allocation has been selected, the system will calculate the Direct Labour Overhead for the Client by taking the Total Direct Labour for the Client (3 above) divided by the Total Direct Labour cost for all Clients.
For example, if the Total Direct Labour for Client A is $50,000, the Total Direct Labour Cost for all clients is $1,000,000, and the Total Labour and overhead Allocation is $500,000, the report will calculate Client A's Overhead Allocation @ $25,000, i.e., $50,000/$1,000,000 X $500,000.
If the % Revenue Overhead allocation has been selected, the system will calculate the Direct Labour Overhead for the Client by taking the Total Revenue for the Client (2 above) divided by the Total Revenue for all Clients.
7. Profit Before Tax – the Gross Profit by the Client (6 above) less the Indirect Labour and Overhead Allocation by the Client (7 above).
8. Profit as a % of Revenue – Profit Before Tax by Client (8 above) divided by Total Revenue by Client – (2 above).