Professional services
Delivery and margin
What the work was worth, what it cost, what was charged for it, and what the arrangement gave away.
A single revenue number conflates three questions. What the work was worth at your rates is one. What you actually charged is another. What it cost you is a third. Finance → Delivery reports all three per client per month, and the gaps between them are where the answers live.
This works with no contract model at all
The commonest arrangement bills none of the work — a subscription, or a flat monthly fee, with no correlation to any hour or ticket. Delivered against invoiced is the same comparison whether a client is on a retainer, a flat fee or a price per incident, so the question is answerable today.
Two margins, and neither is called just margin
| Figure | What it is | What it tells you |
|---|---|---|
| Margin on what was charged | Invoiced less cost | What this client actually made you |
| Margin on what was delivered | Delivered less cost | What your rates would have made, if everything had been billed |
Reporting only the second is actively misleading
On a flat fee, delivering twenty more hours nobody pays for makes delivered-less-cost go up — the figure moves in the opposite direction to the truth, on exactly the arrangement most likely to be losing money. Both are shown, named for what they are. They are apart by exactly what was not charged for.
What was not charged for
Delivered less invoiced is never one lump. It splits, and each part is a different fact about the deal:
- Not yet invoiced
- Work in progress. It will be charged for — this figure says the billing run is behind, not that money was lost.
- Covered
- It drew down something finite the client had bought — a retainer, a block of hours.
- Included in a fee
- A flat fee or subscription covered it and depleted nothing. Merged with *covered*, a flat-fee client would report as having consumed nothing at all.
- Absorbed
- Above a cap the arrangement says is not chargeable. Never the same as work in progress: one will be invoiced and the other never will.
- Written off
- Somebody decided, and said why. The only one of the five explained by a person rather than by the agreement.
A write-off still costs something
It is out of *delivered* and in *cost*, so the margin falls by exactly what the hour cost. Leaving it out of cost would make giving work away look free, which is the opposite of what this page is for.
Where cost comes from
Recorded hours cost the person's time, at a rate derived from what they are paid — see what an hour costs. A recharged expense cost exactly what was spent, so the markup you added is the margin.
A price is not a cost, and none is invented
A fixed fee, an adjustment, an incident and a unit have no derivable cost. What a client pays per incident says nothing about what answering it took, and assuming zero would report a hundred per cent margin on the arrangement most likely to be losing money. They are listed as being in *delivered* but not in *cost*, with what they were worth.
People with no cost rate at all are named once for the whole report. A margin missing four people understates cost by four salaries, and nothing about a total gives that away.
Currencies
Clients are billed in their currency and staff are paid in theirs, so a margin needs a rate. Rates come from the same exchange rates a consolidation uses — the most recent closing rate on or before the end of the period, and supplied by a person, never fetched.
Without a rate, the margin is withheld rather than stated
A figure that silently omitted one currency's salaries would look authoritative, always be too good, and say nothing about why. The unconverted cost is named with its currency instead, and a missing rate holds back only the part it applies to.
Delivered per hour
What an hour was actually delivered at, which is not the rate card. A client on a flat fee has a rate card of nothing and an effective rate that says whether the arrangement is worth keeping. It is absent where no hours were recorded — a month of expenses has no hourly rate.
Who can do what
| Action | Needs |
|---|---|
| See delivery, cost and margin | finance:view |
| Set the cost basis and loading | finance:configure |