C&P ASAP User Guide: Profitability Reports
There are many kinds of job profitability reports. Each report gets its information from a different source, so each has a slightly different focus -- and usefulness.

The foundation of the profitability reports is the job task. Jobs remember everything purchased and billed by job task. Job tasks keep job-to-date totals for costs, time, expenses, and billings from the date the job was started. Since job tasks are connected to jobs and clients, they are an ideal basis for analyzing profitability. Job-to-date profitability reports search for job tasks for a period of time (using the job’s start date) and billing status (such as closed jobs, for example). These tasks are rearranged, subtotaled, and printed by job, client, task, etc. based on the report selected on the Profitability page. In most cases, the job tasks themselves are hidden to save space; what you see instead are just the job’s totals. These totals are based on the same job tasks you’d see in a Job Summary report.

The Gross Margin reports compare costs and profit for any period of time, such as a month or a quarter. These reports are distinctive because they shows profit both before and after labor. Direct costs are the total vendor purchases, and expenses. Net Revenue is billings less direct costs. Direct Labor is the total time cost for the month. Profit is net revenue less direct labor. Jobs are subtotaled by client for easy comparison. The last bill date is shown from the last invoice billed for the job.

The Client P&L is based on G/L journal entries from billing and job costs. Every journal entry can be given a client number and a job number. If a journal entry has a job number, it is selected for the job income statement.

The Task Profitability report show costs, time, and billings for jobs and tasks. It shows only costs and billings for jobs and tasks, and does not account for overhead expenses like rent.

Job profitability vs. Agency profitability

You can see profitability two ways: Job profit is focused on job costs -- vendor purchases, labor, cash disbursements from checks, and out-of-pocket expenses -- and job billings. Agency profit is based strictly on income and expenses for everything -- whether they were the result of jobs or not.

You can’t rely on just one profit report to keep you informed. Job profitability and the income statement emphasize different things: job profitability reports are based solely on jobs, tasks, and clients; income statements are based only on the general ledger.

Job profitability shows only costs and billings for jobs and tasks, and does not account for overhead expenses like rent. Income statements don’t reflect the cost of time spent working on jobs, only the total payroll expense. Income statements take into account other non-job income, like fees and interest income; job profitability doesn’t reflect adjusting entries to the General Ledger.

What’s the difference between gross margin and net income?

Gross margin, as it is used in Clients & Profits ASAP, is based on jobs and tasks. It is the difference between a task’s billings and its costs -- vendor purchases, time sheets, and expenses. Net income, as it is used in Clients & Profits ASAP, is the agency’s real profit after overhead expenses.

Cost rates and profitability

Cost rates are important because they directly affect the job’s profitability. Time sheets use cost rates to calculate the cost amount of labor automatically. The total cost of each time sheet increases the job task’s cost amount when time is posted. Costs rates are flexible, giving you complete control over rates for each staff member. Carefully choosing resource cost rates is an important and necessary step to make your profitability reports meaningful. Each staff has his or her own individual cost rate. For flexibility, cost rates are completely customizable. The staff’s cost rate is entered onto each time sheet automatically, but can be changed.

What if you don’t use cost rates on time sheets? Your profitability reports will be significantly affected. Your jobs will appear much more profitable, which is wrong. The job’s cost totals would show only vendor purchases and checks, and won’t reflect the value of your time. You’re not required to use cost rates, however. But if you don’t, be consistent -- don’t use cost rates on any time for any job. And just be aware that when you look at a profitability report, the total profit doesn’t include labor.

Unbillable jobs and job profitability

Unbillable jobs can be included on the gross margin report if they have the same selections (billing status and start date) as other jobs. It’s a good idea to include these jobs on the report, since it makes your client totals more realistic. Your total billings, costs, and margin for clients will be more accurate, since the cost of the unbillable jobs will be included.

To see the most accurate job totals, you should include your agency overhead jobs as well. To include these jobs, make sure they have a billing status and a start date. When you print a profitability report, enter the billing status that includes your agency jobs as well as the billable client jobs.

Job costing and profitability

It is important to be consistent about how you track job costs. On profitability reports, the cost total includes all vendor purchases, time sheets (using the resource’s cost rates), and expenses. The cost total is the total amount you’ve spent to complete the job (so far). If you don’t include all costs that you really incurred for a job, then your cost total will be too low -- and the job’s profit will be overstated. Likewise, if you don’t enter time with accurate cost rates, the cost total won’t include the cost of the labor used to complete the work -- and the job’s profit will be too high.

Tips for printing profitability reports

You can look at profitability from the production perspective and see a different picture than the agency profitability. This isn’t a problem. The two sides look at what you make and what you spend differently intentionally, providing insights into where the money’s coming from and where it’s going. Without these different points of view, there’s a big chance you’ll miss some key details.

Knowing where your profit is coming from is much more important than knowing how much profit you’ve made. Because in an advertising agency or design studio, there are really only two ways to improve profits: get more clients and bill them for more jobs; or, know where you’re spending every dollar.

All of the job profitability reports are based on job tasks. While the reports don’t show the tasks in detail, the costs and billings on these tasks are calculated and totaled on the reports.

To print profitability reports

1 Choose Profitability from the Snapshots menu.

The Profitability Reports page opens.

2 Enter a date range.

3 Select a report, then click Print.