Your Direct Costs and Productivity KPIs
Your accounting reports don’t show Direct Costs accurately. Because accountants do not ask what it takes to deliver your service. Details are missing here as well because there is confusing information or not at all. In small businesses, everybody sells, delivers, does admin, manages others, and keeps a separate spreadsheet about the above. Establishing what really gets into your delivery process requires a call of judgement.
We will help you draw the line where it is realistic and useful for you to do it. Between those who actually deliver and those who are ‘back office’. Between costs that are key to deliver the services and those which are real overheads. Finally, we will establish the percentage of time and related cost to allocate here. It takes a while, but it pays off.
Percentage of Direct Cost out of Revenue
When to use it: constantly, especially when growing and needing to hire outside expertise.
When to ignore it: never.
Delivery Staff Utilisation Rate
It takes a while to figure it out and it may require an introduction of project timesheets or other internal control checks.
When to use it: constantly, but especially when making hiring decisions .
When to ignore it: only when your delivery is fully outsourced.
Direct Cost per Billed Day
When to use it: monitor it constantly, especially when you negotiate a salary raise, want to outsource delivery, price your services for a new client or negotiate your fees with existing clients.
When to ignore it: never .