MSP Finance: Activity-Based Costing
The fun thing about managerial accounting is that there are no rules. There are concepts, but this is financial information for internal use, so you get to decide what you want to know, why you want to know it and how you’ll use that information in your decision-making. One valuable technique is activity-based costing. Another variant of this concept is client-based costing.
The Basics
Activity-based costing seeks to determine the true cost of doing something. If you’re looking at this at a client level, which is a good idea for an MSP, you’re determining the cost of servicing that client. The obvious benefit is that you can align what you charge a client a lot more closely with what it costs to service a client.
Let’s say you have two clients and you charge each of them the same $150/seat, and they each have 20 seats. That means each client is worth $3,000 a month in revenue. Company A is low-maintenance. They use your full stack and hardly ever send in tickets. Your service desk spends 10 hours per month dealing with them and each hour of your service desk costs $75 all in, which means they cost you $750 each month. This is a great client.
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