Let’s say our MSP is fairly typical. They primarily engage customers through a Managed Services contract with monthly billing based on users or endpoints. But they also have some break/fix work, plus projects, cloud services, and hardware resale.

To get a clearer financial picture, we need to create separate revenue accounts for each of these four categories. That way, we can track how much each is growing.

But revenue is only half the picture.

What About Profitability?

Knowing how much revenue each category brings in is great, but what we really want to see is how profitable each category is.

To do that, we need to track Cost of Sales (also called Cost of Services). This allows us to calculate Gross Profit by line of business—and once you see that, there’s no going back.

Of course, this only works if your PSA is set up to track these costs properly. If it’s not, we’ll have to fix that—but with a clear purpose in mind.