You earn margin when you go to the beach That’s the lovely thing about recurring revenue and that is why it helps make your business more valuable, writes Thomas Taylor from Middle Office. Thomas Taylor Director, Middle Office
Margin is “earnt” by each minute a contractor is on the job, not when you send the client an invoice, that’s just when you batch it up. If your lawyer charges by the hour they earn money from the moment they answer the phone, not when they send you a bill. They call their income “work in progress”, WIP for short, and they follow that number more closely than they follow billing. It might take them months to bill some matters and using that number would make their books “lumpy”.
We see a lot of agencies with that very problem; lumpy books caused by margin timing differences. They usually have temps billed and paid by the week and/or fortnight. So they have some months with 5 weeks and/or some months with 3 fortnights. Sometimes the invoices and payrolls don’t even fall in the same month. Try to think of billing, your batching, like a surveyor’s peg or a navigational fix. It gives you a data point to prove your real-time calculations. What sailors call dead reckoning.
Before modern cars started telling us instant/average fuel economy on the dashboard the nerdy amongst us, me included, would calculate fuel consumption each time we filled up. Fuel consumption is all well and good, but your margins are the most important numbers in your business, it can make or break you. We solve that problem for our clients, we give you more accurate margin data you can rely on, that lets you see trends, not lumps. RECRUITMENT & CO | 20
