Client Profitability over time: Client Performance vs Client Profitability reports in Link Reporting

What is the difference between a Client Performance report and a Client Profitability report? Good question. The Client Performance report is a Work In Progress type report that shows the value of effort that goes into a client or client group vs the invoiced value you generate over a 12 month period. This is why the invoiced values appear negative. This report is used for people who price their services on a retainer basis for calculating what a retainer value should be. The transaction dates used for this report are the individual timesheet, invoice and write/on/off dates. This is very different to the Client Profitability report. The Client Profitability report shows the profit on completed jobs for a specific period. Only completed jobs show on this report as profit is only profit once timesheets, costs and invoices are completed for a job. The report uses the job completed date to determine what appears in this report, not the individual timesheet, disbursement, invoice and write-on/off dates. This means each job is a complete picture of how that job performed. This report is used to determine how valuable a specific client or client group is to your business. A 12 month Client Performance report is unlikely to match a 12 Month Client Profitability report because:

1. Timing differences between timesheets, disbursements, invoices, write ons/offs and job completion dates.
2. Client Performance includes open jobs or jobs in progress, Client Profitability does not.
3. Each month's opening WIP balance and the end of period WIP balance does not appear in the Client Profitability report.

A 12 month Client Profitability report for a specific client or client group is unlikely to match what you see in Xero because:

1. Time costs are based on per-hour cost rates per staff member, not wages and salaries.
2. Open jobs may have invoices that will appear in Xero but never in the Client Profitability report (because it's not profit yet).
3. Timing differences between job completion date (the criteria for this report) and invoice date (the criteria used in Xero)

The Client Performance report is the best basis for a 'Client Profitability over time' type report however it does not include the time cost or direct cost of disbursements incurred on jobs for that client. Although 'Client Profitability over time' looks pretty and looks like a P&L over time - ask yourself - why am I running this report? What decisions do I want to make? What benefit do I gain from monthly invoiced value vs cost?

What you are likely to see is wide variability in the profitability shown in each month. This is due to the timing difference between the timesheet date, the disbursement date and the invoiced date. Not due to the performance of your sales or delivery teams, the quality of the work, the busyness of the month or how you've priced your services. Client Profitability over time also does not display the un-invoiced value of time and effort carried forward each month so distorts what profitability is for a particular client in a particular month.