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Profitability Report - Setting Exclusions

← Connectwise - Profitability Report
Last Updated: July 2019



Setting Exclusions
When viewing your profitability report, you need to be able to trust the numbers that you are seeing. Any inflation or deflation can lead to a false sense of relief or an overexaggerated sense of panic, which is why exclusions are so important.  Here is our quick definition on what we consider exclusions:

"Any fixed item in which there is no labor or the amount of labor does not directly affect the utilization of the entire account/agreement. "


(This item could be a separate agreement or bundled under another agreement)

Example

View the image below to get an example of an exclusion:


For simplicity, this agreement is broken down into three sections (Labor, Anti Virus, Backup/Disaster). Both the Anti Virus  Backup/ Disaster items are fixed so they DO NOT have any labor attached. Whether you work 5 hours or 500 hours during the month, you are going to charge the same amount for these two items, which is why we need to exclude them. Now, we can focus solely on the $1000/month for labor and compare that amount with the time entries to calculate our monthly utilization percentage.


How will this impact utilization?

Remember, we don't want to inflate or deflate our utilization so setting exclusions ensures our numbers are accurately being measured.  Take a look at this quick example:

Although the agreement is worth $2,500/month, there is truly only $1000 available for labor on this particular agreement. If we didn't exclude our fixed costs, we might think that this account is doing well but in reality we probably need to up their agreement if we are constantly being overutilized. 


How do I set default exclusions?

When viewing an agreement, simply click the blue Set Exclusions button. 


  


You will now see a popup where you have two ways to set your exclusions: by products in CW or setting a fixed amount every month manually

1) Automatically set exclusions using Agreement Additions (Recommended)
In your Connectwise, every agreement has the ability to add "Additions" to help break up bundled agreements into different pieces. We pull these additions so you can easily check off which items you wish to exclude on your agreement.
The screenshot below shows 2 products being excluded totaling $570 to be reduced from the Monthly Agreement Amount when calculating Utilization and $487 to be subtracted when calculating Gross Margin.




After selecting the Exclude Product checkbox, close the popup and click the Refresh button to see your updated agreement:




Looking at June 2019, you can see that $570 was reduced from the Monthly Agreement Amount of $4,675. This results in $4,105, which is the amount of money available for labor for this 
specific agreement for the month.
The calculation for Utilization will take the covered time of the month and divide by the Adjusted Amount (4730.67/4105) resulting in a 115.24% for the month of June 2019.

To learn more about Agreement Additions, use this link: Additions Tab

2) Create your own custom exclusions

If you currently don't use additions in ConnectWise, simply use the Custom Exclusion tab to create exclusions specifically for this one agreement. For this example, we adding a custom exclusion of $500 to be reduced for the Utilization and $250 to be reduced for Gross Margin.



Once you add your custom exclusion make sure the price, cost, and dates are set to reflect the proper set of months. After completion, close the popup and click the Refresh button to see your updated agreement.
Looking at June 2019, we can see an additional $500 being excluded from the Monthly Agreement Amount. Now we are excluding $1,070 from $4,675, which results in an adjusted amount of $3,605. With the lower adjusted amount, you will see that the Utilization is higher. Also, since we included an additional cost of $250, you will see that the Gross Margin dollars and percentage has also gone down.