[34] – Autotask Implementation Series: Contracts in Autotask

Welcome to PSA Impact, your podcast for all things PSA, RMM, and MSP. With your hosts, Rayanne Buccianico and Chris Tim. Learn how to get the most out of your PSA tool and manage your business by maximizing profitability and increasing efficiency within your MSP business. Let's listen in. Hello everybody and welcome to another episode of PSA Impact with your hosts, myself, Chris Tim, and my co-host, Rayanne Buccianico.

Hey, Rayanne, how are you doing today? I'm doing great today. How are you doing today? How's things over there? Yeah, all good.

Thank you. It's starting to warm up a little bit, which is good. All is going well over here in the UK. What do we get on the agenda for today? Well, Rayanne, today we're going to talk about, and literally this honestly is my absolute favorite topic that we're going to talk about.

I'm kind of the self-proclaimed expert, I guess, on profitability and billing and contracts and all that kind of stuff. So yeah, today we're going to talk about contracts, the different types of contracts, how and when to use them, all that kind of stuff. So the question to you is, what is, for those listeners who don't really kind of know what a contract is, what is a contract in order to ask? Well, I have to say that this is also one of my favorite topics, right? Because being an accountant by nature, to me, it's all about the billing and the collecting of money and all of that stuff.

So thank you for bringing up this topic. The one thing that you want to think about when you're dealing with contracts, when you think about a contract in order to ask, so many people think, well, I don't have a contract. You know, I don't have contracts with my customers. Well, I'm not talking, and we are not talking about the actual physical piece of paper that you get your customer to sign. We're talking about the billing policies that your company is using to invoice, you know, for the services that you provide.

And really, that's all we're talking about in Autotask contracts. What do you do for your customer and how do you invoice them for it? Exactly, I agree. And I think there's a lot of confusion around the word contracts. A lot of people think it's the, you know, the physical legal contract that gets signed by the customer.

It's not that at all, right? So it's taking, as you say, it's taking that stuff that's on your contract and translating that into billing. So, you know, so when you've got, you know, X amount of units of Office 365, and you've got, you know, maintenance and all these kinds of things that you're offering to your customer on a monthly basis, it's taking those items and creating a contract for those particular items and billing for them. So when a potential customer or a client comes and contacts me, and they say, well, where do you want to start? We've got, Autotask is like this huge monster, you know, and I don't even know where to start.

Where do we begin? And so I always say, well, let's start with the contracts, right? Because, you know, once you have your contract set up, then you can start invoicing your customers. Now you have a quick win. And the first thing I tell them to do is to put together that list that I just mentioned a few minutes ago.

Who are your customers? What do you do for them? And how do you invoice them for it, right? So often that comes, you know, in the form of a spreadsheet and they've got the customers listed down, one side they've got rows or columns of services and prices, costs, because at the time that you're setting up your services for the contract, you also want to know what that service is costing you. And don't worry about the labor costs at this point, because Autotask is going to capture that separately.

So we're talking about hard dollars coming out of your pocket, you know, to pay for things like your Microsoft 365 licenses, you know, your Azure licenses and so on and so forth. Absolutely, and I mean, you mentioned there about labor, and I think a lot of people kind of get really confused, because especially if there's a labor element on your recurring services contracts, maybe you've got a maintenance or something like that, they always look to put a cost against that. And that cost gets taken into account in a different area. As you say, that's kind of to do with your burden rates. When you enter time and you capture that time against the contract, it takes into account the cost of the labor or the cost of that engineer at that point.

So the next part, I think that gets people sometimes confused are the different types of contracts. And, you know, there's so many different things that you can invoice for. Today, I had a client ask me, hey, everything they do is on time and materials, time and materials contracts, you know, all over because they bill all of their time. Except for this one client, a customer of theirs, what they do is that they have a two hour per month minimum. And so every month they want to bill them or invoice them at least two hours every month.

And they're like, I don't even know if Autotest can do this, does it have that kind of capability? I'm thinking, this has got block hour contract written all over, right? So you want to invoice them for at least two hours. If they go over those two hours, you want to invoice them for the overages. If they don't go over the two hours, you don't want to roll over those hours to the following month.

Great, you know, and I showed them how to set it up in a matter of minutes. You know, so that's like one example of the contracts. You know, and I'm going to let you take on the time and materials and the recurring service. But the one thing that I know that so many people get confused in Autotest is the difference between a block hour contract and a retainer contract. And it all boils down to a very simple difference.

Block hours track time and retainers track dollars or pounds, if you're- I was just going to say, or euros or whatever currency you're in. So it deals with money, I guess we should say. Right, thank you for that. So I'm going to let you take on the difference between the fixed price contract and, oh, don't forget the per ticket contract. You know, can't forget that one.

And then of course, recurring service. Yeah, absolutely. So, you know, so there's a lot of contract types. And you actually just mentioned, you know, earlier on about the time and materials. And I think there's also a lot of confusion around that kind of contract.

Purely because a lot of people think if they're doing time and materials work with their customers or purely break-fix that they need to have a time and materials contract. And you actually really don't in all the tasks. You can bill ad hoc by the hour without having a contract. It's advisable to have one because you can track profitability, you can track all of these kinds of things against the contract, but you actually don't need to have one because all the tasks will automatically bill against the work type and against the role. So, you know, if you've got your role set up as, you know, a hundred dollars, pounds, euros, whatever it is per hour, it's then going to use that if you don't have a contract at all.

So the only time you really need to have a time and materials contract is if you're charging at a different rate. So if your standard rate that you're billing at is a hundred an hour, and then you want to charge one customer 80 and the other one 120, for example, an hour, that's where a time and materials contract would come into play. So you mentioned about some of the other ones. So recurring services, I think that's the one that probably 95% of MSPs are going to use, and that is your monthly contract. You know, things like your Office 365 and your antivirus and all of these kinds of things that you're going to be billing on a monthly basis, or actually I shouldn't really say monthly basis, it's kind of more on a term basis.

So whether that be monthly, quarterly, annually, whatever the case might be, you're going to be billing those at regular billing intervals on that kind of contract. So I think it's probably pretty important to point out that as you're creating those recurring service contracts, on the very first page, it's going to ask you the term of the contract. Are you billing this monthly? Are you billing it quarterly, semi-annually, once a year, whatever? And so you can mix and match the term of the contract, how often you're going to be billing for it, and the services, but you may get some undesired results when you do that.

So you kind of want to be pretty careful. And generally, I recommend setting up services, if you bill some customers monthly for a particular service, and bill some customers yearly for that same service, I would create two separate services and mark them clearly, monthly, annual, quarterly, or whatever, so that you know that you're picking up the right one for the right contract. Absolutely. And I think also there's a lot of confusion around that dropdown, monthly, yearly, quarterly, whatever. And I think a lot of people think that if they're offering a contract on a one-year basis, then they need to pick the yearly in that dropdown, and that is not the case.

That is basically the term at which you are billing that contract on. So if you're billing your customer monthly for a contract, then you need to pick monthly in that dropdown box on the period. That is basically your billing period, not the period of the contract. And I think a lot of people get confused on that. That's what you got your start and end date for, or your end after X amount of occurrences.

That's what that's gonna be for, to say, make this a year's contract, or two years, or three years, and then bill during that period of time, bill monthly, or quarterly, or whatever the case may be. So staying with the recurrent service contract for a minute, we talked, I think it was quite a few episodes ago, back when we were doing the backend piece on the products and services and setting those up, right? So the services inside Autotask are specifically designed for the recurring service contracts. And so when you get to that screen, where it's time to choose the different services for the contract, you're given two options. You've got the services, you know, add new service, or add new service bundle.

And so what are your thoughts on the bundle versus the service? That's a great question. Again, my favorite. Of course. Of course it is.

I mean, you know, what else would it be, right? So the service, most people are gonna use services individually. The service bundles allow you to kind of say, you know, I've got a package where maybe you might say, you know, for a set fee, you're gonna get, you know, antivirus, you're gonna get, you know, Office 365, you're gonna get all of these things, and we're gonna charge you $20, $30, 30 euros, whatever it is for all of those services within that bundle. So we're gonna kind of charge you, I guess, a set fee for all of those things because you can override each of the services in there, and then you would just sell bundles of whatever it is that you've got. So I'm gonna jump in here because this is where a lot of people get confused.

So those bundles have to increment uniformly, right? So you can't say, I'm gonna put together a bundle, and I'm gonna sell this bundle, and it's gonna include, you know, monitoring for one server and five desktops, right? So because they are not going to increment, you know, what if that customer of yours brings on a sixth desktop? Then what are you going to do, you know? So what Chris is talking about here is if you have a bundle, like every desktop that we manage is going to have, you know, a particular set of tools, and it's gonna have antivirus, it's gonna have, you know, antimalware, it's gonna have Office 365, E1, you know, or whatever.

But it has to be, you know, the exact same bundle for each machine because if a machine goes up or if they bring on a new machine, you're going to put on all of those same services, you know, and they cannot change because you're not going to be able to increment this antivirus one, but, you know, give this other machine E3 of Office 365, you know, that sort of thing. Yeah, exactly. You would have to, you can't increment each of the services within that bundle individually. So you'd have to sell, you know, like you say, if you've got three workstations or four workstations, you would sell four bundles, essentially, rather than, you know, one bundle with four antivirus and three Office 365s and all these kinds of things. And I think a lot of people get confused with that, but what you can do is you can actually have bundles and individual services in the same contract anyway.

So in that scenario that you were talking about, if you've got, you know, a bundle and on this PC, I'm gonna put on, you know, all of these things, but then a customer comes along and says, well, actually, all I want is an additional Office 365 license. I don't wanna buy a whole bundle because I don't want all the antivirus and all that other stuff. You can just put that on as an individual line item within the contract and just bill for that accordingly. And then you can increment the units on that particular item individually. Generally, I find it easier to work with the individual line items, the service items and the bundles themselves, you know, because three years from now, you may forget what's in that bundle.

And it also becomes a little more difficult when you're using automated services for, like if you're integrated with PAX 8, bringing in, you know, all of the counts for your Office 365 and all of those other services that you're offering, you know, if you want to increment the contract for the actual count, you know, that becomes a little confusing too. I mean, I very seldom in, you know, when I ran my MSP business and when I consult with MSPs now, I very seldom recommend anyone to go down the bundle route. 99% of the time I say, use individual services like you do. And it's just so much easier to manage. And like you say, with products like PAX 8 and other products available, gives you the ability to, you know, easily integrate with each one of those services individually but they don't update anything on the bundle.

Yeah, they're just a mess to work with. I don't really like bundles very much. I normally try and steer away from them as best I can because, you know, a lot of the time you can group stuff up on an invoice anyway. So what you can then say is, you know, you can suppress all of those line items anyway when you, you know, when you design the invoice template and you can say group stuff up. So you don't actually need to use a bundle.

And if you don't want your customers to see each of those line items, you can just group them up and have one headline price on the invoice. Great, just an odd thought about that. If you are using QuickBooks and you do that roll up on the invoice, you know, where you get that top line and then it's kind of grayed out showing all of the, you know, line items underneath of it, that roll up, that group, only the top line comes over into QuickBooks on the invoice. So if you're hoping to show it to your customer, you know, Autotask has this really awesome invoice template, right, so, and it looks really good. You may consider invoicing or sending the invoice out of Autotask to the customer or using a third party tool like Connect Booster that will actually capture the Autotask invoice and send that out to your customer.

But if you're using QuickBooks, you're just going to get that one line item. And I've had a number of unhappy MSPs about the appearance of the invoice. And I just wanted to say publicly on our podcast, Connect Booster is not represented outside of the US. So if anybody here is listening outside of the US and has any contacts with Connect Booster, please go beat their door down and get them to start selling the products outside of the United States. I have so many people that want to use that product and literally every time I contact them, it's not available in the UK.

But I mean, we were talking about, you know, contracts and the different types of contracts. So one of the other ones I wanted to bring up that you mentioned earlier on is the fixed price contract. And I think, again, a lot of people get confused because some people call their managed services, you know, fixed monthly costs or fixed price contracts every month. A fixed price contract, especially in order tasks speak, is not, you know, not a recurring contract of any kind. It's basically your fixed price contract that you would use for projects.

So for example, you know, if you sell it at $5,000 pounds, euros, it's basically going to then say, you know, that's what I'm going to bill my customer, irrespective of whether I do the work in one minute, one day, one year, it's $5,000. That's what I'm going to be billing the customer for. So it's one set fixed price for all the work that you do, no matter how long it takes. Right, and so I generally use that. If something, and we haven't gotten into the projects portion of it yet, but yes, you know, like you said, I would use the fixed price contract for a particular project, more so the short term, because if it's going to be a long, drawn out project, you probably are going to want to manage it using the projects.

But even still, if it's a fixed price, even that project is going to have a fixed price contract associated with it. We'll get to that, you know, in a future episode. But yeah, so just, you know, I'm going to do X amount of work and you're going to pay me Y amount of dollars, and then we're going to get this done. Yeah, and I mean, a fixed price contract doesn't have to necessarily just be the whole 5,000 upfront in one go. What you could do is bill that in milestones.

So, you know, and that lines itself really nice to projects, because you could say, you know, at the end of the first phase of this project, I'm going to bill you the first 1,000, and then I'm going to bill you 2,000 halfway through and the rest right at the end. So you can kind of do these milestone billings to make up that $5,000, or you could just have one big milestone and just charge the whole lot in one go, which a lot of people do when they come to sell projects. And the other thing is, typically, a fixed price contract, and I say typically, because most of the time it's used for projects, but you can actually use it for tickets as well. So there's also a lot of confusion as people think that, you know, you can't use that kind of contract on a ticket. And there's no reason why you couldn't do that.

So all the contract types that we're talking about work whether you're using a ticket or a project or it doesn't really matter what you're doing, you can use any contract type on any of those scenarios. Right, right. Yeah, and then, of course, there's that one last type of contract, the per-ticket contract. I probably, you could count on one hand the number of times I've actually used a per-ticket contract. But there's a couple of scenarios where I've recommended that others use it on a regular basis.

Have you spent any time with the per-ticket contract? So you said you could count that on one hand, I could probably count on one finger how many times I've actually used a per-ticket contract. Yeah, it really isn't very common, certainly not over here in the UK, and with the few US clients I have, certainly isn't something that ever comes up in the way in which people bill. So, yeah, so I don't use it a lot, but I can see the need for it, I can see how people might want to do that, you know, to kind of charge a particular fee per ticket, or an incident, as they actually used to call it, an incident contract. Right, so in some of the areas where I've actually recommended it was repair shops.

If you get a walk-in repair shop, and you charge $99 to diagnose a computer or something like that. Now, AutoTask has made it a little easier to use things other than the per-ticket contract for this, but this is actually what it was designed to do. Right, because if you try to set it up through the work type or the material code, and probably that's where I would likely do it, is create a non-billable work type, and then charge the $99 as a material code, you know, and kind of call it a day, but without going through setting up the per-ticket contract, but you could. You know, you could set up the per-ticket contract, and then track this, you know, computer all the way through the repair process. You know, for $99, I'm hoping that it's not a very long process, but, you know, but yeah, that's where I have used it, is for those, we just charged this one flat rate for, you know, $250 for a new setup or whatever.

Yeah, the other thing to bear in mind with a per-ticket contract is, unlike some of the other contracts that you can just, you know, once you've created the contract, you can bill for it, with a per-ticket contract, the ticket has to be completed before you can actually bill for the per-ticket contract. So, you know, if your work was in progress, you're not going to be able to run the approving post and actually go and bill for that, it's just not even going to show up until such time as you've actually marked the ticket as complete. So you actually have to complete the work, whereas if you were doing block hours, for example, you know, the second you stamp the time entry, whether it be in progress or any other thing, it says, you know, if you've got it to automatically approve and post the labour or immediately without review, as Autotask calls it, as soon as that happens, it deducts the block from the contract, and then you can see immediately that that block's been deducted. But on a per-ticket contract, the ticket has to be marked as complete. And I've run into this a few times, well, the one time when, on my one finger, then I've counted it when I've, is it was like, why is it not going to billing?

I've got the ticket, I've done the work, and it was like, okay, because the ticket is still in progress, and the second you mark the ticket as complete, it goes into billing. And so that's what it's designed to do, is to say you only pay for the ticket when the ticket itself is complete and the work is complete, that's when you're paying for that. So that's something to bear in mind if you were setting up that kind of thing. But to be honest with you, I think anyone who's listening to this now, and I think any person I've spoken to in the last, you know, 10, 12 years of using Autotask, I literally have probably seen one person use it, and other than that, I just don't think it's something that people use a lot. So, well, I think that was probably a pretty good basis of, you know, contracts in Autotask.

In our next episode, I'd really like to maybe dive a little deeper into the contracts, you know, like billing products, configuration items, and attaching services to the configuration item, you know, so there's a lot of things that can be done where installed asset or whatever it is that you call configuration items, because I think there's a lot more that can be done. And also the RMM integration will help a lot with that too, you know, in opening the tickets for those machines. So that's kind of where I was hoping that the next episode would go. Absolutely, and I think that's where we should go because all of these billing items are a brand, well, a fairly brand new feature in Autotask, probably in the last sort of six, eight months. And it's a great way if you're going to be doing per device billing or per user billing, you know, it's a great way to come in and just go and count how many users you've got or count how many configuration items you've got and automatically add them to the contract.

So that differs a lot from services, which nowadays with some of the things like Pax 8 and all these other companies that integrate in, they'll increment the services or, you know, remove stuff from the services as you're buying and removing stuff out of the portal. So that'll take care of the services really nicely. But, you know, things like your users, if you wanted to do per user billing, you can integrate with something like, you know, Active Directory or Azure, and you can go through and then count those users and automatically add them. Well, don't give it all away. We want them to come back next week, don't we?

I know, I know, but there's lots to talk about on it. So we'll get there. But yeah, I mean, this has been a really good topic and hopefully people have got some use and value out of this as they're setting up their contracts. So yeah, I mean, all that's left really for me to say, Rae-Ann, is your PSA is the key to your business success. Go out and make an impact on your world today.

Thanks, Chris. Thanks, Rae-Ann. Thank you for joining us today on PSA Impact. We hope you've learned something and that you'll join us next time when we answer new questions posed by our listeners.