[6] Work Types, Roles, T&M Contracts

Welcome to PSA Impact, your podcast for all things PSA, RMM, and MSP, with your hosts, Rae Ann 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. Hi, and welcome to another episode of PSA Impact Podcast with your hosts, Rae Ann Buccianico, me and my co-host, Chris Tim. We are a PSA independent series with corresponding YouTube channel and MSPs worldwide on all things PSA.

You can get your questions answered by Chris and me and learn how to get the most out of your PSA tool and manage your business by maximizing profitability and increase efficiency within your MSP. We have a phone in where folks can call with their questions or problems and we will do our best to answer them. You can also get in touch with us via our Facebook and LinkedIn groups, and we are also on Twitter. With me today, I have my co-host, Chris Tim. Hey, Chris, how are you doing today?

Hi, Rae Ann. I'm good, thank you. Chris, today I thought we might want to talk about time of material contracts and roles in the PSA. Yeah, that's one of my favorite topics, Rae Ann. So quick question for you, Chris, time and material contracts, what are your thoughts on those?

Oh, that's a great question, Rae Ann. So actually, and it's really timely because I was with a client this week who asked me the exact same question about time and materials contracts. So my take on them is, you know, within Autotask, you obviously have the ability to have a time and materials contract. Now you don't necessarily need to use these time and materials contracts if you're just billing, you know, ad hoc by the hour. Autotask has the ability to have something called a role, which has a rate assigned to it.

And if that's all you've got, then you can just use the role rate to bill out of, and you don't necessarily need to have the time and materials contract for that. Where I would put a time and materials contract would be, you know, for example, if you were doing something outside of those rates. So maybe you were doing, you know, one particular client that has $80 an hour and another client that might have $180 an hour, but your rate is, or your standard rate is, is $130 an hour. So those that are on your standard rate, you would charge out at $130 using the role rate and those that are on $80 or $160 or whatever, you know, you were charging them by the hour for that, that's where you would use a time and materials contract. So I mean, that's my take on it.

It'd be good to, uh, good to get your understanding and what your take on those are, Rayanne. So very similar, but a little different. I think I generally encourage people to set up those time and materials contracts, one, because they have the different role rates, as you mentioned, if your standard role rate is $150 an hour, and you want to give your nonprofit customers a break, maybe charge them $95 an hour, you need to set that up inside the time and materials contract. Although I think there's still a really good argument for setting up those time and materials contracts, even if you're using the standard role rates. And the reason for that might be because at the end of the year, yes, you can run the tickets without them having been on a contract, but when you're running your profitability reports at the end of the year, and you want to run them at the contract level, you can just pick up the time and materials contract, run the report, and see where you're making money on this particular customer or how much time they're spending in a specific period of time.

I think it might be easier to run those profitability reports using the time and materials contract rather than using the standard hourly rate on tickets that are not associated with any contract. Brilliant take on that, Rayane. And I agree, if you're going to run it from a profitability point of view, and you want to run that from a contract perspective, then absolutely, you could use a time and materials contract for that. However, you can still look at the profitability overall of that customer based on what you've billed against contracts and what you've billed against other or not against the contract. You can still see the overall profitability of the customer, whether you're using contracts or not.

Because using the roll rate, what it's essentially going to do is to take the engineer's cost price or the burden rate of that engineer, and whatever your roll rate is, and it's going to give you the profitability from there. So whilst you may not see that profitability from a contract perspective, you'd certainly be able to see that from an overall profitability of the customer as a whole. And one of the reasons I always advocate not using them if you've got a standard roll, it just means you've got to go ahead and set them up for every customer. Whereas if you just had a roll rate on the system and everyone was on the same roll rate, then why set up a contract for every single customer, right? Just run it through your standard roll rate and just bill accordingly from there.

And while I understand everything that you just said, I also find that if you have the contract set up for, let's say, a 12-month period, it forces you to look at that customer rather than just continue to open up tickets and run the tickets without a contract. When that time and materials contract comes to a close, it will force you to look at it and make sure that that customer is still being billed at an appropriate rate. Those are my thoughts on contracts. But you did mention something about roll rates. So I would like to have a quick conversation about the rolls, unless you still had more to talk about at the time and materials contract level.

No, I think rolls would be a fantastic thing to talk about, because I think it's something certainly on the autotask side that seems to cause a huge amount of confusion with people about what they are and how they're used. I could not agree more. Rolls seem to be this huge area of confusion for a lot of companies. And you might see multiple rolls, all with the same rates. And my standard statement to all of my clients is this.

Rolls have one job in the entire universe, and that is to determine the rate that the customer will be billed for that work. There's no reason, really, to have multiple rolls that are all at the same price. I have one client that actually splits out their payroll based on the roll. So if the customer has a roll for remote work, we want that revenue to land in a specific spot. If the customer has or if the resource is using on-site work, we want that to go into a different spot.

If they're working on projects, the revenue goes into another spot. And I'm talking about mapping with the accounting system to measure profitability or to measure your revenue of certain different levels of service. So we use the roll rates to break out the payroll on a regular basis to post to different areas. So that seems to make sense to me, even though they may not have different rates. What are your thoughts on that?

That's a great way of looking at it, Ray. And I fully agree. I think one of the things where people get confused about it is the fact that they call rolls. They really should be called rates. And that's why I always use the word roll rate, which I notice you use quite effectively and extensively as well.

So really, to me, that is a rate. That is what you are billing out your engineers at. So I see so many times people have one roll set up for engineer and they're charging $180 for that. And then they'll have another one that says developer and they're charging $180 for that. And then they have another one that says senior engineer and they're charging $180 for that.

And they've got three different rolls charging out at the exact same rate. The only time you need to use multiple rolls is if you've got multiple rates. So if you have that senior engineer being billed out at $180 an hour and you have the kind of less senior engineer, I don't want to use the word junior, but the less senior engineer, he might be billed out at $120 an hour. That's when you'd have different rolls. But other than that, you really don't need to have multiple rolls all with the same rates on it.

So the thing to remember on this, and I think the takeaway for the listeners here is to think about rolls as rates. They're not actual rolls that your engineers would, well, I guess they are rolls as in, you know, you might have somebody that's a senior engineer, but it's, it's what you're billing that roll out at. That's essentially what a roll is in Autotask. So you do not need to have multiple rolls on the same bill out rate. You know, that's really interesting because a lot of times, more times than not, actually people confuse the term roll with the work type.

So like I was mentioning, this client of mine that splits up their payroll based on the roll rate, no matter how many times I tried to convince him that what he was really talking about were work types. And the roll is really, like I said, one job to determine the rate that the customer is going to be invoiced, whereas the work type defines the type of work that's being done. And I thought that might have been more appropriate in splitting up the payroll. Either way, this particular client of mine really insisted on having all of those rolls split out and it works for them. So we allow him to continue on, you know, with whatever works in his company.

And another takeaway I think for our listeners might be, don't pigeonhole yourself into one specific set of rules, figure out what is working for your company and make sure that you apply it appropriately across the board. Absolutely, Rae-Ann. And, you know, I think something that a lot of people get confused is exactly as you say, they always get confused about, you know, work type versus roll. And exactly as you say, a work type, it should really be the other way around. It should say type of work or type work, because that's really what it is.

It is the type of work that you're doing. So it's on site or it's remote or it's after hours. And what the work type allows you to do is then to take that roll that we mentioned earlier on, that roll rate, and do something like add a multiplier to that. So you might, for example, say, you know what, if I'm going to go out and do after hour support, I might want to build that at one and a half times what I would normally build my roll out at. So where that would come into play, for example, if you had, you know, a senior engineer being billed out at $100 an hour and you had the work type saying that, you know, for emergency after hour support, it's one and a half times, then he would get billed out at $150.

If your junior engineer was being billed out at $50 an hour and he went out on site and you had the work type having a multiplier of, you know, one and a half times at the same, then it would bill him out at $150. So, you know, it would really depend upon, you know, how you want to multiply what you're doing with those roll rates. And that's when you would start to use the work types. So, Rayane, it's good to see that we agree on work types and roles, and it's really nice to hear a different opinion on time and materials contracts. So this is a call out to all of our listeners to tell us what you think and how you use them in your business.

So, you know, reach out to us on one of the socials. You can get us on Twitter, Facebook, LinkedIn, or, of course, you can reach us on our website at psaimpact.net. So remember, everybody, that the PSA is the key to your MSP success. Go out and make an impact on your world today. Thanks, everyone.

Have a great week. Have a good week, everyone. 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.