Guide
4 min read
By MSP Margin Editorial
Owners of small MSPs rarely lack reports. They lack one page they trust, in the same format every month, that answers whether the business is getting healthier. Full financial statements are necessary, but they are not built for a ten-minute read. A KPI pack is.
The goal is a single page, produced after the monthly close, with a handful of numbers and their trend. Keep it short enough that the owner actually reads it and stable enough that month-to-month changes mean something.
The numbers that belong on the page
Five areas cover most of what an MSP owner needs to watch. Each should show the current month, the prior month and the same month last year or a rolling average, so movement is visible.
| Metric | What it shows | Where it comes from |
|---|---|---|
| Monthly recurring revenue | Contracted recurring base | Agreements, reconciled to the books |
| Gross margin by service line | Which lines earn their keep | Income statement by line |
| Effective hourly rate | What labor actually earns | Service revenue and logged hours |
| AR aging | Who owes what, and how late | Receivables aging report |
| Cash and months of coverage | How much runway you have | Bank balances and operating costs |
Recurring revenue. Show the total and the movement: new, expansion, contraction and churn. The movement explains the total. Use the same definition every month; changing what counts mid-year makes the trend useless.
Gross margin by line. Managed services, projects, product resale and any other lines you track. A blended margin hides the line that is dragging the rest down. This number is only as good as your account mapping and labor allocation, so it improves as those improve.
Effective hourly rate. Total service revenue divided by hours worked on client service. It turns agreement pricing and technician time into one number you can compare across months.
AR aging. Show totals by bucket (current, 31 to 60, 61 to 90, over 90 days) and list the largest overdue balances by client. Owners usually act on the list more than the totals.
Cash. Ending cash, and cash divided by average monthly operating cash outflows. That ratio is a plain way to talk about runway.
An illustrative month
The numbers below are illustrative, for an MSP after a month-end close:
- MRR: $100,000, up from $97,000. New and expansion added $5,000; churn and contraction removed $2,000. $97,000 + $5,000 − $2,000 = $100,000.
- Managed services gross margin: revenue $100,000, direct costs $45,000, so margin is $55,000, or 55%.
- Effective hourly rate: $130,000 of total service revenue over 1,000 client service hours is $130 an hour.
- AR: $120,000 total, of which $18,000 is over 60 days. That is 15% of receivables.
- Cash: $250,000 ending balance, against average monthly operating outflows of $150,000, is about 1.7 months of coverage.
Each of those lines should come with a sentence of context if it moved meaningfully. "Over-60 AR rose because one client is disputing a project invoice" is more useful than the number alone.
Keeping it consistent month to month
Consistency is what turns a set of numbers into a pack worth reading. A few rules help.
- Fix the definitions in writing. One short document that says how each metric is calculated, which accounts feed it and what is excluded. When something changes, note it on the page that month.
- Produce it only after close. Pulling numbers before reconciliations are done means figures shift after the owner has seen them, which erodes trust fast.
- Use the same template every month. Same order, same layout, same comparisons. The owner should know exactly where to look.
- Tie back to the books. Recurring revenue from agreements and revenue in the general ledger will not match exactly, because of timing, credits and one-time items. Reconcile the difference and keep the reconciliation, even if it is not on the page.
- Restate history when definitions change. If you change how a metric is calculated, recompute the prior months you show so the trend stays comparable.
Resist adding metrics. Every addition makes the page longer and the important numbers harder to see. If a new measure matters, consider replacing one rather than adding one. Detail can live in supporting tabs for anyone who wants to dig in.
Using it
The pack works best as the agenda for a short monthly conversation between the owner and whoever runs finance. Look at what moved, agree on the reason and decide whether anything needs action: a collection call, a repricing conversation, a hiring decision on hold. Over time, the history of those pages becomes a record of how the business actually performed, which is useful far beyond the month it was written.
This is general information on management reporting, not accounting advice. Definitions and data sources will vary with how your books and systems are set up, so adapt the pack with your accountant.