Where MSP project margin leaks, and how to see it in Autotask data
Most MSPs know their project margin only once a project closes. By then the money has gone, and the post-mortem turns into an argument about whose estimate it was.
Margin rarely disappears in one big overrun. It leaks in small, ordinary ways, week after week, and nearly all of them leave a trace in the data your PSA already holds. If you run Datto Autotask, the records you need are there: tasks with estimated hours, time entries with a billable flag, ticket time, contracts, contract milestones and project charges. What is usually missing is someone looking at them together, every week, while there is still time to act.
Here are the six leaks we saw most often running MSPs, the sign of each in the data, and what to do about it.
1. Time that never gets logged
The engineer who finishes a firewall cutover at 9pm and goes to bed does not log the three hours. On a time and materials project that is revenue gone. On a fixed-price project it is worse: the budget looks healthy while the real effort runs over, so the next quote is built on a number that was never true.
The sign: a project task closed as complete with little or no time against it, or a person whose logged hours for the week sit well below their contracted hours with no leave to explain it.
The fix: make the week the unit. Time submitted once a week, as a whole week, is easier to check for gaps than a trickle of entries. A week that totals 22 hours for a full-time engineer is a question to ask on Monday, not a mystery at month end.
2. Time logged in the wrong place
Project work logged against a ticket, ticket work logged against a project, one client’s hours on another client’s ticket. Each one moves cost and revenue to the wrong place. The project looks cheaper than it was, a managed services agreement looks more expensive, and one invoice is wrong in each direction.
The sign: time on a project’s company tickets that mentions project work in its notes, or bursts of ticket time from engineers who were booked full-time on a project that week.
The fix: someone who knows the work reads the week before it is billed. An approval step does this by design: the project manager sees every entry against their project, with its note, before it reaches the invoice.
3. The billable flag is wrong
A billable project with a run of non-billable time on it, or internal meetings marked billable. The first leaks revenue; the second produces the invoice line that a client queries and you write off, along with some goodwill.
The sign: the share of non-billable time on billable projects, by project and by person. A sudden change in either usually has a simple explanation, and sometimes it is a default nobody changed.
The fix: agree the rules once (what is billable on a fixed-price project, what is billable on time and materials, whether travel is), write them in one paragraph, and have approvers check the flag as part of approval.
4. Scope creep without a change request
The client asks for one more site, one more mailbox migration, one more VLAN. Each is small, the engineer is helpful, and nobody raises a change request because it does not feel worth the paperwork. Twenty small yeses later the project is 30% over.
The sign: remaining estimate going up instead of down. Compare each phase’s estimated hours with the hours logged plus what is left. If the forecast at completion climbs while the scope document stays the same, scope is moving.
The fix: look at forecast against budget every week, by phase, and agree a threshold that triggers a conversation. When the forecast passes 90% of budget with work still open, the project manager raises it with the client while they still remember asking for the extra work.
5. Milestones billed late
Fixed-price work is usually billed in stages: a deposit, a payment when a stage completes, a final payment at acceptance. The stage completes, the team moves on, and the milestone sits until someone in accounts asks. A month’s delay on every milestone is a month of cash you funded yourself.
The sign: contract milestones whose stage is clearly complete, with the related tasks done, that are still not ready to bill. Or milestones billed in a cluster at quarter end.
The fix: tie every milestone to an observable event, either a date or a specific task being done, at the moment the statement of work is signed. Then billing a milestone is a fact to check, not a judgement someone has to remember to make. We cover this in more detail in running fixed-price projects in Autotask without billing late.
6. Costs that never become charges
A replacement switch bought for the project, a licence the client needs for go-live, the flight to the regional office. Somebody paid for it, and unless it becomes a project charge it never reaches the invoice.
The sign: purchases or expense claims referencing a project, with no matching project charge on it.
The fix: route project costs through the project manager for approval, and make approval the moment the charge is created, billable or not.
A 20-minute weekly review
None of this needs a new report suite. It needs the same short look at the same numbers every week. For each open project:
| Check | What you are looking for |
|---|---|
| Hours logged against budget, by phase | Burn running ahead of progress |
| Forecast at completion against budget | Scope moving, or estimates that were never estimates |
| Non-billable time on billable work | Wrong flags, or work that should be a change request |
| Tasks complete with no time | Unlogged effort |
| Milestones whose trigger has passed | Billing waiting on someone to remember |
| Approved costs without a charge | Spend that will never be invoiced |
Twenty minutes with the project managers on a Monday morning, working from the data rather than from memory, catches most of the leak while it is still a conversation rather than a write-off.
Where ProjectSmith fits
We built ProjectSmith to make this review cheap. It reads your Autotask projects and time, puts timesheet approval in front of Autotask so project time on the wrong task and wrong billable flags are caught in the week they happen, shows budget, burn and forecast by phase, and marks fixed-price milestones ready to bill on the Autotask contract when their trigger fires. See how timesheet approval and fixed-price billing work.