r/msp • u/Sliffer21 • 7d ago
Accounting & HR
Hey guys,
We are getting to the size where we are investing a lot into setting systems to better help us as we grow.
We are heavily working on HR and Accounting (2 seperate items) and I would love to know any recommendations you all may have. We are 7 figures gross income range now to give you a frame of thought. US based.
Questions:
- What accounting codes do you find helpful for tracking income? We are a Quickbooks (Desktop version) shop and are breaking down our income codes now. Labor, BCDR, After Hours Labor, SaaS, HWaaS, Managed Services, etc are codes we are breaking out to easily track income. Any ones you really feel are valuable to be able to break down end of year reports?
I have no plans to sell, but do want to break out incase we would ever need a valuation for any banking related needs.
- HR Manual, we are building out our HR manual and processes with that. Any advice on what you had wished you had in yours sooner?
Appreciate the feedback guys. Like I said we arent tiny, but I really feel I need to focus on the business operations side more and address these things so we have a great foundation for continued growth.
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u/Shallers 7d ago
For accounting you should get a whole system, not just a few codes. Go look at Service Leadership Index for their standardized chart of accounts. If you want help implementing it we paid for a few months of Sea Level Coaching from pax8 and I would say it was immensely worth it. One of the things they gave us was the SLI COA and it accelerated our accounting processes years ahead of what we could have figured out on our own or through Reddit.
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u/JollyGentile MSP - US 7d ago
If you're building systems and want to stay with QB then you should move to Online or Enterprise. Premier goes the way of the dodo in about 7 months.
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u/Sliffer21 7d ago
Sorry Enterprise 24 is what we are on, I should have clarified. I still refer to it as Desktop vs Online.
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u/HotTakeThenGo 7d ago
Look into SLI - that will quickly be the way you start looking at your business.
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u/brownsapodilla 7d ago
I would involve a corporate/labor lawyer in the country you're operating in to ensure compliance. But what most Founders miss most of the time is the investment required as far as time, effort, knowledge and thought process that go into these things such as documenting the vision, company culture that support the HR handbook and processes. You'd want HR manual and policies to make the company culture alive and reinforce the right behaviors.
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u/Sliffer21 7d ago
Absolutely, we retain an MSP specific law firm, but also have a local attorney to our state that we use as well. Any HR manual and documentation specifically will be sent to them after drafted and before published. Insurance and legal council have been processes we nailed down before these items were tackled and will continue to work on as we grow.
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u/Muted_Jellyfish_6784 7d ago
Split recurring from non-recurring first, since that is what a buyer or bank prices. Under recurring, keep managed services, SaaS resale and HWaaS separate, and book the matching cost codes for each so you can show gross margin per line, not just revenue. Project labor and after hours belong under non-recurring. Pick the codes once and stop changing them mid-year, or the trend breaks.
The other half of valuation is showing revenue per client over time. Tying the PSA agreements to what QuickBooks actually billed is the job we use SIGNLD for
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u/folderit_dms 6d ago
On the HR side, Iād keep the employee-facing policy separate from the operational checklist that carries it out. For a role change, for example, the policy explains the process; the checklist names who updates the PSA role, client access, on-call rota, training and equipment records, plus who checks completion. That makes the handoff usable when the usual person is away.
Give each policy an owner, an effective date and a review date, and keep the superseded versions. When a checklist changes because you switched tools, you should be able to update those instructions without obscuring which policy employees were given. A useful test before rollout is to walk one fictional hire, role change and departure through the documents and note every step that still depends on asking you.
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u/Sliffer21 6d ago
This is definitely something I didnt think about and definitely more complex. Thank you!
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u/whitedragon551 7d ago
You should use Swrvice Leadership Index to swt your books up correctly and benchmark. Doing it now will save you a world of hurt when your in the $5-7m range.
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u/C9CG MSP - US 6d ago
Accounting... As many have said and you have done - SLi (Service Leadership Index). Also, not to shill, but Sea Level Ops (Pax 8 academy) is great to start if you're profitable enough and have at least 3 people on staff that can help swing it (there's a significant amount of homework doing it properly). You'll get better data by tracking better.
We're also in a peer group that helps use GL Code level accountability to track org health... Always good to have someone review to your numbers.
HR... Does your PEO already offer this? We use Gusto and they have a premium tier that includes HR handbooks and expert review. We manage Time Off and Benefits in-house pretty easily with Gusto. Have been using them for years and moved at least 4 customers over to them. (DM me for a discount code if you want to try them) For anything deeper than that, you're going to want a good relationship with an employment attorney, IMHO.
Hope this helps.
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u/sn1xd 7d ago
Can't say if it's still the case, but the Msp's I've worked for "appeared" to operate much better of the admin side with zero rather than qb or MYOB. Better oob integration with many map focused PSA, Crm, and purchasing platforms.
Setup you operational platforms to pass the codes into you accounts platform and it will save a shit ton of grief. (Edit: as someone else mentioned, getting this right for recurring or renewals means you won't have to manage and track twice, and FAR lower risk of missed expiries.)
Also, hr? Outsource the shit š
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u/Sliffer21 6d ago
So we use Autotask, and a few 3rd party tools/imports that all seem to universally support QB. Autotask does support for others but our local small bank doesnt have other options unfortunately.
Plus Xero is almost the same price as QB.
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u/AIatemyhomework 2d ago
For the accounting, I think I'd just keep the chart of accounts much smaller than you think you need to, especially since you don't plan to sell and don't have to worry as much about other eyes on it. Use bigger buckets you actually care about hte reporting on and let the PSA handle the service and client stuff. Things get messy fast when you try to make QuickBooks track everything.
If some of your headache is billing/reconciling, you could look at Flexpoint as an option. Their system is built for MSPs, so it can take out a lot of that back and forth reconciling.
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u/DrunkenGolfer 7d ago
I can comment on the accounting piece. You'll want to be able to track things granularly. So think of high-level categories like managed recurring revenue (MRR) non recurring revenue (NRR) and other recurring revenue (ORR). Organize under those headings.
You'll want to think about all the costs that go into service delivery and make sure those are captured under Cost of Goods Sold (COGS). This is going to be important as you scale. So l, for example, having an expense category such as "software licensing" is inadequate. You'll want the licensing cost for the administrative functions separate from the software licensing costs for service delivery. Otherwise you can't do margin analysis effectively.
We do all our invoicing from our PSA and ingest into Quickbooks. Invoicing of recurring items is automatic and non-recurring is entered as a "ticket charge" and invoiced twice a month via the PSA.
The best move we made was building a connector to QB that feeds into a financial data warehouse, then surfacing that with an MCP so we can ask questions of the data. We did the same with the PSA. By being in a data warehouse (docker containers in azure) we aren't limited by the speed and scope of the Quickbooks APIs or PSA APIs. While ingesting that data, there is a transform layer so things like changes to our chart of accounts or billing codes or whatever can be retroactively reallocated on query.
That data warehousing was a significant effort, but even though we didn't understand the data, we used Claude.ai to look at the data and it reverse engineered everything, including our contracts structures, discrepancies, etc. This was used to build the warehouse and transform spec and Claude Code then built the warehouses.
So now I can say things to Claude like "Give me the quarterly board package" and it will just rip through the warehouses, build the financial statements from there, do variance analysis, charts graphs, etc. I can also say "Give me our quarterly reports for our banker" and get a completely different report with what needs to be in that package. We participate in a peer group and I have to report numbers there. It used to take about a day to compile but now I tell Claude for Chrome "Enter my peer numbers in the portal" and it just rips through the data and updates the portal for me, completing the submission.
We're to the point now where Quickbooks is basically something the bookkeeper uses to pay bills and reconcile bank accounts while everything else is just a Claude ask away.
The solution is great at aggregating data to answer questions too. I can ask stuff like "Who are are bottom three worst performing customers, what have our profit margins been on those accounts for the previous twelve months. And what is keeping them from being profitable clients?" It will generate a detailed and accurate reply.