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Overhead Allocation Worksheet / Client P&L Analysis

Do any of you use the Overhead Allocation Worksheet and Client P&L Analysis report to determine client profitability on a monthly basis? If you do, do you compute Direct Service Costs to be employee salaries only, or do you include FICA and Medicare tax and benefits costs too? Finally, have you had any difficulty determining the makeup of the Direct Client Expenses figure?

Mike Bratton
Financial Manager
Brokaw

I don't use this report. I allocate an overhead amount to each billable hour, not % of sales. However, for direct labor, I include salaries and all applicable payroll taxes (FICA, MDCR, FUTA, SUI). Benefits are considered part of our fixed operating budget, but I know of agencies that also include benefits in their direct labor figure.

Barry Owens
Controller
MAI Sports, Inc.

I have been using the same method over 20 years and it seems to work. for cost accounting we use employee salary divided by 1640 hours of productive work hours in a year after company holidays vacation and sick time as well as adm time, take that number and use a multiple of 2.8 times for billing rate. The formula for calculation of overhead than is used as such: Total operating Cost of Company-(direct payroll cost+direct service cost)divided by total direct payroll cost. This give your the overhead number which then is placed onto each client based on direct payroll cost.

Steven D. Orenstein
Chief Financial Officer
Kern Direct, Inc

I use both reports monthly and compute the Overhead Allocation Worksheet using Direct Service Costs. I markup actual salaries by 13% to include FICA, Medicare, and benefits. C&P has a FAQ's fact sheet about the overhead allocation worksheet and how the 4 allocation methods compute. I have been able to track (according to their notes) the computation for Direct Service Costs. This is the website that explains these methods (you have to be a support subscriber to have access to this section of the C&P site):

http://www.cnp-x.com/support/FAQs

I usually print the Client P&L Analysis report before I run to allocation calculation to clean up anything funny. Also when I do my monthly unbilled WIP GL entry and I make sure I attach the client code to each amount so that the Client P&L Analysis tracks properly. Also note that if a staffer appears on your overhead report but you don't have any salary to enter, you need to enter .01 or the analysis will not compute properly. Since C&P's Client P&L Analysis Report does not track YTD figures, I export the report to excel and create my own YTD report.

Dawn Jaworski
Accounting Manager
Gabriel deGrood Bendt Advertising Agency