Margin ArchitectureSynthetic worked example — not client data
Worked Example · Managed ServicesThe report said 39% margins. The ledger said 1.9% EBITDA.
A $14.2M managed-services provider is heading into renewal season with a plan to hire four more engineers. The platform’s client margin report shows a 39% blended gross margin with every major client comfortably profitable. The general ledger shows 1.9% EBITDA. Nobody can explain the gap, and finance and operations have each stopped believing the other’s number.
Both teams could reproduce their number. Only the rebuilt model reconciled the complete signal.
Educational example with an invented company and figures. The visuals demonstrate reporting logic; they do not represent clients, results or realized savings.
Reconciling a $697k revenue discrepancy and a $1.834M gross-margin overstatement.
This is the artifact the engagement turns on. Every step is a defect found in the evidence, not an adjustment of opinion. The two systems disagreed on revenue by $697k; correcting that alongside four further defects walks reported gross margin of $5,807k down to a true $3,973k — a $1.834M overstatement in total, and a blended margin of 28.0% rather than 39%.
None of this was fraud. A re-exported March batch was counted twice. Five credit memos sat outside the report’s filter. Labour was costed at a $50 standard rate against billable hours only, while the real loaded cost — US payroll plus Colombian payroll converted at actual monthly rates with social charges — had to be carried across every hour worked. Dedicated client infrastructure was never added to the passthrough configuration. And a subcontractor cost had been counted twice in the other direction, which is the one step that moves in the company’s favour.
Six raw evidence exports.
Cases built on clean data start where real engagements finish. This one starts where they actually begin — with exports nobody has reconciled, in two languages and two currencies.
| Evidence export | Rows | What was wrong with it |
|---|---|---|
| Platform invoices | 1,091 | A re-exported March batch double-counted at $412k; five credit memos totalling $285k excluded from the margin report; four or more name variants per major client; mixed date formats; roughly 14% of amounts stored as text. |
| Timesheets | 1,822 | Client field mixing names, variants and internal codes; 26 correction pairs; 130 bench rows with no client; negative-hour corrections. |
| General ledger (US) | 244 | Split debit and credit columns, comma-formatted text amounts, and a class field empty on every single row — the ledger had no client dimension at all, which is why the platform report existed in the first place. |
| Payroll (Colombia) | 264 | Spanish headers, pesos with dot separators, mixed period formats, and social charges at 45.9% that no one had loaded into the delivery rate. |
| Cloud vendor billing | 396 | Thirty-eight subscription-tag variants, and $465k of dedicated client infrastructure absent from the passthrough configuration. |
| Customer master | 18 | Two active clients missing, one duplicate identifier, one churned client still listed. |
Control totals, not opinions. Platform revenue of $14,897k against ledger revenue of $14,200k is a $697k gap that resolves exactly: $412k of duplicates plus $285k of credit memos. Delivery labour resolves the same way — $3,630k of US payroll plus $1,257k of Colombian payroll is $4,887k of real loaded cost, against $4,120k the report assumed. Every step ties or it does not ship.
What the corrections did to each client.
With revenue de-duplicated, labour costed at its real loaded rate across every hour worked, and dedicated infrastructure attributed, two of the three largest clients turn out to be losing money.
Two reporting levels, stated exactly. Subcontractor cost sits above the client line in the ledger and is attributed to no individual client. The client bars therefore weight to a different figure than the company blended rate, and the difference is precisely the subcontractor pool:
Client-weighted reported margin is 43.8%. Deducting the reported subcontractor pool of $705k gives the company blended reported margin of 39.0%. After correction, client-weighted margin is 32.3%; deducting the true subcontractor pool of $610k gives the company blended corrected margin of 28.0%. The $95k difference between the two pools is the duplicated subcontractor cost reversed in the bridge above.
The interactive figure shown is the company blended rate. Even after the rebuild one cost pool remains unattributed — the difference is that it is now measured rather than invisible.
Two of the top three are underwater.
Ordered by how far the platform report sat from the truth. Atlas and Pinewood consumed 2,050 hours beyond their contract allowances between them, flagged non-billable, so the margin report never saw the work at all.
Meridian is genuinely strong at 38.4% — and is 28% of revenue. Its risk is concentration, not margin. That distinction was unavailable while every client appeared profitable.
Maintain the logic with the report.
Relevant definitions and checks become part of the agreed model and monthly cycle. This example shows the financial depth available within the reporting service.
Allocations, margin definitions and assumptions must be adapted and validated for each business. A reporting correction is not, by itself, a saving or a pricing recommendation.
Tell us what you need to report each month.
We start with your current reports, available sources, and the calendar your team needs. Setup and the monthly service are scoped in writing.