The new year is a natural time to evaluate your business, take stock of challenges and opportunities, and develop a strategic roadmap for growth. As you review the previous year and make plans for the months ahead, make sure you set yourself up for success. Adding a new service, winning new clients or entering a new vertical may be key components of your strategic plan, but they likely require financial resources to get started. You may need to invest in new tools, hire additional staff with specialized expertise, or attend trainings to further develop your own knowledgebase and skills. It’s more difficult to act on your goals when you don’t have money in the bank. Make 2022 the year you prioritize cash flow so you can achieve your growth goals.
Cash flow is a critical element that determines an MSP’s ability to scale. If you don’t have cash flow, you can’t grow. If your money is trapped in A/R, you can’t invest back in your business.
There are numerous things you can do that will ultimately increase cash flow—for example, pay off debt, negotiate vendor contracts, update longstanding customer contracts, eliminate unnecessary spending. One of the most obvious and overlooked ways to increase cash flow is to insist on getting paid by your customers on time, every time.
ConnectBooster spoke with several MSPs who have taken control of their A/R and cash flow. They all shared common themes: know your company’s value, selectively take on only the clients who will abide by your payment expectations, adopt autopay, incentives and penalties despite your hesitancy and discomfort, and save time and effort while reducing errors with automations.
Fellow MSPs who have achieved low A/R and consistent cash flow share reminders, tips and advice that you can adopt in 2022.
Use Payment Expectations to Determine Best-Fit Customers
Setting up customers with autopay is the best way to ensure predictable and consistent cash will hit your bank account each month. But MSPs commonly believe their customers are opposed to autopay, and to avoid alienation, don’t press the subject. Customers may be hesitant, not necessarily opposed.
Kloud9 IT made the choice to assert autopay as a protocol in their businesses. CEO Trent Milliron shared they set a goal to get 100% of their customers on recurring autopayments via credit card or ACH for the flat fee portion of approved items indicated in their contracts. If a prospective client won’t agree, they don’t take them on. Now, they operate with approximately 99% of their clients on recurring autopay.
“I think most MSPs are not comfortable making autopay mandatory, but I can tell you that they should be comfortable because I have never had anybody really say no in the end,” Trent explained.
Their payment expectations became a sort of litmus test to determine if a customer is a good fit for their company. “I’ve only had a few customers balk at it and when they do, I start questioning whether they can afford us,” Trent shared. “If I’m defining in the contract that the only portion that’s going to come out of your account [via autopay] is the flat fees which are laid out in the contract, then I have to question, what are you scared of?”
Remove Emotions When Making Decisions
EVERNET Consulting, LLC CEO Eric Buhrendorf said he made a decision to run a better business, which included applying an onboarding fee to new clients and requiring payments through ConnectBooster. He advises fellow MSPs to take the emotion out of your business decisions.
“I made a decision not to be beholden to any would-be customers,” Eric said.
He began asserting his company’s value and payment expectations up front. Eric admits, at first it was unnerving, then it became exciting. Ultimately, EVERNET’s profits increased by 300%.
“I ran the business scared and afraid of my clients and money for 10 years. I would onboard any client and had a mass of accounts that we had to chase payments,” Eric said. “Now we charge an onboarding fee that’s really asking the prospective customer, ‘do you value this relationship?’ If they don’t see the value in the relationship, then it isn’t a fit for EVERNET. If they do, we explain how the relationship has to work—this is what we do and how we do it.”
As part of this methodology, EVERNET requires payments through ConnectBooster, both to ensure on-time, consistent payments, and to save staff time. Nearly 100% of payments to EVERNET are processed through ConnectBooster.
As soon as a payment is overdue, EVERNET applies an account servicing fee and lets the client know they can avoid this with autopay.
“We’re not a bank. We don’t extend credit to anybody.” Eric stated. “Who wants to make that call to clients asking for payment? How tired are you of watching your bookkeeper make deposits? Owners expect their bookkeepers to chase the money, but how much time do you want your staff to spend making calls, printing invoices, stuffing envelopes, and sending notices? Your bookkeeper doesn’t want to do this either, so A/R creeps up.”
“We stopped being emotional and let the numbers run the business. Now cash is in my bank account every month.”
Save Time and Money with Automations
A lot of human effort goes into trying to get paid. If you’re constantly chasing money that should already be in the bank, then you have less time to devote to servicing clients.
Evan Faller, director of operations at Furniture Wizard Software, knew they could make the billing and collection process more efficient for their office staff, and customers.
“The process of taking cards and updating card information and expiration dates was taking too much time. We knew we could get a return by using automations.” Evan said.
They spent 4-5 days finalizing transaction before closing a billing date, of which they had three each month. After implementing automations with ConnectBooster, they reduced the number of days spent on processing payments from 12 down to 3—a 75% reduction in time. Less time spent on billing and collections eliminated the need to hire additional staff, which had a direct impact on cash flow.
Primarily, Furniture Wizard Software sought to be more efficient and save time, but automations also solved a secondary goal.
“As a technology company, we wanted to show our customers we’re adopting software and tools that make their lives easier and offer transparency to their bills,” Evan shared. “Automations created a better experience for our internal staff and the ConnectBooster portal also provided value for our customers.”
Adopt Strategies to Transition to a New Payment Protocol
If you’ve been lax about your billing and collection protocols, you may feel hesitant to change the way your customers do business with you. The following are simple and effective methods fellow MSPs have used to transition to their preferred payment expectations:
- Make an announcement that rates will increase due to rising costs of doing business. Then offer a discount to qualifying accounts that enroll in autopay.
- Pitch autopay as a free, value-added benefit for your customers. By enrolling in automatic payments, you give them the power to pay their bill or automatically schedule their monthly payment whenever and wherever, 24/7, regardless of business hours.
- Before each customer’s next service agreement renewal date, add in a clause about payment expectations. Then discuss the changes when the time comes for customers to renew.
- Make the payment fields required in your electronic contracts, so customers can’t quickly sign and return and later claim they didn’t agree to the payment terms.
- Include incentives and penalties alongside your billing and payment expectations in your service agreements, and consistently enforce your expectations.
Achieve Effortless Cash Flow
Your infrastructure can influence and support business practices that prioritize getting paid on time. ConnectBooster is an automated payment gateway designed for MSPs. With two-way syncing and programmable billing rules, it automatically collects the exact dollar amount outstanding in your accounting solution from your customer’s securely stored ACH or credit card, and then updates the correct data in your accounting package.
Connect with us to learn more about how ConnectBooster can help you master your cash flow in 2022 and make traction on your goals.