Which Tools and Best Practices Will Strengthen an MSP’s Cash Flow?
Money is fuel for building a business. However, even companies with huge contracts and what appears on paper to be strong cash flow cannot funnel those dollars into expansion unless their clients pay their invoices. The faster those payments flow into the bank, the quicker the firm can leverage those dollars to grow the business.
From hiring technicians, engineers and account managers to increasing marketing and sales budgets and technology investments, MSPs that fund those developments internally (with proceeds) rather than externally (with credit and bank loans) put themselves in a better financial position. No finance charges or potential defaults and no loss of control to lenders or investors. Organic growth allows MSPs to increase the viability and valuation of their business.
While the financial side of the house is a significant focus for many MSPs, the payment side of the equation does not always receive enough attention. With recurring revenue streams on the rise, accounts receivables can multiply quickly, so providers should streamline, tighten, and automate their collections processes. Addressing potential billing and payment “headaches” can help IT services companies minimize cash flow issues.
Current economic pressures may force MSPs to revamp their payment policies sooner rather than later. Rising inflation and interest rates—coupled with ongoing personnel shortages—are taxing the finances of many businesses, including MSPs and their customers. Providers need to be proactive to ensure clients pay on time. In economic downturns, some businesses delay contractor and third-party payments to protect their own cash flow, which can significantly impact their IT services partners.
MSPs should streamline and strengthen their collections processes and implement automated recurring billing solutions to prevent those situations from becoming the norm. A good starting point is to review and assess current invoicing and collections procedures and tools, including PSA and accounting packages, as well as past A/R trends.
Time for a Makeover?
What issues continually slow payments? Invoice generation is just one potential “speed bump.” Few clients may be willing to pay bills they don’t receive, so MSPs must ensure nothing slows the process. For example, some cross-train team members to approve and send out invoices, so illnesses and vacations don’t throw off the schedule.
The best option is to assess each step of the collections process, from invoicing to transaction completion to invoice reconciliation, and then implement an automated recurring billing platform (if you’re not already using these tools). Like a PSA, it’s important to fix problems before adding those workflows to a technology solution.
MSPs need to do their homework before attempting to create the ultimate automated billing system. You need to know how long it takes to collect the money your business earns. After closing a ticket to implement a new solution or reaching the end of a managed services billing period, how much time passes before the client receives an invoice? Do team members or systems generate those bills in minutes, or does it take hours or days? If the latter, MSPs should consider a makeover of their processes and tools.
Map Out the Solutions
Integrations between PSA platforms and accounting packages allow MSPs to create and send those statements in real-time and expedite collections through an automated recurring billing tool. Properly connecting and configuring those systems can save time, reduce headaches and frustration, and significantly improve the company’s cash flow.
Cash flow may be one of the channel’s most underrated factors or metrics.
Removing people (manual steps) from the process will reduce, if not eliminate, collection delays. Accounting will no longer have an excuse for not sending out invoices and, with a payment platform, will not store huge piles of customers’ checks waiting to make a deposit. These systems take over and can effectively and instantly manage those cash flow-critical steps.
Automated recurring billing ensures the collections process runs on time and in the proper order based on your MSP business’ needs and contract requirements. Lessening the “people component” of these activities also minimizes the headaches for everyone.
Improve Overall Productivity
From owners and technicians to accountants, no one enjoys handling collections, especially with clients they like, respect and interact with regularly. Good relationships can be a detriment when it comes to asking for money. Monotonous duties also drive procrastination, and when employees or customers slow down the process, it affects cash flow. But MSPs few give these responsibilities enough attention. While sales and account managers tend to get a lot of accolades, few companies recognize an over-achieving A/R (though every business really should).
Automated recurring billing systems take on some of the least popular manual tasks in managed services. These tools can also boost morale and eliminate headaches for clients’ accounting teams. Everyone will appreciate being involved in fewer emotionally draining collections calls.
Reducing stress is just one benefit. Eliminating manual procedures can also boost productivity. Automated recurring billing lets MSPs better leverage their most valuable resources—employees and cash. Personnel efficiency and cost control are especially critical in today’s economic environment.
These are just a few reasons why automated billing systems have become a business standard for the channel. MSPs leverage these technologies to streamline operations and enhance profit potential.
Simplify collections with a complete automated recurring billing system platform—link ConnectBooster to your PSA, accounting package and other IT services tools. Consider that combination the ultimate cash flow enhancing solution. Schedule a discovery call to learn how ConnectBooster can transform your company’s billing, collections and invoice reconciliation process.