10 Jan Go Big in 2018: Transform How Your Business Collects Payments
As your business sets out to achieve your goals for 2018 you probably plan to grow, maybe by 10%. Now as you’re plotting out what it takes to reach that goal, the first step should be confirming if you’ve collected your finances from last year.
One of the most significant roadblocks to growth is finances; poor cash flow and a lack of assets are bad news when trying to solicit loans from banks to invest in your company.
Start the year off right with a strong focus on your business’ financial situation.
Transform how your team collects payments. That’s an excellent way to ensure you can meet your business growth targets in 2018.
Change your cash flow model
Your business has two directions to go; either it’s growing or dying.
Now, the majority of MSPs will theoretically have a lot of incoming revenue. Unfortunately, that money is trapped in your accounts receivables.
You may count that as a success, but cash in your bank account always trumps theoretical money listed on a spreadsheet. Most MSPs are an average of at least 30-90 days behind on their billing, meaning you may not have received payment for the work you did in Q4 of 2017.
In reality, it means your business could be short $100,000 or more each month that keeps rolling past the 90-day mark. It’s fairly obvious you’d rather receive that cash now instead of sending invoice after invoice hoping to be paid 30-90 days later.
Imagine what would happen if an MSP received that $100,000 in 30 days instead of 90. That would allow the firm to redeploy that cash three times faster.
Let’s say you apply that $100,000 back to their sales team. MSPs need to be constantly expanding that group to continue growing. With more sales team members, they might increase their revenue by another $10,000 each month, which could be reinvested in the department and bring in another $20,000. That feeds the growth cycle again and again.
That improved cash flow helps accelerate expansion, as the money spent on sales and marketing will bring in, even more, revenue, creating greater momentum in the organization. Soon you’ll quickly blow past your 10-15% growth expectations.
Having that cash on hand has a compounding effect. You won’t believe how quickly money grows once you have enough of it on hand to invest in resources that bring in more revenue.
Have the money conversation upfront
The beginning of a new client relationship is the best time to have the money talk, where an MSP can lay out the expectations of how the customer is going to pay for the services your team delivers.
That’s the time when they’ll be excited to work with your company and trust that the new relationship will benefit their organization. It’s also when MSPs should take control of the money conversation and set the proper expectations. The first stipulation should be that they pay your company automatically each month.
They have no reason to say no. They trust you enough to work with you, they’ve been sold on what you represent as a company. Don’t wait to ask for automated payment after you’ve invested your own time and money into their business.
You could already be thousands of dollars in the hole at that point, and you’ve essentially become your client’s bank. They have no reason to change the arrangement when they can put off paying your company for months at a time.
When 90% of your clients are on an auto bill payment plan, you’ve guaranteed that income every month.
If your business goes through a slow period when you’re not bringing on new clients, you know your bills and expenses will be covered. After all, the firm may have $200,000 in recurring revenue every month guaranteed.
Your business can control your cash flow
Finances are stressful. But your business doesn’t deserve to be held back by a lack of cash flow in 2018.
It can be intimidating to switch to a different business model, but your business will always be at the mercy of your clients and their payment timelines.
As an MSP, you have to take control of when you receive payments. Once you do that, that increased cash on hand can be redeployed to help your firm reach its goals in 2018.