Getting your clients to pay their managed services invoices on time sounds great, but that scenario is nearly impossible unless your company implements best practices to ensure it happens. It’s quite simple for MSPs with actionable plans in place with employees who adhere to company standards with absolutely no unapproved exceptions.
Unfortunately, the channel hasn’t traditionally placed a lot of emphasis on the financial side of IT services businesses. Sure, tech is an extremely crucial part of the equation, but having money in the bank is just as important to those who want to keep the lights on and pay their other bills. MSPs understand that part and are increasingly looking for new and better ways to manage their cash flow.
One sure-fire way to make that happen is to focus more attention on the collections process ‒ specifically around reducing accounts receivables. The best way to improve an MSPs bottom line without adding new contracts (though selling more services is typically encouraged), is to decrease the time between sending invoices to customers and receiving their payments.
The quicker they pay, the more cash you have in the bank. That increase in capital means MSPs won’t have to borrow as much of other people’s money (a costly endeavor) when expanding their businesses or taking on new projects. When your clients pay promptly at a set time each month, it not only gives you the peace of mind knowing the company has the resources needed to maintain its operations, but it provides the funds necessary to fuel portfolio expansion and other strategic initiatives.
Why autopay is the only way
MRR (Monthly Recurring Revenue) doesn’t happen without prompt payment for the services your team renders. Accounts receivables are just that; financial promises based on existing contracts. Sending out invoices each month is just the beginning of what can be a long and painful process for MSPs who don’t have a well-planned and automated collections process in place. Autopay is the engine that fuels MRR.
Getting your clients on an automated payment platform does require a little work, but there are a couple of things channel professionals can do to overcome almost any objection. First, have a conversation with your clients about future rate increases. Begin those discussions by justifying a 5% bump (if not more) to cover the rising costs of service delivery, including advanced technology and compliance requirements and the expense of the latest cybersecurity protections. You get the picture.
A great time for those conversations is during QBRs (quarterly business reviews), especially around contract renewal time. Tie autopay into those negotiations by offering to eliminate part or all of the increase for a certain period, such as two or three months, or longer if your firm isn’t seeing significant growth in its expenses.
The set-up is crucial. MSPs who openly discuss minor increases during a contract renewal year, and then dangle a carrot that softens the financial impact even more, enjoy a greater chance of success. Speak to their wallet. Instead of a five percent increase on monthly cost for services, they just need to agree to set up and continue to use autopay as long as the agreement is in place.
Waiving the increase for a year or less is offset by the value of getting paid on time each month. Autopay lowers AR quickly and gives MSPs faster access to the money they earn and reduces the time spent making collections calls and sending follow-up emails and letters to slow paying clients. No one enjoys that last activity (not even the accountants).
Provide options to your clients
Here’s another idea to get clients on board with autopay. If they agree to use a credit card to pay their monthly service charges, their monthly payment would only rise a fraction of the total proposed increase. For example, agreeing to that stipulation would eliminate 3% of a 5% (or even a 7-10%) hike in their monthly service charges. Essentially, your clients pay your credit card fees and still feel like they received a discount.
See how that works? MSPs can speak to their clients’ wallets while covering their own credit processing costs. It’s a win-win scenario.
Do what it takes to get your clients to buy into autopay. Make them understand how the automation process benefits their businesses and give them incentives that make the decision makers feel good about signing on the dotted line.