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Five Conventional Ways To Fix Your Managed Services Billing Problems

Nov 25, 2020

The list of people who genuinely enjoy making collections calls must be relatively short. While billing-related responsibilities can be uncomfortable for many employees, when a business has poor processes, and client payment deadlines pass all too frequently, everyone tends to get lax. Customers let timelines slip, team members avoid making the hard calls, and it may seem like everyone except the accountant could care less about the bills getting paid.

Managed services billing problems tend to escalate quickly. Slip just once sending out your invoices on time and it will create a ripple effect that lasts for months, if not years. Some clients are quick to take advantage of a perceived lax attitude towards payments. Very few will ever go out of their way to rectify a managed services billing problem that tilts in their favor.

That may sound pessimistic, but when it comes to money, most people attempt to hold onto it as long as possible to maximize their company’s cash flow and short-term profitability. MSPs need to keep that reality in mind when building out payment policies for their clients.

The most common managed services billing problems

Some managed services billing problems originate from customers’ internal controls that discourage on-time payments, particularly when they incur no penalty for missing due dates. Poor processes and disconnected systems, as well as a lack of enforceable policies, are some of the other issues that cause collections headaches for MSPs.

How can you fix managed services billing problems like these? Here are five easy ways to resolve or at least minimize the issues that waste MSPs’ time and money.

#1 Delegate and prioritize

One of the most significant managed services billing problems originates from a greater organizational issue: a lack of organization. MSPs are typically extremely proactive when it comes to tackling their clients’ IT problems, securing data, and handling virtually every other aspect of their technology stack. That’s where providers focus their time and attention.

Since resources are usually limited and the skill set is primarily tech-related, invoicing and collections can take a back seat to support, sales, and other customer-oriented parts of their operations. To prevent managed services billing problems, someone has to be responsible for generating and sending invoices and enforcing payment policies.

MSPs must also give their collections teams the time and resources to get the job done. Most importantly, they need time to manage all stages of the process effectively. That includes critical activities such as reviewing outstanding invoices and scheduling calls with clients to discuss past due accounts and other managed services billing issues. Every MSP should assign qualified people to manage this essential part of their business.

#2 Create and enforce payment policies

Do your customers know how to pay you for your goods or services? Do your contracts include a policy that clearly details your expectations of the client, including due dates, late fees and corresponding interest rates, and acceptable methods of payment? You can also avoid managed services billing problems by listing details such as the company’s mailing address, phone numbers of the collections team, and instructions for paying online or setting up a secure payment portal.

Of course, a policy is only as good as the execution. Team members must closely follow the guidelines and stringently enforce the terms of each client’s contract. Letting payment dates slide, not imposing late charges, and relaxing other rules listed in your policies are sure ways to increase your managed services billing problems.

#3 Assign the right people to the job

This may seem like a no-brainer, but many companies give collections responsibilities to their least qualified people, as a punishment for poor performance, or only to those with any free time. None of those scenarios will fix managed services billing problems. Management should either hire a dedicated person with accounting and collections skills or handle the job themselves. Those with a financial stake in the business (more than a paycheck) will be more willing to follow through with collections calls and enforce the stipulations in each client contract.

#4 Automate the process

Removing people from the process can improve results, especially when humans are replaced with applications purposely designed for collections. MSPs can integrate accounting platforms, PSAs, and payment portals to speed up invoicing and collections and significantly reduce managed services billing problems.

#5 Encourage/mandate electronic payments

The absolute best way to fix managed services billing issues is to eliminate as many excuses from your clients as possible. When MSPs set up and mandate the use of a secure payment portal and automatic monthly payments, it significantly reduces the risk of not getting paid on time. Providers can incentivize clients by lowering an annual rate increase (3% instead of 5%, for example) or just require that process for all new clients and renewals.

Choose “all the above”

MSPs need to focus more on solutions, not collections. If you are experiencing managed services billing problems, carefully review all the tips above to see which might improve your current financial situation. Each of these options is a channel-proven best practice.

Are you making the best effort to reduce the time between invoicing and payments in your business? If not, start fixing the managed services billing problems today, one by one, and watch how quickly your cash flow responds.

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