Implement MSP Billing Best Practices to Encourage On-Time Payments

Accounts Receivable (A/R) is not revenue. The money a customer owes an MSP should not be factored into the cash flow equation until that payment has actually cleared the bank. You cannot spend an IOU.

Despite this reality, far too many businesses still consider accounts receivables to be as good as cash. While financial companies often buy outstanding debt for a fraction of its face value, there is no substitute for receiving on-time payments from clients that require no human interaction. No need for phone calls, follow-up emails, or reminder letters; just a notification of each bank deposit made within the previously agreed-upon amount of time.       

On-time payments should not be an afterthought for MSPs, nor an unobtainable wish. But more often than not, on-time payments are not prioritized. On average, MSPs wait 60 days or more before receiving payment! Businesses need procedures, policies, and systems to create invoices and quickly convert those accounts receivables into cash—and IT services firms are no different. An IT services firm may have slightly more complex billing due to the nature of variable billing agreements. Nevertheless, MSPs can achieve predictable on-time payments from customers. The timing and workflows are critical, as are steps for validating and tracking all the various payments to ensure nothing gets lost amidst the chaos of running an MSP. 

Most firms cannot afford to patiently wait for weeks, if not months, to get paid after mailing out invoices or only have team members check on the status of overdue accounts when it’s convenient. Expediency and efficiency drive cash flow and profitability, and providers that adopt proven billing best practices are more likely to achieve both objectives. Those practices include:    

1. Create Clear and Concise Payment Policies

How will customers be expected to pay for services? MSPs should adopt clear and concise policies that customers can understand and employees can easily explain. Those details should include dues dates, fees for overdue invoices, and preferred forms and methods of payment, as well as contact information for the accounts receivable department and other key team members. 

2. Set the Proper Expectations

The best way to avoid payment problems is by reviewing the company’s policies during the sales process, not on the handoff with account managers or when the first invoice becomes due. Engaging key decision-makers upfront helps MSPs establish clear “rules of engagement” and prevents misunderstandings from happening later. That timing also allows the sales team to gain “buy-in” on critical options like autopay, especially for recurring services, and set expectations for the onboarding process, implementation, and support.

3. Adopt Automation

MSPs are accustomed to tools like PSAs, RMMs, and system management portals that make life easier for their team members and clients. Similarly, automation can streamline and expedite invoicing and payments, boost cash flow and eliminate headaches for providers and their clients. Most of those businesses have the means and ability to pay on time each month; they just lack the motivation and systems to make it happen effortlessly and cost-effectively. ConnectBooster gives clients that power.   

4. Create a Winning Implementation Strategy

As with any change, getting clients to adopt payment automation may seem daunting without the proper motivation. While 100% adoption should be the objective, aiming to get 80% of clients’ monthly recurring charges on autopay is a realistic starting point, providing a strong and steady revenue stream for MSPs. They should continue to work toward converting that final 20% of holdouts. Incentives like delayed rate increases or free new (temporary) services help boost adoption.      

5. Reinforce and Clarify     

When onboarding a new client, always provide them with details on the payment process and everything that will take place, from service implementation to billing. They should know when to expect invoices, the subsequent charges on their credit or bank accounts, and the process for asking questions or resolving billing issues. Provide clients with a reasonable timeline and terms for making payments and provide contacts for account managers, the A/R team and executives (with the proper escalation steps).

Work the Plan

While the billing process is not typically complicated, some of the more critical steps often require a little extra motivation—like ensuring clients make their payments on time and following the right instructions. Automation eliminates many of those headaches. Clients set up their accounts with bank or credit information and schedules and check the approval boxes. When new invoices are generated or the system notes a specific date and time, the wheels kick into gear and the payment process commences.       

The main goals are to ensure every client receives the agreed-upon level of support each month and that their IT provider gets paid promptly for those services. There’s no need to turn IT team members into collections agents or give no-interest or low-interest loans to your customers. Proactive payment platforms like ConnectBooster simplify the process for everyone and let MSPs invest more of their own money in the business. A more predictable monthly income means a healthier cash flow, higher profitability, and greater financial options for funding growth and other endeavors.     

The best way to set your business up for success and make sure your clients never miss a payment due date is to automate your billing process. ConnectBooster automates customer payments based on variable billing amounts generated by the tools your MSP already uses, so you can stay focused on what matters: your customers. Plus, your clients will love the transparency, ease-of-use and convenience of their new 24/7, 365 payments portal. Connect with us to schedule a discovery call to start getting paid on time with less work.


MSPS Guide to Predictable Cash Flow in Uncertain Times

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