The channel isn’t known for fairy tale endings. You can put your heart and soul into building a managed services business, landing big-dollar contracts to provide support to wildly successful companies, and still end up failing. There are no guarantees, and even the best-laid plans can end in failure if one or two critical pieces of your plan don’t fall into place.

Many of the brightest and highly skilled IT services professionals have seen their firms crash and burn despite having a strong business plan in place. Some encounter unforeseen circumstances such as the passing or sudden departure of key employees or business partners or run into issues they simply didn’t envision.

Client non-payment is one of those factors. While securing large dollar contracts can make an MSP business appear quite prosperous, those agreements are basically just promises that exist between two or more parties. Recurring revenue doesn’t truly exist until it shows up as a deposit on your bank ledger.

The steps between signing a contract with a new client and receiving that first initial payment are what can make or break your MSP business. Without effective processes and tools in place, invoicing and collections can easily get out of hand, and your cash flow can suffer significantly.

Many business owners get caught in that trap. Optimistic MSPs expect their clients to pay promptly after meeting certain terms of their contracts. After providing a month of managed services for a new customer and sending out an invoice in a timely manner, you might anticipate receiving a check or credit card payment within the next 30-days.

As well you should if a proper system is in place.

Create an airtight collections process

No matter how much time you devote to planning and operational improvements, your MSP’s financial success isn’t guaranteed. However, with the adoption of industry best practices and channel-proven tools, your firm can significantly improve the odds.

A proper invoicing solution is a perfect place to start. Popular channel options such as QuickBooks, Xero, or Microsoft Dynamics GP make it easy for providers to generate and send bills for monthly recurring services, as well as for any one-off projects, equipment, and other supplies. Every MSP should have an accounting package for invoicing, expenses, and other financial activities, even if they rely on outside professionals to handle some of those responsibilities, including tax filing and reconciliations.

Of course, a tool can only do so much. If your firm’s accounts receivables are approaching 90 days, QuickBooks alone won’t fix the problem. It’s time to tighten the collections processes.
The key good cash flow starts with getting your invoices out on a timely basis. After all, how can a client pay for a bill they haven’t received? When it comes to collections, following industry best practices such as sending out all

invoices within 48 hours of a month-end (preferably sooner) via email helps ensure faster payment.

While some clients may still prefer getting their bills through traditional snail mail, but the convenience and low cost of electronic messaging and secure online portals are making that archaic practice obsolete. Nudge the slow adopters to get them to convert as often as possible.

Beyond accounting

If your invoicing process is locked in and working well (meaning every client gets their bill within 48 hours), take time to research the other things that slow down collections and weaken your company’s cash flow. What’s keeping your clients from paying within the terms of your contracts?

SMBs often have rather unstructured processes for compensating their suppliers. While some pay invoices on a timely basis and within the confines of their contracts, usually 15 to 30 days, others simply send checks whenever the pile gets large enough to notice, or the person in charge has time. Another frequent strategy is to hold off until the company has enough money in the bank and pay off the oldest bills first ̶ essentially a FIFO strategy for their accounts payable inventory.

Whatever the cause, you can eliminate many of the delays that keep you from realizing the full benefits of recurring revenue with a few simple additions or tweaks to your company’s collections strategy. Automation should be one of the first considerations. Not only can ticketing, quoting, and payment-enabling tools help MSPs get paid quicker and boost their cash flow, but when properly integrated, these combined systems can save them a substantial amount of time, money, and headaches.

Address the major problem with collections

Automation minimizes the impact of one of the biggest points of failure in the payment process: people. When you successfully integrate your accounting software and PSA, quoting, email, and payment platforms, key information automatically routes through each system with little to no human interaction.

For example, whenever a technician closes a service ticket, your PSA can push relevant data to other linked solutions. No need to manually input the same information into multiple systems, tasks that tend to bore employees and create more human errors. Automating those repetitive and mundane processes will cut down on problems and payroll, and with the right tools, significantly trim your accounts receivables balances.

Financial tools can also address some of the people issues MSPs experience on the client-side of their businesses, including the procrastinators and poorly organized individuals in charge of paying your invoices each month.

Automation, in many cases, will take those responsibilities out of their hands and simplify the process.

For example, a safe and secure payment portal that lets your clients view current and past invoices and store credit and ACH information will minimize the need for human interactions in collections. Simply input contracts and dates, and their standard obligations will be taken care of automatically each month.

Connect the dots

Strong cash flow doesn’t happen by accident. MSPs need well-crafted customer collections policies and effective tools, as well as tough backbones to ensure clients pay on time each month. Automation simplifies the process without causing undue headaches and overhead costs.

Successful providers connect those dots. They review and strengthen policies on a regular basis and implement new solutions that can save time and money for all involved (MSPs and their clients).

Even with those standards in place, there are no guarantees. Problems will persist as long as there are people and profits at stake, but if you do everything possible to increase the cash in your bank account, you’ll be in a better position to pay your bills and invest in future projects and business growth.