13 Jun Three Secrets For MSPs’ To Reduce Their Aging Accounts Receivables
One of the most challenging parts of running a business is having the “money conversation” with clients. Whether employees spend their days on IT or the office side of operations (including sales and marketing), not many people enjoy making collection calls or following up on past due invoices. Since those discussions can be less than stellar, business owners often delay “the talk” while hoping the problem will resolve itself with having a conversation about payment expectations.
Those who expect the post office to drop off check-bearing envelopes consistently are usually disappointed when the money they were anticipating fails to arrive. SMBs rarely put much effort into developing, let alone maintaining, a timely payment process, and they may forget, ignore, or overlook outstanding invoices from time to time.
On the opposite side of the payment equation, MSPs can invest a lot of time and money on manual collections and still not end up getting paid; leaving your company with no way to recover those investments. Even if late paying clients eventually send a check for their overdue invoices, unless you recoup a significant late-payment fee, those collections costs will remain on the expense side of your company’s accounting ledger.
A better way to reduce A/R
It shouldn’t be hard to reduce your company’s accounts receivables. The problem is MSPs must have several discussions with prospective clients, from infrastructure improvements and new solution options to the cost-effective monthly charge for providing excellent services. It’s hard enough to remember all the intricate technology-related details, so the payment options and requirements tend to get left for later or glossed over in the conversations.
The timing of the conversation or failing to bring it up is just one of the issues driving your accounts receivables balances higher. Thankfully, there’s hope for MSPs who want to get paid on time without having to always prod and stalk their clients. Your odds of success will improve significantly by following these three steps.
#1. Set the proper expectations with your customers
MSPs should ideally address payment requirements and detail the methodologies during the sales process, not after signing contracts. At that point in the relationship, decision-makers are leaning forward and actively engaged, and most likely to “buy in” to the autopay option.
That’s also the point where you’re setting expectations around a whole host of things such as the onboarding process, implementation, and support. Price negotiations are already complete, so there’s no need to discuss giving that new client an additional discount for using autopay, as it should be your company standard.
Instead, your team should spend this time explaining the payment process and timelines. All billing related to recurring services should be automatically set up on autopay, with project work and other one-time purchases potentially being the exceptions. That should be a standard discussion with prospects and newly signed clients. You will need to carry on a much different conversation with your existing clients (detailed in number 3).
#2. Implement payment automation & transparency
MSPs already rely on tools such as PSAs, RMMs, and automated systems for pushing out patches and client communications. So, why not implement similar “hands off” solutions for your payments, as well?
A lot of the reasons clients don’t pay on time involves their processes (or a lack thereof). Businesses with well-defined systems and robust policies in place tend to be paid on time because clients don’t know anything different. Loose agreements can cause confusion or allow clients to “fill in the blanks” with their own preferred payment plan. Systems that provide customer alerts enable users to review invoice details and let them make changes to their payment methods help motivate prospects to “buy in” to the program.
The thing is, most of your clients have the means and ability to pay on time each month. An automated system with full transparency simplifies the process and keeps cash flowing into your business on a recurring monthly basis.
#3. Follow the 80-20 rule
How do you get all your clients on board with payment automation? Achieving a 100% adoption rate should always be the goal as it’s effectively the nirvana of cash flow. However, a realistic objective is to get 80% of your clients’ with recurring invoice payments on an automated platform and continue grooming that bottom 20% of the holdouts.
There are many ways to overcome autopay resistance, including offering incentives such as holding off a rate increase for customers who sign up for monthly ACH payments. You want more clients that truly appreciate what you do by paying their invoices on time. Even when your team can’t or doesn’t wish to fire the bottom 20%, sales should be closing companies with no objections to autopay. If you can’t cull all the resisters, do all that you can to minimize their influence on your bottom line.
Give your clients an autopay roadmap
When onboarding a new client, you should always provide them with details on the payment process and everything that will take place, from service implementation to billing. Even when invoices go out the first of the month, you don’t have to charge their bank account or credit card that day.
A good best practice is to give your clients a little gap so they feel comfortable and can address any problems or questions concerning their invoices. For example, MSPs may want to trigger payments on the 5th of each month.
Communicate autopay details during the sales process, as well as during onboarding, and show them how much visibility and control ConnectBooster or any payment platform will give them, 24/7/365. Remove potential barriers early on and get paid quickly for the recurring services your team delivers.