Even the most successful MSPs can run into cash flow issues . Sourcing the staff and tools to support an influx of new clients is expensive and can be a real issue if your A / R is out of hand . Additionally , if your company expands without a strong cash flow , you may need to rely on lines of credit and bank loans to meet payroll obligations and pay expenses .
No business owner wants to get into the practice of delaying payments to contractors , utilities , landlords and others simply because of problems with their debt-collection methods . Strengthening collections policies and procedures will put more cash in your bank accounts for paying those bills and boosting and expanding operations .
How To Build Up Your Cash Flow
An effective accounts receivable plan should be simple and easy to communicate with employees and customers . Here are six tips to take charge of your cash flow and end late client payments for good :
1 . Develop Strict Collections Policies And Keep Promises Every Step Of The Way
Think of collections policies as your MSP ’ s unwavering handshake — a commitment made to ensure that the wheels of your business keep turning smoothly . These rules must be clearly written into all managed services contracts and be accessible to your employees and clients . Strict adherence to these policies is critical for ensuring balances , late fees and assessments are always paid on time . Also , review your policies in detail with prospective clients before closing any sales and during the onboarding process . This allows you to address any misconceptions and clarify expectations .
Your collections policies are more than just words on paper . They ’ re a testament to your commitment to your business and your clients . Do what you say and say what you do so that your policies stand as a living testament to your dedication .
2 . Focus On Continual Improvement
Just as the old saying “ You can ’ t make a silk purse out of a sow ’ s ear ” says , it ’ s clear that without the necessary resources , achieving financial success becomes an uphill battle . Designating someone to handle bill generation , A / R monitoring and persistent followups on overdue payments is a step in the right direction . But in order to ensure financial success , you need to provide your collections team with enough time , resources and opportunities to refine policies and procedures and get the job done .
3 . Collections Are A Responsibility , Not A Punishment
As an essential part of the financial engine , you should have a dedicated person with accounting and collections skills in place . If that person does not have these skills , you should provide them with the right support and training . Insider tip : Those with a financial stake in the business will be more willing to follow through with collections calls and enforce the stipulations in each client contract .
4 . Create And Regularly Review A / R Aging Reports And Note “ Fashionably Late ” Payers
Ah , the ever-fashionable “ late payers .” You know them well — those clients who seem to have a knack for making tardy appearances when it ’ s time to settle their bills . Tracking which clients appear most frequently at the top of your A / R list is essential . That periodic review helps you identify and monitor harmful financial trends and implement penalties to change those behaviors . Those who rank high on the aging report should be first in line for “ autopay ” to avoid the need for tough discussions in the future .
5 . Implement Payment Automation
Getting each client to pay on time each billing period can be a chore without the right policies , management and systems — but automation can simplify this process . MSPs have the tools at their disposal , including a Professional Services Automation platform and accounting packages , which create a seamless ( and essentially hands-free ) invoice-to-payment collections system when connected to a secure payment portal . A secure payment portal is a win-win for both you and your clients . It offers streamlined transactions , improved data protection and seamless credit card and ACH payment processing . Additionally , it enables clients to conveniently access their payment and transaction history securely in one place , providing greater clarity into where their money is going and adding an air of trust and credibility to your MSP .
6 . Uphold Payment Incentives Or Penalties
Most business owners respond more favorably to inducements than fees and late charges . That ’ s why many MSPs offer discounts for signing up for autopay . For example , a 10 % discount for six months can ease the transition for reluctant clients . Alternatively , instead of taking on a 10 % price increase for contract renewals , you could drop that to 5 % ( or less ) if the company opts into autopay .
Taming A / R Isn ’ t Rocket Science
Getting paid on time is not an unreasonable expectation , nor should it be a difficult hurdle for you to overcome . With the right tools and a forward-focused attitude , you can boost your financial freedom , strengthening your cash flow to pay the bills and fund organic growth .
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