Which Tools and Best Practices Will Strengthen an MSP’s Cash Flow?
Money is fuel for building a business. However, even companies with huge contracts and what appears on paper to be strong cash flow cannot funnel those dollars into expansion unless their clients pay their invoices. The faster those payments flow into the bank, the quicker the firm can leverage those dollars to grow the business.
From hiring technicians, engineers and account managers to increasing marketing and sales budgets and technology investments, MSPs that fund those developments internally (with proceeds) rather than externally (with credit and bank loans) put themselves in a better financial position. No finance charges or potential defaults and no loss of control to lenders or investors. Organic growth allows MSPs to increase the viability and valuation of their business.
While the financial side of the house is a significant focus for many MSPs, the payment side of the equation does not always receive enough attention. With recurring revenue streams on the rise, accounts receivables can multiply quickly, so providers should streamline, tighten, and automate their collections processes. Addressing potential billing and payment “headaches” can help IT services companies minimize cash flow issues.
Current economic pressures may force MSPs to revamp their payment policies sooner rather than later. Rising inflation and interest rates—coupled with ongoing personnel shortages—are taxing the finances of many businesses, including MSPs and their customers. Providers need to be proactive to ensure clients pay on time. In economic downturns, some businesses delay contractor and third-party payments to protect their own cash flow, which can significantly impact their IT services partners.