There are many ways for MSPs to improve cash flow. Just as a successful MSP takes a proactive approach to technical awareness, the same must be said in their approach to financial health – being more proactive will help make better business decisions. This process involves making projections and forecasting cash inflows and outflows.
Here are 5 ways for MSPs to improve cash flow:
- Tighten receivables
- Extending credit to clients is common – but you’re not a bank and you should not encourage payment timelines that delay receivables.
- If you don’t get paid upfront, keep track of the payment schedule and make sure to follow up.
- Stretch payables
- Sometimes delaying payments may be a necessity instead of an option when balancing cash flow issues.
- To preserve vendor relationships and avoid duplicated payments, make scheduled payments.
- Increase sales (without increasing costs)
- Be proactive in looking for alternate ways to increase revenue with upsell and cross-sell opportunities.
- Ensure your billing is aligned with service delivery.
- Increase team efficiency
- Gain efficiency from standardizing processes and cutting out space between the knowledge techs need and the tools that hold that knowledge.
- Increasing efficiency by teams working smarter, not harder, can help you grow your business.
- Align inflows and outflows
- Growth can be a massive cash flow sink, especially if you invest in growth first and don’t see a return quickly.
- Be aware of your options for aligning the costs of expansion with its benefits.
The main points to remember about cash flow management are if you think about cash flow proactively, you should be fine; but if you think about cash flow retroactively-after you realize you’ve got a problem-you have much less flexibility to fix things and get back on track! Our post on Autotask Project Billing the Easy Way can help you stay on top of your client billing.
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