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MSPs: Do You Have A Cash Flow Mindset?

Many MSPs struggle with cashflow – I made a short video to explain why and what you can do as a managed services provider to always ensure you have a healthy bank balance. Here’s some of the main points.

Why is cashflow so important to an MSP?

Other than helping you sleep at night, there are many reasons to adopt a cashflow mindset in your business.  For starters, having enough in the bank to keep on top of your supplier payments and pay your employees is fundamental to keeping your business afloat.

But that’s not all. I see it every day with our Benchmark 365 Partners – MSPs with consistent cash flow are able to make important strategic decisions such as employing more staff,  initiating marketing campaigns and purchasing the tools to make your company more efficient.  MSPs with cashflow grow faster and more sustainably than their cashless peers.

Your customers’ cashflow mindset – and you!

Your customers have a cashflow mindset – which can often be to avoid paying their suppliers on time.  Perhaps they too are struggling with cashflow or perhaps they just want to carry enough money on hand to protect their own interests.  Some industries are used to being paid infrequently or in big lump sums so they expect you as an MSP to adhere to their payment terms.

Unfortunately MSPs don’t have the luxury of waiting weeks or months to be paid so you must adopt your own cash flow mindset to get paid in advance – that is – before you deliver the hardware or before you deliver your service.

This can be difficult to adopt at first but after a while it becomes routine and a habit for both you and your clients.

Tightening the cash flow screws

If you’ve had fairly loose payment terms in the past it can seem like a rude shock to your customers if you suddenly change your policy and demand an upfront payment for everything you do.

This is where a carefully communicated policy comes into effect.  For example, if you’ve been selling hardware or software without accepting upfront payment you might like to start there by letting your customers know that you require a credit card payment for hardware.  You might consider explaining that in order to keep prices fair and reasonable you cannot offer credit on low margin items like hardware anymore.

Once you’ve flexed your cashflow mindset and your customers are in the habit of paying for hardware and software upfront it’s time to step it up even more.  If you do hourly rate work how about asking for a block of time paid in advance?  If you’re selling managed services why not bill one month in advance and let your client know they have 30 days to pay?

These cash flow tactics can be transformational for an MSP enabling you to invest further in your business and finally get a good night’s sleep!

Once you get your cashflow under control you should think about whether or not you are allocating those hard won dollars in in the right way. Consider using an outsourced team of dispatch, L1/2/3 engineers and customer service on demand at a fractional cost of local staffing. Services like Benchmark 365 can help you get your servicing costs down and smooth out your out-goings making  for more predictable expenditures. Add that to always getting paid upfront by your clients and making 50% more profit.  That’s smart business!


James Vickery is CEO of Benchmark 365, a private label MSP partner that offers around-the-clock helpdesk, NOC, Level 1, 2 and 3 support. Read more Benchmark 365 blogs here.

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