Do More With Less: How to Handle Rising Receivables
BY IT GLUE | April 23, 2020
Not that it needs explaining, but a) most MSPs are faced with rising receivables and b) that’s a problem. You’ve got clients who either aren’t doing any business, or aren’t doing their usual amount, and their cash flow problems are becoming your cash flow problems. So how do you handle this?
Negotiation Mode: Restructure the Contract
Contract re-negotiations happen all the time, especially where outstanding debt is concerned. If your client cannot pay for the services in the contract, then you may need to have a conversation about what services they can pay for. Separate their musts from their wants. They must have secure environments at all times. They want new hardware, or rapid ticket response. It’s better to renegotiate a deal and get something, while maintaining the positive relationship, than it is to get nothing.
Cost-Cutting Mode: Reduce Expenses
A lot of companies are getting into the cost-cutting game. Putting people on furlough or laying them off is one of the absolute worst parts of running a business. Most people hate firing toxic incompetents much less laying off actual awesome people. If your financial projections allow you to cut costs elsewhere, do it. You’re not in an office, so don’t keep the lights on. Reduce salaries if you need to. Look for efficiency all around your business – is the total cost of ownership for your tech stack giving you the ROI you need? Deep integrations, killer documentation and automated everything make you more efficient. The total cost of ownership is what matters – not the sticker price. Sticker price is a trap; smart business owners know better than to be suckered into buying bargain basement crap.
Shutdown Mode: Disconnect Everything
Pay to play makes some intuitive sense. If they can’t pay for your services, don’t provide any. This is what you’d do if it was business as usual. In business unusual, however, I recommend you play the long game. What business are they in? How healthy was that business before COVID? By all means, shed some deadweight customers, that’s always a healthy thing to do, but if you’ve got a good client that you think will be able to get back up and running when all this is over, it’s probably better to go into negotiation mode.
Jerk Mode: Increasing Collections Aggressiveness
When it’s business as usual, increasing pressure on your outstanding clients is a common tactic for managing A/R. But this is business unusual. In business unusual, you’re not going to get blood out of stone by smashing it harder with your hammer. Someone who isn’t paying, but always did before, it’s because they can’t. So if you increase pressure, you’ll just come across like an insensitive jerk, and ultimately you’ll probably do more harm than good. Don’t be a jerk.
Lifesaver Mode: Take Advantage of Your Options
In most countries, there are a number of programs available to employers to help them cope with the struggles they are facing. The Kaseya Cares program helps our partners to navigate the myriad programs available to them. Use every dollar you’re eligible for in order to help you get through this. These programs have been developed specifically to help businesses like yours.
When receivables increase like they are for most of you, it can feel like your cash conversion cycle extends out beyond the end of time. Look for ways to find new revenue. Look for ways to improve the efficiency of your tech stack – not the cost – the efficiency. And for goodness sake, not every client that owes you is the same. Talk to them – this is a time when you need to engage in an honest dialogue rather than wasting time trying to collect from people who don’t have any money.
At IT Glue, efficiency is what we do. All that stuff about saving time, automation, and deep integrations – that’s our jam. Take a look at how we can help you manage your financial picture, starting now.
