Spending time assisting your clients with ongoing IT support can take up a considerable amount of time. So can your company's bookkeeping needs.
To grow a successful managed services business, you need to ensure that the majority of your resources are spent troubleshooting problems and handling operations and cybersecurity for your clients. Your bookkeeping is still a task that should not be neglected.
Luckily, we have a few helpful tips that will assist you in ensuring that you always have access to accurate and current financial information without having to spend an enormous amount of time and money achieving it.
1. Set up your chart of accounts properly
A well-constructed chart of accounts can help immensely with organizing the revenue flowing into your MSP business. The categorization of income is necessary to keep a watchful eye on the trajectory of your business.
Blending non-standardized revenue lines into your business will make it challenging to generate a true and accurate picture of your business's valuation. To avoid this, you should ensure that you have specific sub-accounts for expenses and costs of goods sold to identify your expenditures properly.
2. Track your expenses closely
To properly understand your margins, you need to ensure your costs are allocated appropriately. You must be able to allocate expenses to clients and specific projects or services to understand their profitability and identify areas that need a reduction in spending.
To do so, you can use expense management software like Dext Prepare. This will allow you to capture all of your expenses by taking a photo of your invoices and forwarding them to a dedicated Dext email address. The program will extract all of the crucial data from these documents, creating a transaction that can be exported to your accounting software, saving you time on manual data entry while you stay on top of your expenses.
3. Invoice promptly
The faster that you invoice your clients, the faster you will get paid. If you have recurring invoices, it's best to send them automatically through your accounting software or invoicing system. This will get them to your clients quickly and ensure that you get paid on time, improving the health of your cash flow.
You also want to ensure that all of the information on your invoices are clear and correct. Any discrepancies can cause confusion and will slow down the payment process.
4. Use pre-authorized debit to collect payments
For managed service providers, you likely bill clients on a recurring basis every month for the services you provide. There is an opportunity to save time on collections and follow-ups by using pre-authorized debit to collect your payments.
Instead of losing money to transaction fees, you can utilize a tool like Rotessa to collect payments from your clients automatically. Implementing a process like this can speed up the payment process, eliminate the need to spend valuable resources on collections, and can help improve your cash flow.
5. Follow-up on outstanding invoices
If you still have ongoing projects with clients, it is important to promptly follow up on outstanding invoices to ensure that the business continues to operate smoothly.
Consider following up on unpaid invoices on a bi-weekly basis as part of your regular bookkeeping routine. Alternatively, you can also send automated invoice payment reminders to clients a few days before payment is due as well as afterward.
6. Outsource your bookkeeping to a professional
If you don't have time to handle your books, hiring a bookkeeper is always best. However, hiring an in-house bookkeeper can be costly and may pose a risk to your business if they decide to leave at some point in the future. Outsourcing your bookkeeping to a third-party firm is a good way to get your books taken care of without having to deal with turnover and managing another employee.
Also, if you were to stop working with an outsourced bookkeeping firm, there would be a much smoother transition process in place. They will be able to hand over all of the necessary information to your team with less of a risk of information loss.
7. Review your books regularly
Having a bookkeeper to keep your books up to date is important, but you also need to review your books regularly to understand the financial health of your business. Schedule time every month to review your financial reports. This will allow you to identify areas where you might be overspending or whether your business has sufficient cash flow to meet its short-term obligations.
Reviewing your books regularly will also allow you to spot-check your numbers to ensure your books are being appropriately managed. Take an in-depth look at your utilization rate, profitability by project, customer, service, liquidity, and cash flow to ensure your business is where it needs to be. You can also take advantage of this time to set metrics and review their data to ensure your business is hitting its targets.
By implementing some helpful tips into your bookkeeping routine, you will be able to stay on top of your financial information. You will be able to ensure that you have access to current information, giving you the ability to make sound financial decisions. These tips will also help you streamline your bookkeeping process, saving you a significant amount of time and money.