MSP Accounting and Finance Best Practices
A major threat to a growing MSP is poor accounting practices. All it takes is a dishonest employee or an honest miscalculation to impact your bottom line.
When it comes to accounting and finances, you need the peace of mind that comes with knowing that your business is in good financial standing.
How can you make important business decisions like hiring more people or adding infrastructure if you don’t know how the books are looking?
Enter finance and accounting. These functions keep track of monetary transactions. Using detailed guidelines, the transactions are recorded, summarized, and presented in financial reports, such as an income statement or balance sheet. The objective of the reports is to provide a financial analysis with which to make sound economic decisions.
The accuracy of data and financial predictions needs to be spot-on. Streamlining and automating the flow of this information reduces the opportunity for error, eliminating human mistakes, which, in turn, affects the allocation of resources for all other areas of the company – meaning you can do more without adding additional staff. This is crucial for small MSPs.
Finance and accounting automation provides the peace of mind you need in order to grow your business with confidence.
Here are four best practices which are key to MSP accounting and finance activities.
Staying in Sync
Don’t get stuck managing multiple data sets in multiple databases. Managing multiple entries results in inaccuracy, time delays, and unhappy employees. I’ve worked in MSP shops that had multiple systems and it was extremely inefficient. Staff members were constantly frustrated at how none of the systems used were in sync with one another.
Identify the source of truth for your key pieces of data, and make sure your systems are synchronized. It will pay off in the long run.
Further reading Guide to MSP Finance and Profitability
Concentrate on Cash Flow
Regular, accurate financial reporting will ensure that the executive team is ahead of the game. A centralized database enables them to respond strategically, in a timely fashion, and never be caught off guard.
Time delays related to cash flow can have an enormous negative impact on the business. Measuring accounting will make sure you’re focused on having the least amount of outstanding cash. Issues with cash flow also make employees question the business and lose faith in the direction of the company.
Speak the Truth
The basic fundamentals of finance recommend producing an accurate representation of the business’s performance each period. Having multiple systems that are manually connected makes this virtually impossible. Integration and consistency between systems will accelerate your ability to ‘truth it’ and have a source of truth for data in order to validate information.
Further reading Software for MSP Finance and Accounting Management
Don’t Leave It to Chance
Reconciliation of your financial systems will make sure you are invoicing as you should, paying the proper accounts, and not misrepresenting your company’s value.
Few people would say managing the numbers is the most exciting aspect of their job, but numbers are the lifeblood of your MSP. A combination of synchronized systems, automation, and reporting can give you the insight you need to make good high-level financial decisions.
This enables you not to leave anything to ‘chance’. In terms of finances, everything is known and accounted for.
As you can see, having your financial and accounting systems working in concert can alleviate many of the challenges MSPs face in terms of financials.
Integrating systems which are synchronized and accurate allows executives and staff to better understand the financial standing of the organization.
By implementing these best practices, your MSP’s financial and accounting systems will be efficient and precise.
Download our free guide to learn how MSPs can change their business approaches to maintain high profits in 2021. In this guide, you will find:
- Key ways to analyze your opportunities and business health
- Practical steps for boosting your profits
- Tips on how to review your marketing strategy