How to Fix Your Cashflow: B2B Payment Strategies That Work

Business Focus Podcast

How to Fix Your Cashflow: B2B Payment Strategies That Work

Struggling with cashflow challenges in your business? You’re not alone, and we’ve got the insights to help you thrive. In this episode, Brendan Ritchie sits down with Paul MacNeil, VP and GM of Payments at ConnectWise, during the IT Nation Connect conference in Orlando. Paul shares his journey from running an MSP to developing tools that revolutionise how businesses approach payments and cashflow.

Episode Highlights: 

• Why cashflow is the oxygen of your business.
• The hidden costs of delayed payments and how to tackle them.
• Strategies to move clients to direct debit seamlessly.

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The Cashflow Conundrum: How Businesses Can Ensure Timely Payments and Financial Stability

In the world of business, the phrase “cash is king” isn’t just a cliché—it’s a reality that underpins the success or failure of enterprises across industries. Whether you’re an MSP (Managed Services Provider) or a mid-market business, cashflow challenges can stifle growth, complicate decision-making, and in severe cases, threaten your very existence.

Paul MacNeil, VP and GM of Payments at ConnectWise, brings a unique perspective to this conversation. Having transitioned from running his own MSP to helping businesses streamline their payment processes, Paul offers invaluable insights on managing cashflow effectively and building financial resilience.

Why Cashflow is the Lifeblood of Your Business

Cashflow isn’t just about having money in the bank; it’s the oxygen that keeps your business running. Paul emphasises that “from the moment you issue an invoice until the payment lands in your account, you’re losing money.” Time, resources, and human capital are consumed during this period, eroding profitability.

For many businesses, the crux of the issue lies in delayed payments. When your Day Sales Outstanding (DSO) stretches beyond acceptable limits, it can severely impact your ability to invest in growth opportunities, pay bills, or even meet payroll.

Paul’s own MSP struggled with a DSO of 48 days—a figure that might seem reasonable in corporate settings but was crippling for his business. By automating payments and adopting a direct debit system, he slashed his DSO to just 4 days. This transformative change not only improved cashflow but also enhanced the overall financial health of his business.

The Hidden Costs of Late Payments

Beyond the immediate impact on cashflow, late payments incur hidden costs that can weigh heavily on businesses. These include:

• Lost Opportunities: Money tied up in unpaid invoices cannot be reinvested.
• Operational Inefficiencies: Chasing payments consumes time and resources.
• Increased Risk: Prolonged payment delays heighten the risk of bad debts.

Paul notes that businesses often fail to consider the opportunity cost of delayed payments. The longer it takes to collect, the less value you can extract from every dollar earned.

Automating Payments: The Game Changer

Automation is not just a buzzword—it’s a necessity for businesses seeking to streamline operations and improve cashflow. Paul’s experience demonstrates how automation can alleviate many of the pain points associated with traditional payment collection methods.

• Predictable Cashflow: Automating payments ensures consistency and reliability, enabling better financial planning.
• Reduced Risk: Automated systems quickly flag failed payments, allowing businesses to address issues proactively.
• Enhanced Efficiency: Automation frees up valuable time, allowing teams to focus on growth rather than administrative tasks.

Paul’s recommendation for businesses? Start now. “The best time to implement automation is today. If you’re not already doing it, you’re leaving money on the table.”

Overcoming Objections to Direct Debit

Many businesses hesitate to implement direct debit due to perceived resistance from clients. Common objections include concerns about fees or a reluctance to change established processes. However, Paul argues that these barriers are often overstated.

By framing direct debit as a non-negotiable part of the business arrangement, you can set clear expectations with clients. “When we rolled out direct debit, we made it simple: invoices were issued on the first of the month, and payments were collected on the same day,” Paul explains. This predictability not only benefited his business but also built trust with clients.

Building Better Relationships Through Timely Payments

The relationship between timely payments and strong business relationships cannot be overstated. Paying suppliers promptly fosters goodwill and can lead to better service and responsiveness. Paul shares an anecdote about his electrician, who prioritised his calls because of his reputation for quick payments.

The same principle applies in reverse: when clients pay on time, businesses can allocate resources more effectively and maintain a higher standard of service.

Practical Tips for Getting Started

If your business is grappling with cashflow challenges, here are some actionable steps to get started:

1. Evaluate Your Tools: Platforms like Wise-Pay integrate with accounting software such as Xero and QuickBooks, making it easier to automate payments.
2. Educate Your Team: Ensure your team understands the “why” behind automation. Resistance often stems from a lack of understanding.
3. Communicate With Clients: Clearly explain the benefits of direct debit, both for your business and theirs.
4. Incentivise Automation: Consider offering discounts or other incentives to encourage clients to adopt automated payments.
5. Monitor Progress: Regularly review metrics such as DSO to measure the impact of your efforts.

The Bigger Picture: Surviving and Thriving

Paul’s journey underscores a critical truth: businesses that prioritise cashflow management are better positioned to survive and thrive. Whether you’re a small business owner or a mid-market leader, addressing cashflow issues head-on can unlock opportunities for growth and stability.

As Paul succinctly puts it, “Revenue is vanity, profit is sanity, but cash is king.” By implementing the right tools and strategies, you can ensure your business remains financially healthy and resilient in the face of challenges.

For more insights on improving cashflow and automating payments, visit Wise-Pay and explore how their solutions can help your business succeed.