According to PYMNTS, billing disputes and communication breakdowns result in an average of $4 million in unpaid B2B invoices. MSPs that rely on manual processes and legacy systems for billing face hurdles like cash flow bottlenecks, interrupted services, client dissatisfaction, and wasted resources. 

The complex nature of MSP pricing models, combined with recurring billing and diverse client requirements, makes financial management a challenging task for MSPs. They must fulfill the diverse financial needs of their clients and generate recurring bills according to the complex pricing structures and billing cycles for each client. Without proper systems, they face billing errors and disputes over charges.

Timely and accurate invoicing improves cash flow by minimizing the Days Sales Outstanding (DSO), which is over 60 days for 42% of businesses. Billing transparency helps build trust with clients and strengthens buyer-supplier relationships. Clients are more likely to continue their relationships with MSPs with efficient and reliable invoicing and payment collection processes.

This article will address common billing challenges MSPs face and offer solutions to streamline processes.

{{toc}}

Understanding the 5 Common MSP Billing Challenges

MSPs using manual billing may face payment delays or disputes due to errors like incorrect amounts or missing details. Fixing these errors requires time-consuming follow-ups and corrections, frustrating clients.

According to Atradius, 55% of all B2B invoices are overdue, causing company cash flow problems. MSPs facing cash flow disruptions find it hard to sustain operations, pay staff, or invest in growth.

Client misunderstandings due to unclear invoicing may lead to payment disputes or lost business. Not properly discussing and establishing due dates, payment methods, or late payment consequences reduces the client’s priority of making timely payments.

Inefficient MSP billing systems leave your finance teams struggling to monitor overdue payments and send reminders promptly. It delays payment collection and also impacts client satisfaction due to inconsistent follow-ups.

Here are some common MSP billing challenges:

1. Manual Invoicing and Payment Processes

Using manual methods to draft invoices may seem manageable initially, but it quickly becomes unsustainable as your client list grows. Errors like miscalculations, incorrect details, and missing items can cause client disputes or delayed payments. 

According to PYMNTS, manual payment processes require 67% more time for follow-up and 30% longer DSO. These delayed payments create an inconsistent cash flow and impact your operations. MSPs can save time with automated payment collection and spend it on delivering better services.

2. Integration Issues with PSA and Accounting Tools

MSPs use Professional Services Automation (PSA) tools like Autotask, SuperOps, and ConnectWise; and accounting tools like QuickBooks Online, QuickBooks Desktop, and Xero to manage operations and accounting.

If your billing software does not integrate well with these tools, it can lead to data discrepancies, like mismatched invoices or duplicate entries. These errors increase workloads and affect billing accuracy. 

According to The 2023 Global Managed Security Survey, integrating technology solutions is a challenge for 32% of MSPs. Poor integration may lead to data synchronization errors and slower payment processing times. It impacts real-time payment reconciliation and service delivery, leading to client dissatisfaction.

3. Payment Collection Delays

According to MSP Insights, the average MSP payment cycle is 60 days or longer. Delayed payments disrupt cash flow as MSPs operate on tight profit margins. 

Late approvals, missed payment deadlines, poor follow-up, or outdated billing systems can lead to overdue invoices that disrupt business operations. 

Clients may become dissatisfied if they experience service interruptions or extra fees from late payments, leading to lost trust and business opportunities.

According to Upflow, 66% of outstanding invoices are at risk of non-payment. It can result in a significant loss of revenue for MSPs. It also hampers your ability to accurately forecast your MSP’s revenue and manage your accounts payable. The challenge amplifies when dealing with multiple clients with varying payment cycles and terms.

4. Client Disputes Due to Billing Errors

According to Deloitte, 48% of B2B customers get frustrated as they struggle to find accurate pricing information. 

A legacy MSP billing system that generates confusing or inconsistent invoices makes it hard for clients to process payments, resulting in billing disputes. These disagreements are further increased by errors in payment terms, due dates, accepted payment methods, and penalties for late payments.

Correcting billing errors and pursuing overdue payments for disputed invoices wastes time and money. It also damages your MSP’s reputation and adversely impacts relationships with clients. Recurring billing disputes may even lead to customer churn and loss of business.

5. Complex Billing Structures

MSPs frequently rely on various service offerings and variable pricing models, including hourly rates, fixed fees, usage-based charges, and subscriptions. These flexible pricing models allow for tailored client engagement but complicate billing. Inconsistent or overly complex invoices confuse clients.

Charges for plan changes, add-ons during the subscription, and one-time charges further complicate your MSP bills. 

Clients may dispute invoices if they cannot understand what they are paying for or find discrepancies in their bills. 

According to Mastercard, every dispute costs merchants $15-$70 in operational costs. Additionally, if the invoice does not provide a clear breakdown of all charges, it can be challenging to resolve these disputes.

5 Effective Strategies to Overcome Billing Challenges

Streamlining billing processes is essential for your MSP’s financial health. It ensures timely and accurate invoice generation and submission to your clients. You can save overhead expenses on payment reminders, follow-ups, and dispute settlements.

In addition to saving costs and time, a streamlined billing process improves customer satisfaction. 

Real-time payment reconciliation eliminates downtime due to payment concerns, and minimal follow-up strengthens client relationships. 

Here are effective strategies to overcome MSP billing challenges:

1. Automate Invoicing and Payment Processes

MSPs can significantly reduce time spent on manual data entry by automating invoicing and payment collection. 

The billing system creates invoices based on schedules or client agreements on scheduled dates. It leads to faster payments by minimizing errors and ensuring invoices are sent on time and to authorized personnel only. 

For example, a Detroit-based MSP, TAZ Networks, saved 30% of its invoicing time with FlexPoint’s AutoPay. It saved time spent chasing past-due payments, manually sending QuickBooks statements, and re-sending invoices to clients. 

‍FlexPoint’s passwordless client portal helped reduce the company’s A/R aging by 4 times.

Automated MSP billing systems cut administrative burdens for your team. These also have built-in features such as automatic reminders for upcoming payments or overdue invoices, making it easier for clients to track and make timely payments. 

Faster payments and less time spent on administrative tasks improve your MSP’s financial health.

2. Integrate Billing Software with PSA and Accounting Tools

Integrating billing software with PSA tools and accounting systems synchronizes all your financial records. It enables real-time data sharing between systems and provides a seamless flow of information from invoicing to bookkeeping. It reduces the requirement for manual data entry and minimizes errors.

For example, a Modesto-based MSP, Circuit Saviors, improved 30% efficiency by integrating its QuickBooks with FlexPoint’s platform. The company saves 16+ hours per month with FlexPoint’s AutoPay feature since there is no need to match each payment to its contract or set amounts manually.

With integrated billing software, your MSP can generate detailed and real-time reports on financial performance, client payment history, and revenue trends. These insights can help you make informed pricing strategies and budget planning decisions.

3. Implement Payment Reminders and Follow-Ups

According to PYMNTS, manually collecting payments requires 30% more time for follow-ups than automated methods.

Automated billing systems help MSPs improve their collection rates by sending timely reminders of pending and upcoming payments. They notify clients through their preferred channels, such as email or SMS.

For instance, Columbus and Ohio-based MSP SkyCamp Technologies saves  8 hours each month with the automated reminders feature on FlexPoint’s portal.

Complete invoice visibility on their client’s passwordless portal increased the use of the AutoPay feature by 20% and helped collect late payments 30% faster.

Automated payment reminders and follow-ups reduce the risk of late or missed payments. It keeps your MSP's finances stable, letting you focus on delivering quality client services without interruption.

4. Streamline Billing Structures

MSPs offer a variety of services with flexible pricing structures to multiple clients. To reduce confusion, MSPs should adopt clear billing models that clients can easily understand. You can consolidate services into simpler packages, and provide clear invoice breakdowns and multiple payment methods.

For example, a Kansas-based MSP, Pileus Technologies, increased its new customers by 5% with FlexPoint one-click financing. The company scaled profitably with 80% faster payment processing times.

By offering alternative pricing structures, MSPs can reduce customer churn and charge disputes. Clear communication about pricing models helps set client expectations, and offering their preferred payment options improves satisfaction.

5. Enhance Transparency with Detailed Invoices

Transparency in billing helps maintain strong client relationships. Itemized invoices detail each service provided along with associated costs. It allows clients to see what they are paying for and reduces the chances of disputes arising from misunderstandings.

For example, a Houston-based MSP, WJP Technology Consultants, saves 15% on payment collection costs with FlexPoint’s interactive dashboard. 

The platform offers clients a unified view of upcoming payments and recurring invoices, making payment processing 3 times faster. 30% of its clients have switched to FlexPoint’s AutoPay feature to simplify payment processing.

Providing invoices through a client portal allows clients to access their invoices online anytime and reduces the likelihood of lost invoices. 

Features like real-time invoice tracking and payment history promote transparency. Clients can communicate with your MSP regarding billing issues or disputes through the client portal.

Conclusion: Simplify MSP Billing with FlexPoint

Streamlining billing is crucial for MSPs to improve cash flow, accuracy, and client satisfaction. An organized billing process ensures accurate invoices are sent promptly, reducing errors and disputes.

Integrating billing software with accounting tools enables MSPs to synchronize real-time data, reducing manual entry and errors. It reconciles and reports your MSP’s financial performance.

Implementing automated payment reminders and clear billing structures reduces late payments and enhances client trust through transparency. These improvements build stronger client relationships and contribute to your MSP's financial stability and growth.

FlexPoint provides billing tools tailored for MSPs. It tackles common billing challenges to improve financial health and client relationships for your MSP.

FlexPoint offers the following features to support your MSP's billing needs:

• Eliminates Manual Tasks: Automating tasks like invoice creation, sending reminders, and follow-ups saves time and cost of additional resources.‍
• Setting Custom Payment Rules: MSPs can establish custom rules for payment collection according to client preferences. Automatic notifications remind clients of outstanding invoices to ensure invoices are paid on time.‍
• Real-Time Data Synchronization: Integrates with your MSP-specific tools to eliminate duplicate data entry. Keeping billing information up-to-date reduces discrepancies and improves accuracy. FlexPoint also offers unique dual-syncing capabilities between ConnectWise PSA and QuickBooks Online/ QuickBooks Desktop.‍
• Secure and Easy Payments: The platform supports credit cards and ACH transfers, making it convenient for clients to pay. Passwordless authentication simplifies access while ensuring security.
• ‍Track Payment Trends: Analyzes billing trends and payment behaviors to help MSPs optimize services and tailor pricing to improve profitability.

By adopting FlexPoint’s innovative solutions, MSPs can position themselves for sustainable growth. It helps you stay competitive while maintaining solid relationships with your clients.

Ready to overcome your MSP billing challenges? FlexPoint’s comprehensive billing solution is designed to simplify invoicing, reduce errors, and accelerate payments. 

‍Schedule a demo today to discover how FlexPoint can streamline billing operations and enhance financial management.

Additional FAQs: Addressing MSP Billing Challenges

{{faq-section}}