Credit Control for IT & MSP Businesses: When Complex Billing Creates Cashflow Problems

IT and MSP businesses can have some of the more complicated customer accounts I come across.

One customer might be paying for monthly IT support, Microsoft 365 licences, other software subscriptions, hardware and project work, all invoiced in different ways.

When everything is kept up to date and customers pay exactly what they're invoiced, that's fine.

The problems tend to start when something changes.

I recently spent some time helping an IT business get their customer payments reconciled. Their invoicing wasn't the problem. Invoices were being raised and sent to customers as they should be.

It was everything that happened afterwards that had become difficult to keep on top of.

And if you're going to chase a customer for money, knowing exactly what they genuinely owe you is pretty important.

IT billing can get complicated very quickly

User licences are a good example.

Let's say you're billing a customer every month for 30 Microsoft 365 licences and then one of their employees leaves.

If that information doesn't make its way through to the right person and the additional licence isn't cancelled, the next invoice still includes it.

The customer spots the problem and queries the invoice. They might hold the whole payment while they wait for it to be corrected, or they might pay everything they agree with and leave the disputed amount outstanding.

Neither is necessarily a major problem if it's picked up and sorted quickly.

But if it isn't resolved before the next billing run, another invoice goes out with the same charge on it, and now you've potentially got two invoices being queried.

Leave it another month and you've got three.

At that point, continuing to send payment reminders isn't going to achieve very much. Someone needs to find out what's happened, get the query resolved and establish exactly what the customer should be paying.

And this is where another problem can creep in.

The customer might decide to pay everything they believe they owe while the disputed amount is being sorted out.

Great. Money has arrived.

Except they haven't sent a remittance advice.

If they have several invoices outstanding for support, licences, hardware and project work, it might not be immediately obvious what that payment relates to.

Allocate it against the wrong invoices and your records no longer show the true position.

The next time someone does the credit control, they could end up chasing the customer for an invoice they've already paid while the balance they genuinely haven't paid gets older.

That's not a great conversation to have with a customer, particularly when they're completely right to say they've already paid it.

An overdue invoice doesn't always mean you've got a bad payer

This is something I think gets missed when people talk about credit control.

If an invoice is sitting in your overdue column, the natural reaction is to chase the customer for payment.

But first, you need to know why it hasn't been paid.

Perhaps they're waiting for a credit note. Maybe a licence or service has been billed incorrectly. They might have made a part payment that hasn't been allocated properly. Or there could be a query sitting in someone's inbox that nobody has picked up.

None of those problems will be solved by repeatedly sending the same overdue reminder.

Good credit control means understanding what's happening on the account and following it through.

If there's a query, get it resolved. If a customer promises to pay on Friday, check that the money actually arrives. And when payments do come in, make sure they're reconciled properly so the next conversation you have with that customer is based on accurate information.

That's particularly important as an IT or MSP business grows.

What was fairly easy to keep track of with 20 customers can look very different with 100 or 200. There are more invoices going out, more licence changes happening, more queries coming in and more payments hitting the bank.

And when the people responsible for managing all of that are also doing several other jobs within the business, it's very easy for things to start slipping.

A few things that can make life easier

A lot of these problems are much easier to prevent than they are to untangle afterwards.

If you're billing for user licences, make sure there's a clear process for telling whoever handles the invoicing when licences are added, removed or changed. It sounds simple, but if that information doesn't reach the right person before the next billing run, you're potentially creating a query before the invoice has even gone out.

I'd also make sure somebody is checking and reconciling payments regularly rather than waiting until it's time to do the credit control. If a payment arrives without a remittance advice and you can't confidently allocate it, ask the customer while the payment is still recent rather than trying to work it out three weeks later.

And when a customer raises a query, don't just make a note of it and move on to the next overdue account. Find out who needs to resolve it and follow it through. Once it's sorted, go back to the customer and agree what happens with the outstanding payment.

The same applies to promises to pay. If somebody tells you they'll pay on Friday, make a note to check. If Friday comes and goes without the payment arriving, follow it up.

None of this is particularly complicated.

The difficult part is doing it consistently when you've also got customers to look after and an IT business to run.

Credit control is only one part of getting paid

This is why I don't think of credit control as simply chasing overdue invoices.

By the time you're making that phone call, quite a lot has already had to happen properly.

The invoice needed to be raised correctly and sent to the right person. Any queries needed to be picked up and resolved. When payment arrived, it needed to be allocated correctly. And throughout all of that, somebody needed to know what was happening and what needed following up next.

That's the process INcharge manages for our clients.

We look after everything from raising the invoice through to reconciling the payment when it arrives, dealing with queries and consistently following up outstanding payments in between.

For an IT or MSP business with recurring services, licences, hardware and project work all being billed in different ways, having someone taking ownership of that process can remove a lot of the confusion - and a lot of work.

It also means that when you look at the amount your customers owe you, you can have confidence that it's actually right.

Because before you chase an outstanding invoice, you need to be certain it's genuinely outstanding.

A sale isn't a sale until the invoice is paid.