Business Technology

Getting the right financial insights for your MSP company

By October 2020No Comments
Getting the right financial insights for your MSP company Beyond Accounting

In a managed services provider (MSP) company, services and consultancy are largely built around pricing for time. Selling equipment is financially straightforward, but managing jobs so that you can bill accurately for the cost of delivering your service is crucial. We have a lot of clients in the MSP sector, and we’ve seen some of the issues they’ve had getting a seamless system up and running.

The professional services automation (PSA) systems on the market for the MSP sector will often include functionality in client relationship management (CRM), job management, timesheets, and billing. Finding a tool that does what you need but that you also get good value from can be tricky. It’s possible you may only use 50% of the features you are paying for.

The financial questions your MSP system should answer

As accountants, we would expect a good MSP solution to be giving you actionable financial insights in real time. Are you able to easily answer questions such as: Who are my top customers? Which customers are profitable for me? Which customers aren’t profitable? Who on my team is delivering value? What margins am I making on Microsoft products? Do I make any money on hardware? Can you pull those answers easily out of your existing system?

When we sit down with our managed services clients, we study the reports and have conversations around where turnover is, whether the company is growing, and what profitability levels are being achieved. If we see that things aren’t as good as we’d expect, we will dig into the numbers to find out why. At this point, we’ll have more nuanced queries that a good system should be able to answer, for example:

  • How many clients are on repeat contracts?
  • What amount of revenue is not yet accrued?
  • What’s the margin for xxx?

Effective operations impact the bottom line

We’re getting into the area of operations here and often clients will find that their system isn’t able to break things down in a way that gives them actionable insights. But when they have a platform that can answer these questions and when they look at the information on a regular basis instead of on a quarterly or maybe even yearly basis, they can make changes that have a substantial effect on the Profit & Loss account.

Training the team so they understand the system thoroughly is a wise investment. Running a profitable MSP is as much about people as about the system, because the team has to input the information needed or you will get no value from the software. At its simplest level, you need to know that the work you are doing is being paid for if your business is going to make money. Even the best systems still require people to make sure that everything is logged and there is no leakage.

Generally speaking, the connectivity is good with these services as they are cloud-based and so have good integration with other systems. They all integrate with Xero, although for some the integration takes a little more work. PSAs we typically see used are:

Autotask: “IT business management software

Autodesk, from Datto, integrates with over 150 tools. Features include service desk, project management, account management, time and billing, inventory and procurement, resource management, and automation. But Autotask is a more entry-level offer.

ConnectWise: “IT management and MSP software

ConnectWise is a more comprehensive solution. It’s a global brand with a large office in the UK. Because this kind of platform is highly complex, you do need to work with an expert to get yours set up the right way for your business. To really get the benefit from this type of company-wide system, you should probably have someone available to regularly review and optimise the integration.

Freshservice: “ITSM system

Freshservice, from Freshworks, pitches itself as a “simple” solution but is suitable for mid-market enterprises as well as SMEs. Freshworks has a range of products in areas such as sales, team management, virtual call centre, marketing, etc.

Kaseya: “IT Complete

Dublin-headquartered Kaseya calls itself “the industry’s first & only unified MSP growth platform”. They also have a range of products – all focused on the IT space.

Microsoft Dynamics: “CRM and ERP applications

With the power of global giant Microsoft behind it, Dynamics 365/D365 gives a lot of flexibility and scalability. You can pick and choose which apps you want to deploy, making it a cost-effective way to grow your business. Thanks to our familiarity with other Microsoft products, most people find the UI intuitive and easy to use.

What’s next for these automation solutions?

I spoke to John Crowe, of Automate Technology, who has used a wide range of PSAs over the years and knows the market well.

Autotask, Kaseya, and Connectwise are very feature-rich but do feel quite clunky to use. Ultimately, I think they will need to be rewritten to compete with PSAs such as Freshdesk (I’d also add Zendesk and Atera as good alternatives) on UI/UX. The options like Freshservice, while easier to use, still lack core functionality for MSPs in terms of work types. Generally speaking, this industry has been fairly static for a while.”

I asked John how easily these solutions address an MSP’s biggest need: accurate billing.

“We have to log the time spent but also the nature of the work – some work types are included in a contract and some aren’t – because it’s essential that when the time comes to bill we aren’t wading through oceans of records to produce an invoice. A system is only as good as the data that’s put into it, of course. But ultimately you may have to balance taking a little extra time to input data into your system with the increased revenue from accurately billing for work.

When it comes to integration with Xero for seamless billing, there are differences that can impact on efficiency. For example, in Freshservice you tick a box to say if the job was billable, but with so many different contracts and scopes of work, how can the technician or engineer be certain what should be invoiced and what shouldn’t? When your business is small, you can oversee this and make sure records are accurate, but that becomes impossible as the business scales. So this is a need that will have to be better addressed by many of the solutions out there.”

It’s clear that automation is where the market wants all of these solutions to go. Regardless of sector, we want seamless, two-way integrations of all our tools, allowing us to choose the best fit for each of our needs (marketing, project management, reporting, inventory, etc.) and have them connect simply and well so we have a unified understanding of our business and pinpoint accuracy when it comes to billing.

Xero is working hard to deliver this kind of experience with its OpenAPI and add-on marketplace. In fact, we have seen some good bespoke hybrid integrations implemented for our clients using the Xero OpenAPI. One of the platforms that handles this type of integration well is Apiant. However, I think we still have a way to go before we can take the onus off people doing the heavy lifting when it comes to inputting information.

At Beyond, we believe that technology should always impact your bottom line. That’s why we help our clients with the selection and implementation of smart business systems, allowing them to make more informed business decisions. Get in contact today.
Rory