The cash flow playbook: how to manage your most valuable resource

  • Sierra Pacific Group Team
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    Sierra Pacific Group Team

  • March 28, 2023
  • 3 minute read

Cash flow is oxygen for your company — without it, your business dies. That's why it's the #1 variable you should be tracking. 

Adam Bielanski, Founder & CEO of Sierra Pacific Group (SPG), saw the perils of poor cash flow firsthand while running his MSP during the recession 15 years ago. Now, he’s built SPG to help clients truly understand their numbers and use them to supercharge scale and efficiency. 

At SPG, we stress that exceptional cash flow looks like: 

  1. Visibility into your numbers at all times

  2. Short DSO (Day Sales Outstanding)

  3. Automated payment flows

To help providers on their way, SPG recently hosted a webinar on achieving end-to-end financial automation. We covered everything you need to know about QuickBooks, Wise-Sync, and creating online systems to better manage cash flow and process efficiency. 

In this first recap, we cover:

  1. What you need to know about accounts receivable

  2. How integrated systems enable accuracy & business intelligence

  3. SPG’s core KPIs for healthy financials


What you need to know about accounts receivable

Paul MacNeill, Founder & CEO of Wise-Sync, has his own stories of a struggling finance team. 

Years ago, his bookkeeper lacked essential visibility into their ConnectWise implementation. 

That blindness to real-time cash flow created a disconnect between systems. There was an immense delay between a new month beginning and Paul receiving the last month’s numbers. 

Looking to save the business, he realized he needed to overhaul his accounts receivable. 

Today, he knows nothing else matters if you're not controlling your AR. After all, if you're not getting paid, you can't do anything else. 

3 need-to-know AR tips for MSPs

Once Paul honed in on the mechanisms that ensure timely payment, his DSO plummeted. 

Ultimately, visibility into the numbers, efficiency, and solid cash flow equipped Paul with business transparency to scrutinize acquisitions and drive the company toward profitability. 

Through this situation, he came away with some need-to-know tips for MSPs: 

  1. Your business won't make a penny if you're still sending invoices. Automation is key. 

  2. You are not your clients' bank. Focus on getting paid sooner. 

  3. Nothing creates profit like ensuring your cash flow. 

Understanding the impact of DSO

To be clear, your clients aren't in the habit of withholding payment. 

The issue is the time between making a sale, invoicing the client, and collecting the money. 

Clients pay you per your process, so make your process work for you. At SPG, we see time and time again that automation and streamlining are the answers. 

Through integrated systems that are checked weekly, you ensure sales, cash flow, and the longevity of your business. Getting your DSO down and maintaining integration efficiencies across your financial process synchronizes the entire machine. 

As a result, your business is empowered with info to make the best decisions. 


How integrated systems enable accuracy & business intelligence

To ensure you get accurate numbers, you need two things:

I. Integrated accounting systems and financial tooling

Integrating your accounting systems and a great tool stack will feed your business intelligence. 

In other words: Essential business intelligence is inaccessible without steady information flow. So, use automation to your advantage and avoid creating tech silos that hinder that info.

II. Understanding of how you track revenue and actively collect cash

If you’re struggling to find the best payment collection method for your company, SPG recommends leveraging down payments. These will ensure you have cash in your deferred revenue account that you can allocate against future income. 

For MSPs, everything ultimately comes back to cash flow. 

It often acts as the point of reference for all other actions in your business. 

For instance, when your working relationships improve, so does cash flow. Customers who trust your service quality will happily pay upfront. 


SPG’s core KPIs for healthy financials

Financial management comes down to core business functions. SPG helps MSPs and TSPs identify, understand, and optimize those functions. 

For instance, one accounting practice we highlight is separating income vs. profitability costs. 

Don’t just lump everything into one “sales” bucket. A summary is insufficient. Instead, you need detailed info from your accounting system to produce informative P&L sheets. 

SPG emphasizes these KPIs to clients

Of course, SPG measures basic client acquisition costs and top-line revenue for our users. 

We also stress measuring KPIs like: 

  1. Any AR over 30 days — What is your accounts payable balance? This should be measured on a weekly basis. 

  2. Number of deals opened — What’s your number of new monthly recurring contracts? What about net new non-recurring contracts? 

  3. Project stats — How many are open? What’s the number of service tickets completed? 

  4. Kill ratios (for tech & consulting services) — Have you killed more tickets than you’ve brought in during any given week? 

Understanding each of these levers will help you drive overall profitability. 

Cash flow is your most valuable indicator

Cash flow functions like a fire alarm — it indicates when you simply do not have enough money to continue operating your business. 

Corporate laws dictate that you’re insolvent when you don’t have enough money to pay bills when they’re due. That’s where personal liability comes in (AKA the point of no return). 

To steer as clear as possible from that path, companies double down on managing cash flow for clear indications of their financial performance. 

From there, they can knowledgeably balance their cash and sustainably invest in the business.

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