Everything in business has an ROI. Calculating ROI isn’t always easy because it’s hard pin down exact costs sometimes, but every action you take – and every action you don’t take – can be distilled back into an ROI type of calculation.
Let's take billing reconciliation, for example. If you’re doing this manually, you’re putting in hours. It might not be much more than that – you're already paying for the vendor portals, the PSA and the Excel spreadsheet. Those sunk costs don’t count.
It’s the hours that matter.
Not just the hours you spend doing billing reconciliation but what you would otherwise be doing if you weren’t spending that time doing billing reconciliation.
The direct costs of billing reconciliation are easy – the cost of your time.
Direct cost = $/hr of labor x # of hours
How do you value your time? If you billed your time to a client, what would that dollar figure be? If you’re billing at $200 per hour and you spend 10 hours a month on billing reconciliation, that’s $2000 just in direct costs.
Maybe you hire someone to handle this. What is that cost? Bookkeepers might not be $200/hr but they aren’t free. Take a moment and run this calculation.
Then there’s the indirect costs of doing billing reconciliation. What does it take out of you?
We asked MSPs how they felt about billing reconciliation, and the responses ranged from “annoyed” and “frustrated there isn’t an automated tool” to “I want to go clean toilets at McDonalds because it would be better than having to do this.”
Not everything you’re going to do in business is fun, but dealing with this kind of visceral, negative emotional state is just not good for your health. There might not be an easy-to-calculate dollar value to these indirect costs, but take a gander at stress symptoms and ask yourself which one of these you could do without this month.
Costs of Inaction
A lot of MSPs we’ve talked to report that they often procrastinate on billing reconciliation. Or that they only reason they don’t procrastinate is because they’d miss out on too much revenue. Estimates ranged from 3%-10% of revenue leaked by not doing billing reconciliation. That’s a ton – thousands of dollars a month even for a small MSP.
In some cases, it’s the difference between a healthy profit and a struggling operation.
One large MSP discovered $3500/month in lost revenue; $42,000 total. That was on one service, for one client.
If you’ve never missed out on any revenue, more power to you. But chances are you have, and it stings to think about. What’s that number?
And if you don’t know how much revenue you’re missing out on, trust me, this is one situation where ignorance is not bliss.
The other big cost of doing billing reconciliation right now is the opportunity cost. You know better than I do what your priorities are in life right now. Ask yourself:
"What would I rather do with those hours that I spend on billing reconciliation?"
We feel best in life when we’re contributing to something bigger than ourselves. Maybe it’s spending quality time with your family.
Maybe it’s working on your business, helping clients and providing employment for people.
Maybe you’d like to spend more time building a better community.
Right now, you’re not thinking about what you’re missing because of billing reconciliation headaches, because you don’t think you have a choice.
Now, you do have a choice.
Which makes more sense – doing billing reconciliation the slow, painful way? Or freeing up all those hours so you can do things that matter more, and help you get closer to your dreams?
Which one of those options feels better?
With things like billing reconciliation, the process just seems a bit too broken. Gradient has a fix. Check out Gradient Billable™.
Because delivering IT services is hard enough. Running your MSP business shouldn’t be.
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