Businesses across the globe are hurting to some degree with the impact of the COVID-19 pandemic. Some, like grocery stores and disinfectant producers, are hurting due to increased demand for their products and services, but their supply chain is unable to keep up. However, most businesses are hurting because their products and services are not needed to the same scale as before the crisis set in. From ConnectWise’s relationships with thousands of partners, we know this is hitting our managed services provider (MSP) vertical—dependent on geography—from a minimal impact to a crippling impact.
A common question being asked to all suppliers, including MSPs, is, “I have less cash coming in my door, so I can’t afford your services anymore although I still need them. Can you lower my invoice?”
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So, how do you respond? You may be thinking, “Can I keep these clients, or will I lose them?” You need to maintain a strong relationship with your client while still staying solvent. When customers can’t pay or ask for pauses in contracts here’s what you can do:
Consider the Options
You don’t want to be a driving force in crippling a good relationship—but the truth of the matter is, a sudden economic downturn wasn’t something anybody expected. Being flexible and showing your clients you are compassionate to their needs while still maintaining your business is key.
Look at all the options available that you can modify within the agreement before pausing or cancelling completely. Modifications such as offering increased payment options or payment deferral could be a wise precaution to help prevent the loss of clients. For example, you could consider implementing one or more of the following:
Lower Invoice Dollars
One solution is actually lowering the cost of invoice dollars. This is not necessarily the best option in terms of cash flow management, but it could prevent loss of the client altogether and reaffirm your company’s dedication to your clients.
If you can’t afford the financial burden of lowering the invoice, you could offer an extended term of service to your client for the same price. In this sense, they are getting more than their money’s worth, but over a longer period of time, which gives your business time to financially recuperate.
Consider removing cost of goods sold (COGS), which can include products, licenses, and more.
By removing specific services, you’re allowing your client to stay on board and still receive the services that are absolutely necessary for their business to function. This also lowers labor COGS.
If you modify services or products, you can either add more value to a package for your client making the financial burden more of a valuable investment, or offer a more simplified package to your client at a more affordable rate. Either option provides opportunity to retain cash flow.
By implementing one or more of these options, you are showing your client that even if you cannot afford to lower invoices. This shows that you are doing everything in your power to help them while still protecting your business, and this not only protects your cash flow, but your reputation as a trusted adviser.
Find a Compromise
You want to settle for an option that is in both parties’ best interests. Using the options above, work with your clients directly to gauge what would be best for them and their current situation to find an agreeable solution. What is most important when coming to an agreement is being absolutely certain your client knows and understands the impact to services and price.
Once options are agreed upon by both parties:
- Agree on a term/length, or at minimum a date to sit down and review the current arrangement
- Sign new contracts
- Reinforce your business as a key partner for this client
What if You Cannot Agree on a Compromise?
The worst-case scenario—your client wants (or needs) to breach the contract. In this case, enforce the terms of the contract and then terminate the contract. However, just because your client has to breach the contract, doesn’t mean they won’t want to return to you for services in the future. Be sure you consider this when going through the termination process.
Once new contract terms are negotiated, be sure to stay invested in the success of your client’s business—NOT just their ability to pay their bills. The same principle applies when a client has to breach a contract.
You need to show you care. If you are interested in retaining a client and keeping your relationship strong, make sure you end up with a “win/win” scenario where everyone feels like they made the right decisions. This shows you view them as a partnership, not just a key factor to cash flow.
It is more important than ever to get your cash flow management under control.