Cash Flow Mastery: Strategic Financial Planning for Growing MSPs

Join Becky Brown and Morgan Holmes, founders of Stride, as they share proven strategies for managing cash flow in growing MSPs.

Learn how to balance growth investments with operational stability, forecast cash needs accurately, and build financial systems that scale.

This session is specifically designed for MSPs generating $2MM-$10MM in revenue who want to make more informed financial decisions.

In this 60-minute session, you’ll learn:

Transcript

Steve: [00:00:00] I would like to introduce our guests. We have Becky and Morgan, both from Stride. Um, I’m, I’m confused. Becky, I think you’re listed as the founder. And then Morgan is listed, I think, as the CEO, is that, is that accurate? Morgan and I

Becky: are co founders.

Steve: We’re co founders. Okay. So I, I don’t know what I, I think I used AI to figure out what your titles are.

I don’t know. Um, so, okay. Co founders. Excellent. Um, what are you going to teach us about today? 

Becky: Cashflow. 

Steve: why don’t you dive in and see what we got? 

Becky: nice to see everyone. Uh, today I’m going to talk to you about cashflow.

Um, so stride is an accounting. accounting firm, and we do accounting for MSPs. We manage the day to day accounting. We manage the, um, the tax prep at the end of the year, and we also manage, um, we do advisory, cash flow advisory, financial statement advisory. Today we’re going to focus on cash flow. I’m going to start with a quote.

This quote is one of the earliest lessons I learned in business was that ballot sheets in income states. Statements are fiction. Cashflow is reality. So really that’s what it is. Cashflow is the reality. If you don’t have cash, you can’t keep going. Um, so I’m going to talk a little bit about how you can manage cashflow in your business.

And, um, [00:01:00] so I’m going to talk about cashflow from operations and then Morgan’s going to talk about cashflow, other types of cashflow. So from operations, accounts receivable is of course, right? The, the lifeblood of any business. It’s, it’s, We’re beginning, right? And without cashflow, even the most profitable company can run into trouble.

So one thing that’s super important is when you’re making an agreement with a new customer is really agreeing on the payment terms. And that doesn’t just mean, you know, how, when they’re going to pay you. It’s really about what is the process of you getting paid in multiple situations. So hardware, you want to get paid in advance for hardware because you don’t want to become a bank.

So you don’t, when you’re buying something or you have to spend money on your, on your customer’s behalf, you don’t want to be putting that money out before you get paid. Um, for, uh, if you have a monthly agreement, an ongoing agreement with a client. [00:02:00] Getting them to pay in advance up front with a ongoing agreement to auto pay.

That’s best practice. That way you’re not chasing money every month. You have predictable cash flow and there’s no reason to discuss it because you’ve already agreed upon it on that price for a certain amount of time. And then for projects, getting paid, if it’s going to be a big project or even a small project, 50 percent upfront.

It makes, it gives that client a real commitment. They have the skin in the game, um, and that way you’re not out of pocket and you can cover your expenses that come up during, during that period. So it’s super important to, you know, get paid, get cash, not just be able to send a bill out 30 days after you do the work and then have it be paid 30 days later.

That’s going to hurt your cash flow and you’re gonna, and you’re gonna have problems when it comes to, uh, when it comes to making [00:03:00] payroll and paying your bills. Another way to really to manage your cash flow through operations is with accounts payable. We have, uh, we see a lot of times that people are eager to pay their vendors as quickly as possible, which is great.

However, if a vendor gives you net 30 terms, take advantage of it, pay when it’s due. Don’t pay late, pay it on time, but pay it when it’s due rather. That will save your cashflow for you to do other things throughout that 30 days. 

Steve: I’m sorry. No, I’ve heard, um, when I ran my MSP, I had, I had clients who would always pay me like 10 days late and it was just another strategy of managing cashflow.

So you’re saying pay, don’t, don’t pay late, you know, pay it on time. Don’t pay early if you don’t have to, what’s the benefit to paying a few [00:04:00] days late?

Becky: Well, the benefit to paying a few days late, the benefit is to the customer because they’re getting their cash flow for 10 extra days, right? That’s why you would want to have an agreement with them that after a certain on the due date it will auto pay Okay, so that’s more in terms of like when you’re making that agreement with them.

It’s not just about yeah You’re going to do the work and they’re going to pay you. How are they going to pay you? And make sure they pay you on time, have a payment method on file that you’ll charge in case they don’t pay it earlier. 

Steve: I like that idea. 

Becky: Yeah, so that’s, I mean, it’s a way, go ahead. 

Morgan: I was going to say also if you’re paying late, Steve, oftentimes contract terms have late payment fees.

And I know, for example, uh, most professional services will, uh, have interest on unpaid balances. So it’s, it’s not uncommon to see. A vendor have one and a half percent per month [00:05:00] interest rate on unpaid balance. So paying, paying on time is great. Paying early is, you know, cuts into your cash flow. 

Becky: And if you pay late and then that vendor doesn’t assess a late fee, then you’re going to keep paying it late because you’re like, Hey, here’s a cash flow tool.

I have 15 extra days to pay this vendor because they don’t ask me anything until 15 days late. So therefore I just got an extra 15 days. Whereas the ones who know that there’s going to be a late fee, they’re going to pay it on time because they don’t want that late fee. 

Steve: That makes sense. 

Becky: Yeah. And so I would say that when you paying bills late, yes, that’s a strategy, but you’re risking having interest or late payments or ruining a relationship with your vendor.

So hang on time is what we advise, but some vendors offer discounts for early payment. Any discounts for early payment, take advantage [00:06:00] of them though. That’s a time to pay early, but if there’s no discount, take the terms that they’re extending. Yeah. So, um, yeah. So when it comes to operations, really the big triggers that you have is when you collect from your customers and when you pay your bills, when the money goes out the door, right?

So. Getting that control and making sure that they’re timed, right. So, you know, your payroll, what are your payroll run dates versus when you’re collecting cash to make sure that you have the cash to cover the payroll, um, and, and just making sure that you’re not, you’re not having to dip into reserves or anything to run your operations.

Right. Just for the operational part. So I’ll let Morgan talk about some other ways that you can work on your cash flow. 

Morgan: Sure. Sure. So, so other than operations, um, there are a couple other ways to increase cash flow. Um, one is debt. So if you are [00:07:00] finding yourself in a situation where your operation. Cash flows aren’t aren’t sufficient to cover payroll or whatever, or you just find yourself in a spot where currently cash flows aren’t great.

But I know it’ll turn around down the road. Debt is a great way to fill that gap. So think about things like charging your, your bills on credit cards, get a home, not a home equity, but a line of credit or a home equity line of credit, but get a line of credit to kind of backstop some of those expenses.

Um, you straight debt. So bank debt is another way to get some cash in the door. Um, and then there’s lots of other ways. There’s factoring your receivables and stuff like that. So, um, so that that’s a great way to fill cash flow needs. Um, obviously. Debt generally is not great, but it is a good way to to increase your [00:08:00] cash flow needs, uh, short in the short term, um, you know, some pros of taking on debt.

Um, you know, it’s easy to get interest is tax deductible. And, uh, you know, your payments on the debt is, is pretty predictable. Um, some cons on taking on debt, obviously, uh, loading up your balance sheet with debt. Doesn’t look good for banks and vendors. And if you’re going to sell the company, you don’t want a whole lot of debt on your balance sheet.

Oftentimes, lenders will require personal guarantees or collateralization of assets. And then, uh, you know, payments are due regardless of whether you have income coming in or not. So, you know, those are the downsides to debt, um, on the tax side. So, I’m a, I’m the, I run the tax group at stride and on the tax side, we.

Look at are there ways to decrease my tax liability so that I don’t have [00:09:00] to put cash out to the internal revenue service for the franchise tax for whatever taxing authority. So minimizing taxes helps increase cash flow and then we always tell our clients to always know how much or an estimate of how much you’re going to owe in taxes for that year.

So that you know how much of that cash that’s sitting on your balance sheet. Okay. Doesn’t really belong to you. Ultimately, you’ll have to put that cash into the IRS or whatever taxing authority. Uh, you may be doing business, um, in that jurisdiction. So, so those are some other things. Um, on the, on the, you know, on the P& L side or the income statement side, um, we look at, you know, credit card fees.

If you can pass those credit card fees on to your customers, that’s a great way to increase your cash flow because you’re not, you’re not paying their fees. Um, again, avoiding late fees is a [00:10:00] great one. Don’t, don’t pay. Bill’s late when you can, you know, if you pay one day late, if you incur late fee, that cuts into your cash flow.

So, and then again, taxes get reduce your taxes, look for tax strategies to reduce your tax liability to increase your cash flow. 

Steve: And, you know, shameless plug, uh, alternative payments has the ability to pass those credit card fees on to your clients. 

Morgan: Yeah, yeah, we’ve, we’ve seen, we’ve seen, uh, you know, we, we look at a lot of tax returns in books and we’ve seen one set of books where they’re paying about 50, 000 a year in credit card fees and it’s, it’s an easy pickup, right?

I mean, that’s a 

Steve: salary. 

Morgan: Yeah. It’s also, it’s also a 401k contribution or something like that. Right? 

Steve: Yeah, 

Becky: it’s a 

Morgan: year of college for your kids. 

Steve: Yeah, I mean, there are [00:11:00] so many better things you could take that 50, 000 that you’re paying in credit card fees. And, and look, I know not all of you that are here are spending 50, 000 a year in credit card fees.

Some of you are spending more. No, some, some of you might only be spending, you know, 5, in credit card fees. Maybe you, uh, were smart and you have all of your clients on, uh, ACH or most of them on ACH. So, um, yeah, there, there are There are definitely ways that you can, you can save on the credit card fees. I would say ACH is, is one, uh, no brainer.

Especially, um, in, in today’s age of, of technology and the cloud and everything, you don’t want to be waiting on checks. That’s, that’s the, the worst way to manage cash flow is to send out an invoice to somebody. And wait for them to mail the check and hope it didn’t get lost in the mail. Or did they actually mail it?

Did they forget? Or are [00:12:00] they dragging their feet? Or whatever, right? Um, that was always, when I ran my MSP, that was one of my biggest fears was what if they want to mail me a check? Ugh, I’d rather just go pick up the check. Which, which stinks because now I’m out like, you know, an hour because I’m going out of my way to go pick up a check.

We have a 

Morgan: client, Steve, we have a client recently that instituted. So they were collecting checks and, and, you know, we helped them get off of that. They’re now doing ACH payments and they’ve now instituted a, uh, an internal, um, process, if you will, that if you mail them a check, they’re going to charge you a 25 fee.

Steve: Wow, that’s good job. And, and, you know, it stinks to like have to nickel and dime people, but at the same time, like, you know, to, to process a check and, and look, I’m sure I’m talking about. Uh, you know, alternative [00:13:00] payments, but it doesn’t matter if you use our platform or not right to process a check it, it takes additional time, which means you have somebody spending those, those resources, right?

So charging 25 as a convenience charge or whatever you want to call it to, to pay by check, I don’t see any problem with that, but you know what really grinds my gears? Um, my, my HOA, which you already don’t need me to say anymore, but um, my HOA, we just built a house in July. It’s our first house, which means it’s my first HOA.

They have a convenience fee for me to be able to pay online, whether it’s ACH or credit card. They charge me an extra 3. 50. It’s 

Becky: criminal. 

Steve: But I can mail them a check. My break doesn’t even do checks.[00:14:00] 

Morgan: Most people don’t even have checks anymore. 

Steve: Yeah. It’s 2025 guys.

Becky: What’s really funny is my son, my nine year old son got a check for something and he was like, Can I keep it? And he was so excited. He said, it says my name on it. And it was so funny because I had already deposited mobile deposits. So I was like, it’s worthless. You can have it. But he was so proud. Cause he’s like, I’ve never gotten a check before.

And I thought it was so funny. 

Steve: That is funny. Good for him. It’s like, you know, when you get your first 2 bill.

All right. Uh, cashflow. What else you guys got? 

Becky: How about any questions? Do we have any questions? 

Steve: Not yet. Oh. 

Morgan: Yeah, I mean, the other way to get cash on the door, uh, I don’t think it’s something that [00:15:00] most MSP, uh, Owners would want to do, but you know, equity is another thing, right? So, uh, if you, if you get yourself in a spot where, you know, you really need the cashflow and you’re willing to sell part of your business to get that cash, that that’s another way, 

Becky: you know, 

Morgan: or maybe you want a couple of your employees, you know, your key employees to be owners of the business, you know, have them buy into the business, you know, put some cash in.

So equity is another way, but probably not a very common way in, uh. In the MSP space, 

Steve: let’s talk about that for a moment. Um, I want to, I want to flush this out. So let’s pretend, uh, I am an employee at an MSP. Now in today’s day and age, let’s be honest. I’m probably making. Okay, money, you know, I’m not like, it’s not like I’m flipping burgers at McDonald’s, but it’s not also not like I’m the CEO, right?

So [00:16:00] maybe I only have a very small savings. Uh, what are some creative ways employees can get equity? Now, obviously, if, if the owner strapped for cash and they need the cash. This, this maybe doesn’t pertain, but, um, if maybe there’s an owner who is interested in, uh, giving a portion of the business to employees, or maybe the owner is just ready to retire and they want to find a creative way to give it to one or several employees.

How? How? How can you do it? 

Morgan: Yeah. So a couple ways that we see it done is, um, employers could grant the equity to to the to the employees. So, uh, I’ll give you Steve. I’ll give you 10 percent of my company. Um, you know, the downside to granting equity to, to Steve is that Steve now has an income pickup, right?

[00:17:00] So he, he has to pay the tax man for his, uh, for the tax on whatever value 10 percent equates to, right? So, so that, that’s the downside of granting equity. Um, you could grant equity on a, on a, on a schedule. So, you know, if you’re going to give 10 percent to. To Steve, you know, you could give Steve 2. 5 percent a year over a 4 year period.

Um, again, Steve still has the tax implications of that. So whatever that value is, when Steve receives that 2. 5%, you know, he’s going to owe taxes on that. And, you know, the downside to that is you owe taxes. And secondly. If you do it with the vesting schedule like that, you’re going to have potentially an increase in value over those four years.

So your tax bill may be going up as you’re getting that equity. 

Becky: The 

Morgan: other common way I see people giving equity to, um, to, uh, to employees is they’ll [00:18:00] give them the equity in exchange for a note. And so it doesn’t have the same tax implications because you’re not compensating the employee. The employee is actually purchasing the shares from you.

Um, they, they now owe you that money and you can extinguish that debt via distributions from the business. So, so that that’s a pretty common way to, um, to get ownership over to your employees. There’s other ways to, um, you know, if the owner wants out of the business, you could consider something like an ESOP or your.

Give basically giving the company to your employees through an ESOP. So not very common, but people do it. But the two most common ways are either granting equity to the employee or selling the shares and in exchange for a note or cash. 

Steve: Cash is king.

Becky: And if the business [00:19:00] owner needs cash and the employee has cash, they have leverage, right? It’s like they could, you know what I mean? Like it depends on the situation the business owner is in. Right. But if they need the cash and the employee has it. You know, that could be a win win situation. 

Morgan: I’m sure, Steve, you could even take that note from your employee and sell it somewhere.

I bet you could find someone to purchase the note. 

Steve: Interesting. That is really interesting. Now, um, another way that I’ve seen MSPs that are really strapped for cash is selling off their AR, I think is, is what it’s called, or there’s factoring. I think those two are slightly different. Or maybe they’re the same thing.

I don’t know. 

Morgan: They’re very similar. But yeah, I mean, one is basically just borrowing against your AR. So, or the other is selling the AR. So, [00:20:00] but they’re very similar where you’re, you know, collecting receivables and, and then getting cash for those receivables. I mean, Ideally, we have clients that don’t have receivables, right?

They’re getting paid up front for, for their services. They’re getting paid up front for whatever equipment that they’re purchasing and turning around and providing to their customers. And, you know, the only AR that they might have might be, you know, half of whatever project the MSP might be doing for them.

The half that they didn’t collect up front would be the only receivable. So, ideally, we, you want to stay away from the receivables if you can. 

Steve: Yeah. Yeah. I, I feel like, uh, factoring and selling off AR, that type of stuff is, is kind of like, uh, those payday loans. 

Morgan: Yes. That’s not cheap debt. 

Becky: Well, it’s not cheap.

And I, the, when I’ve seen people do factoring, it’s when they do business with like big [00:21:00] companies that pay on long term net 90 net one 20. And so they need to still function their business. And if they have a big appeal from a big company, they can get that factory, right? Like it’s a pretty sure they’re going to pay.

Whereas like, if I go and I say, I have, you know, Joe Smith’s coffee shop on the corner and I want to factor against it. They don’t, that’s not like a reputable company. It would be, I don’t even know that I would get it. So I think it’s more. It’s geared towards people who are doing business with really large companies and they’re paying on long terms 

Steve: And that’s that’s really good.

Um, you know, I always think of the the negative right? I always think of oh What what kind of predatory scam are people running with this nonsense? And that’s and that’s what I think of when it comes to payday loans You know, it’s I feel like they’re they’re taking advantage of people who are in you know Just a real crappy situation, or, uh, maybe aren’t [00:22:00] educated enough to understand that, that it’s a really bad deal or whatever.

Right. Um, I guess I didn’t think of factoring as, as a way to, to help you because you’re, you’re doing big business with crazy three, four, five month terms. Um, I can’t imagine letting somebody not pay me for half a year. 

Becky: It’s 

Steve: not quarter of a year. 

Becky: It’s your like It’s, it’s what, what do they call it? Like the, the advantage is you’re doing business with them and they could go do business with another vendor.

So if you wanna do business with this company, um, you’re gonna get, these are the terms we’re gonna give you and launch. 

Morgan: Yeah, yeah. We, yeah, we, we have a client that did a project for a major, uh, multinational corporation and the terms there were, you do the project, we’ll pay you in 90 days. Right. So, you know, there was a lot of, yeah, there was 120 days.

So there was a lot of upfront costs for that project. And, [00:23:00] you know, the owners of the business went out and got lines of credit, um, so that they could fund the costs of the project. Other things that we, um, recommended to them was, you know, the company has a 401k. If you have the ability to borrow against your 401k, uh, maybe, maybe that’s a way to get some additional liquidity.

So, you know How does that work? Yeah, so the rules on borrowing against your 401k Is that assuming your 401k allows you to borrow from it the maximum amount that you can borrow from your 401k Is 50 percent of the balance or 50, 

Becky: 000. 

Morgan: So, so just, you know, it’s a, it’s a way to, um, way to get some, some cash.

If you have a balance in your 401k, if you don’t have a balance in your 401k, and you have an existing IRA, you know, you could. Uh, again, assuming your, uh, 401k will allow you to do this, you transfer your IRA balance over to your 401k, and now you can borrow [00:24:00] against that. 

Steve: That’s really interesting. And I, I guess I just want to clarify, um, are you talking about the business owners 401k, or are you talking about the employees, like, being able to mess with their 401k?

Oh, 

Morgan: no, no. It’s the business owners. So, yeah. Okay. Yeah. I 

Steve: was going to say, man, I’d love to gamble with other people’s money. Let’s do it. 

Morgan: Yeah. I’m pretty sure you might go to jail if you’re borrowing. That’s 

Becky: not a coach. I don’t even think you could get access because once you make the contribution, it’s in their account.

So I don’t know. Yeah, 

Steve: exactly. Exactly. I don’t know. I know a guy. 

Becky: Well, I was gonna say, there’s shady versions of, I mean, payday loans, yes, those are shady in general, but I’m sure there’s shady versions of the factoring program, right? There’s probably, like, people who will give anybody money against any receivable and charge them a huge interest, right?

Like, of course, you can take anything and make it, but I do think [00:25:00] that it is, it can be legitimate. In certain cases. Yeah. 

Steve: So, uh, every now and then, I’m sorry, Morgan, every now and then I get, uh, a random and I’m going to not even talk about the ones that are text messages. I’ll get a random email letting me know that Taylor IT group, my MSP that I, I ran is eligible for a loan of up to a hundred thousand dollars.

Are those like spear phishing campaigns or? Or are these actual companies that are trying to just market and using whatever shady technique they can use to try and get customers? 

Becky: I think they’re trying to get your social security number. 

Steve: Okay.

Morgan: I was going to say, Steve, that, you know, all of these things that we’re talking about, you know, outside of cashflow from operations. So if you’re talking about taking on debt or taking on any of that stuff, you [00:26:00] know, hopefully that. Hopefully MSPs are monitoring their cash flow and are seeing, you know, a month or two months out, like, Hey, I might have cash flow needs a month or two from now and not get yourself in a situation like our client was, we’re like, Hey, I need to get this loan, like tomorrow, otherwise I’m not going to be able to take on a project or my business is going to go under.

Or I can’t make payroll because I don’t have cash. Right. You really need to start looking out into the future and identifying, Hey, where are some soft spots. In my cash flows and planning for how you’re going to fill those soft spots before Before you’re already there, 

Steve: let’s talk about, um, forecasting, forecasting.

I, I feel like that’s, uh, reading the tea leaves in, in my mind, because I, I don’t know, I’m sure, I’m sure it’s very scientific and mathematical and, and it works, right. But I’ve never done it. I, [00:27:00] I, uh, I’m very much a fly by the seat of my pants. I think that’s the right way to say that. Uh, You know, I, I, I shoot from the hip, right?

You know, I don’t, I’m not a planner and I think Morgan, you said to me earlier and I’ve heard it before, if, uh, if you fail to plan, you’re planning to fail. Yeah. So, you know, that, that’s very much me. You 

Becky: know, when it comes to forecasting, when it comes to cashflow forecasting. Pretty much, you know, your monthly expenses.

Of course there could be random things that come up, but so it’s planning for those operating expenses, your payroll, your rent, your, you know, your regular monthly operating expenses and what you expect to bring in. So you have agreements that are signed agreements and everyone’s paying you monthly on the first.

That’s, you know, you can count on that cashflow if you’re sending invoices. And hoping people pay, that’s, you can’t count on it, so it’s [00:28:00] harder to forecast. So it really depends, you have your system set up, you get your clients to pay, have a payment method on file, pay in advance, all the things that help you understand when the money is coming in.

The money going out is pretty predictable. And that way you can see how long, where is a problem. In three months will I have a problem? In six months will I have a problem? Much easier to see when you have a problem. Autopay. People paying you. Predictably. Harder to do when you’re putting invoices out into the universe.

Steve: Yes. Yes. 

Morgan: Um, I mean, think about, think about it like your, your household expenses, Steve, right? Like, you know that you’re gonna get paid on the first and the 15th, you know, your mortgage payment’s gonna be due on the first, and you’re, you know, all those expenses, right? 

Becky: Mm-hmm . 

Morgan: Um, if you’re self-employed and, and you don’t know when you’re gonna have income, yeah.

It, it becomes more complex, right? So, you know, if you’re, if you’re someone who is. It’s [00:29:00] not sending invoices and getting your clients to pay you on the first of the month. It’s much easier to project out what your cash flows might look like. 

Steve: You know, I gotta say, um. And I’ve, I’ve probably said this before, uh, on a, on a earlier session, but I use a bank personally called cube Q U B E.

And, uh, it has changed the way I manage my money completely. Um, it, it’s basically like, uh, the. Envelope budgeting system where you know every every dollar has a has a job right and you you set up all these cubes They call them, you know one. Here’s my electric bill. Here’s my Netflix bill so on and so forth every cube has its own bank account and its own debit card number and I can tell it when the bills due so that way it now sorts them [00:30:00] all in the order so that way I can make sure they’re all funded correctly, et cetera, et cetera, right?

So, are you aware of something like that for people who maybe just need a better visual for business? 

Becky: There’s a profit first method, which is sort of like that, which is like you open business account, bank accounts for Your profit for your taxes, for your payroll, multiple accounts. And then whenever you get money, you split it or once a month, you split it.

between those accounts. Um, so that’s that there’s a book about it. It’s a big thing called profit first. So that’s, that’s what that is. Um, I don’t know of a bank specifically that would do that, but, um, it’s definitely done in business. Relightify. There you go. 

Steve: I’ll have to check that one out. The, the only one that I could think of that’s kind of close is Mercury, [00:31:00] Rafi.

Um, have, have you guys worked with any Mercury users? Mercury’s cool, man. They, um, so it’s, it’s free checking and, um, uh, they’ve got, you can, you can make however many accounts you want. You can label the accounts. You can give debit cards to whoever you want within the company. You can give them access to only certain accounts.

Uh, you can even create virtual debit cards. So I was basically doing that, that, um, with Mercury, but it was, uh, it was a lot of work because they didn’t have those, those, you know, budget like features, right? It was, it was all very, very manual. So I’ll check out Relayfy that, that looks cool for the business side of things.

Becky: RAMP isn’t a bank, but it’s where it’s like a payable. system and you can do the same thing where you can have the virtual [00:32:00] cards for different people in the business. Um, you can set a budget for them, give them a monthly budget. Yeah. 

Steve: Very cool. 

Becky: Yeah. 

Steve: Yeah. I, we use ramp here. So, you know, I’ve got my marketing ramp and I’ve got, you know, a few different ramp cards and, uh, I, I really liked the way it works.

It makes it very easy for us to. No, you know, just manage all of our expenses and not have to put it on, you know, my credit card and then expense it and then wait three months for them to get around to paying me because, because they’re doing their own cash flow management. Right. Is that, is, is that a, is that a thing you, you delay paying your employees because cashflow management?

Becky: Never. 

Morgan: Not our employees. I’m 

Steve: sure people do it. I just want to clarify, Baxter’s a great guy. He has not done that to us. Okay.[00:33:00] 

Becky: I can’t imagine many employee employers do. And if they do, that’s one way to get your business to go down pretty quick is not by your employees. 

Steve: Well, and I guess I was thinking more like expense reimbursement. Not, not necessarily payroll. Yeah. So. 

Becky: I mean, I don’t know how much your, your reimbursements are, but if there’s that much that they can help the company’s cashflow.

I think you should, I don’t know, you should get a company card. 

Steve: Let me tell you, let me tell you, um, some, some past companies have, have been very poor at that. We’re not going to name names. Uh, let’s, let’s talk about investments. What kind of investments can or should businesses Uh, obviously MSPs be making with some of the extra cash they’ve got laying around.

Like, obviously they want to have a reserve for a rainy day, [00:34:00] but then they should take some of that extra money and like, I don’t know, puts on the stock market, right? What are they? 

Morgan: And themselves, right? Isn’t that, isn’t that when you start a business to pay yourself? 

Steve: Yeah, yeah, but it’s, but it’s not, but it’s not give yourself an owner’s draw or a, or a bonus.

It’s, you know, invest in your future, right? 

Morgan: Yeah, so I mean, the, what we commonly see right now in the MSP space, and maybe it’s been for a while is, you know, they all want to go out and buy another MSP or grow their business. You know, those that that aren’t interested in that. They’re just, you know, fine with where their businesses is.

you know, how do you get cash out of the business, um, in a tax efficient way, right? So, you know, one of the, one of the ways that we talk to our clients, um, often about is, [00:35:00] you know, make sure you, if you have a 401k that has a safe harbor plan, uh, consider doing a discretionary profit sharing. Um, contributions, right?

So that allows you to put a pretty significant amount of money into your 401k. Uh, the business gets a tax deduction for it and, um, and you end up obviously with a bigger 401k balance, so. 

Steve: What is a safe harbor? Can you talk to me about that? 

Morgan: Yeah, so, uh, 401k plans, um, there’s a bunch of rules around top heavy plans.

So you don’t want, um, heavily compensated people basically mistreating employees, right? So what the safe harbor plan does is it’s typically like a 3 percent match on everybody, on everybody’s salary. And that gets you out of the testing rules for the top heavy, um, requirements for a 401k. If you have that in place, then you can do discretionary profit sharing contributions.

And those profit sharing [00:36:00] contributions need to be paid to everybody, right? But your employees will get a smaller amount and you’ll get a bigger amount. Um, and the, the, uh, maximum amount that you could contribute to your 401k is around $70,000. So the employee would do their, their, um, contribution the 23,500, and the business would put the remaining in, and that would be a tax deduction of the business.

And you end up with another, you know, 40 something thousand dollars in your 401k. 

Steve: That’s awesome. I like that. 

Morgan: Often times what we see is people will take these distributions and then they’ll just put them in the Schwab account, you know. It’s a, in a Schwab taxable account or a Fidelity taxable account.

You know, it’s like, well, why don’t you just do a profit sharing contribution in your 401k? You would get a tax deduction for it and 401k. 

Steve: Hey guys, we’ve got 20 minutes left. Uh, we’re gonna, we’re gonna end at the top of the hour, [00:37:00] unless, unless we end sooner. Uh, so if you have any questions, um, specifically around accounting or cash flow management, uh, please, you know, pop them in Q& A, or since the chat is, uh, moving slow enough, you can pop it into the chat as well.

Um, what, what other types, are there, are there ways that the business can invest its money without necessarily leaving the business? So, so like, you know, can, can I put, can I put it in like a, something better than a high yield savings account? 

Becky: Yeah, you could do a CD. 

Steve: Okay. Do, do people still do CDs? 

Morgan: Yeah.

Yeah. But you, I mean, you could get a similar interest rate on a more liquid investment, right? Like a money market fund or something like that, right? It’s pretty safe. You know, I would, I would suggest that unless you have a lot of cash, um, [00:38:00] you know, if you’re, if you’re really focusing on cashflow and you might have cashflow needs, putting, putting it in the stock market or something like that is not a great way to go because.

Stock market goes up and down, right? So down the road, if, uh, if you need the cash and the market’s down, you’re probably gonna, gonna lose some money. So the safer bet is to do something like a money market fund or a CD, or, you know, do a CD ladder even where you’re, you know, putting it in different, different terms and, and the CDs are maturing at different terms.

No, that’s not a bad way to go either. After you pay down your debt, of course. 

Steve: No, stop talking about paying down my debt. Ha ha 

Becky: ha. One thing I was going to say is don’t keep debt on credit cards because credit card interest is insane. It’s only 39%. Only 39%. You need to keep your carry debt, get a different kind of debt.

Steve: All [00:39:00] right.

Um, all right. So when I think of cash flow, my, my thought, you know, when I ran my MSP, I always worried about one thing. Money in greater than sign money out. Right. So that was, that was all I worried about. And if, and if I was doing that. I was winning. Um, but there’s, there’s probably more nuance to cash flow than that, right?

Like, 

Becky: well, it’s important to look at money into money out. It’s important also to look at what money is coming in and what money is going to be going out. It’s not just now, like Morgan said, you’ve got to be able to look in the future because if you’re focusing on your P and L and that’s what you’re looking at, then you don’t know that you are running, not running out of cash because a P and L is just.

You know, how [00:40:00] much you’re invoicing, right? You’re not, it’s not, it doesn’t reflect how much cash you brought in necessarily. So it’s important one to look at your balance sheet also, but also look at cashflow and look forward in cashflow. 

Steve: Okay. Uh, KPIs. Or whatever metrics we want to think about, right? What, what would you say are the top few?

I’m not going to limit you, but what are the top metrics that every MSP, no matter what size they are, that they should be monitoring? And how often should they be monitoring them?

Morgan: Are you referring to specifically cash flow, uh, KPIs, or? Yeah. So, uh, EBITDA is one that That would, you know, from a cash flow perspective, you want to be watching, um, free cash [00:41:00] flow. So, yeah, I mean, they’re on the, you know, there’s other KPIs that are out there, you know, like, um, your current, your current ratio and stuff like that.

But, um, if you’re talking about cash flow, you’re really focused on, you know, free cashflow and EBITDA probably. 

Steve: Okay. Would you say that there are any other KPIs maybe outside of cashflow that like, okay, if I look at my EBITDA and, uh, it’s, you, you usually look at it and say, all right, I’ve got a 10 percent or a 22 percent or whatever.

Right. So, uh, if I look at that, uh, are there other KPIs I should be associating with that to get a bigger. better picture of my business health. 

Morgan: So one would be, um, if you, again, if you have receivables, like how long are those receivables outstanding? So the days receivable outstanding would be a good one to keep your eye [00:42:00] on.

Obviously the shorter the receivables outstanding, the better. So you want to focus on trying to shorten up those days that your receivables are outstanding, um, lengthen how long your days payable are outstanding, right? So again, you don’t want to be getting an invoice in the mail and sending the check out the next day if you don’t have to.

So, 

Becky: oh, 

Morgan: yes, yeah.

Your bank transfer, whatever. So you, you know, you want to shorten up the receivables and payables so that you have sufficient amount of cash on hand 

Becky: and client concentration is something that’s super important to look at, like not having too much of your revenue tied up in too few of your clients. So I think that’s a huge thing to keep an eye on.

Um, you know, if someone has one client, that’s 70 percent of their revenue, that’s super risky.

Keep a close eye on. [00:43:00] 

Steve: Very good. What, uh, do you have any other, um, Words of wisdom that you would like to impart. 

Morgan: I’ll give you, I’ll give you one, um, word of wisdom is make sure you’re keeping your books up to date. You know, shameless plug for Stride, but even if you’re not using Stride, make sure you keep your books up to date.

Um, you know, if you’re, if you’re scrambling around this time frame to do last year’s books, um, you’re, you’re not in a great spot. You should be keeping your books up to date, um, as, as often as possible. So, you know, I always tell people, it’s not, I’m a tax guy, right? Like if you hand me a crappy set of books, you’re going to probably get a crappy tax return or a big bill for me to fix everything.

So 

Becky: keep those 

Morgan: books updated. 

Becky: I talked to somebody this morning and he said, Oh, I won’t have my 2024 tax return until much later in the year. And I was like, Oh, really? Okay. [00:44:00] And, and then he, I, I asked him, um, and he said, isn’t that all businesses, all businesses have to go on extension. And I was like, no, most of our clients have had their tax returns filed already, or they’re ready to be filed.

They’re, we close every month. And so closing December is another month and we’re ready to file taxes in January, end of January. 

Steve: It’s March 6th. If you haven’t done your taxes yet, get your button gear. 

Morgan: Yeah, those are my, or get that extension done. 

Becky: And if you haven’t done your books yet, you’re even even more trouble

Steve: Yeah. Yeah. Can, can you give us the, the elevator pitch? What does Stride do for MSPs? 

Becky: Stride helps MSPs get out of the way of getting their accounting done. So, Stride gets the bills out, or the invoices out to the customers. We get the bills paid to the vendors. We manage payroll. Um, we will set up a payment system for you to get your clients on [00:45:00] ACH, get them away from paying by check.

Um, and help you eliminate your receivables. We’ll also make sure you’re paying the right amount of taxes on a, on a quarterly basis versus being surprised at the end of the year. 

Steve: Perfect. And I see that, uh, just about everyone that answered the poll is an alternative payments customer. So I’ll, I’ll keep it brief.

Alternative payments is a payment portal for MSPs so that way their clients can. Pay them electronically. So if uh, if you are not doing that today, reach out to us alternativepayments. io. All right. Well, Becky Morgan, this has been fun. Thank you very much for hopping on here and, and doing this with us. Um, guys, if any of you are interested in, uh, reaching [00:46:00] www.

stride. services. And that is their website. I’m sure they’ve got a contact page and you know, all that good stuff. So, uh, thank you so much. Our next session will be on March 20th and, uh, we’re going to talk about some MSP financials. Uh, we’re, we’re actually going to look at some real financials from real MSPs, and we’re going to talk about the good, the bad, the ugly.

So definitely register for that. And, uh, we’ll see you then take care of everybody. 

Morgan: Bye all. Thanks, Steve. 

Becky: Thanks, Steve. 

Morgan: Thanks, guys.