In this episode of ‘It’s A Numbers Game,’ hosts Adam Morris and Daniel Welling are joined by guests Angie Hasenbank from Hasenbank Accounting Services (US) and Lauren McMaster from Rosy Small Business Services (Australia) for a globe-spanning discussion on mastering MSP finances. Key topics include the importance of standardised charts of accounts, proper labour allocation to see true gross margins, and the creation of disciplined workflows from quotes to invoices. Practical tips on working effectively with finance partners across time zones are also explored, aiming to help MSP owners build trust and avoid surprises. Learn the financial foundations every MSP needs to streamline operations and improve financial health.
00:00 Introduction and Guest Welcome
00:45 Global Collaboration in MSP Finance
01:36 ConnectWise Community and Common Challenges
04:53 Importance of Standardised Chart of Accounts
05:50 Payroll Allocation and Time Sheets
11:48 Product Discipline and Purchase Orders
16:23 Preparing for Financial Control
19:30 Final Thoughts and Encouragement
25:09 Episode Recap and Conclusion
Listen on Spotify or Apple Podcasts
Connect with Angie Hasenbank on LinkedIn by clicking here – https://www.linkedin.com/in/angie-hasenbank-b6112441/
Connect with Lauren McMaster on LinkedIn by clicking here – https://www.linkedin.com/in/lauren-mcmaster-99564938/
Connect with Daniel Welling on LinkedIn by clicking here –https://www.linkedin.com/in/daniel-welling-54659715/
Connect with Adam Morris on LinkedIn by clicking here – https://www.linkedin.com/in/adamcmorris/
Visit The MSP Finance Team website, simply click here –https://www.mspfinanceteam.com/
MSP Glossary: MSP Finance Glossary Explained | MSP Finance Team
We look forward to catching up with you on the next one. Stay tuned!
Transcript:
Daniel: [00:00:00] Well, welcome, welcome to the first of what will be hopefully a new series of something a little bit different from us. I’m joined obviously as always by my partner in crime, Adam. We have another two guests though today. we have, Angie from the US and Lauren from Australia. Welcome along to the show.
Angie: Thank.
Daniel: So we are recording this episode, 10 o’ nine o’clock in the evening, UK time, which is three o’clock in the US in the afternoon, and six o’clock in the morning in Australia. So. Lauren, I think has, has won the, the most awkward time to join the podcast. So thank you for that, Lauren.
And we are all talking today, thanks to, techno global team and, an introduction from Peter, that, that connected, the three of us working. At, at different points around the globe, helping MSPs, get command of, their [00:01:00] financial position. And, so what we wanted to do today was announce, first of all, how we are working together and embracing the, the well trodden road of co-opetition within the MSP space and, and also to offer our listeners.
a tip from, I would say the three corners of the globe as we, as we don’t have a fourth at this point. So, to kick us off. maybe, maybe we should, we should talk a little bit about, how we are actually working together. So, and what we all have in common. So maybe, Lauren, you’d like to go fir first and talk a little bit about, the ConnectWise community that we’re all a part of.
Lauren: Sure. So, I guess we’re a small little piece down in Australia. It feels sometimes of the ConnectWise community. but we have come together to, to see how we can offer and expand on our, each of our local services in a more global manner with with [00:02:00] each other, particularly around our connection with the evolve, group and, many of our clients are in that space, or we’ve come from that space depending on who we each are. and that’s what we like to bring so that the different view of, the MSP finance. And I guess when we’ve all chatted, we’ve chatted a couple of times prior to this. the challenges are very similar regardless of which, locality you. You are actually in. So it’s quite interesting to see the challenges that we face in our clients face are very similar.
Daniel: and of course linked by the common framework of, of SLI and the rhythm of the evolve, peer group system.
Lauren: Yes. It’s almost end of quarter again, everybody.
Daniel: whenever we release this, it’ll be close to, to an end of quarter almost certainly. And, and an and Angie, the same from the us what’s your perspective?
Angie: I just think that it’s very interesting that we’re all kind of the same. It [00:03:00] doesn’t, even though we’re all across the world here, it’s just so much similar. We’re doing the same things, the same challenges all of our MSPs are having are the still the same and. I think it’s just very interesting to see that piece, and I’m looking forward to having this alliance so that as some of our other MSPs may expand into different countries, they may be needing some other help as well, and I think that’s where we can really help each other and help them.
Daniel: really great point. And a Peter a. Not just the Ms. P, but the MSP’s customers are now also in international. So, in fact, just today, I was talking with a client who, who has a customer with a, an Australian branch office, and, and they found, a local MSP to work with, to help support that client. And there’s a, that there’s a almost a new dynamic required in order. [00:04:00] Work alongside partner across time zones and, and cooperate efficiently, which, which is part of what the three of us are doing, here, and sort of very much finding our way with, how we can support each other, share information, but equally work within the same marketplace.
and, and eventually locality as we, we all imagine that we’ll end up in the future having. International MSP clients potentially just headquartered in any one region. And, maybe if we focus on what we have in common or what our MSP clients have in common in terms of challenges and. Ways in which MSPs can mitigate those challenges. perhaps if we were to, to go around the room and each pick a challenge and a recommendation for, for how to tackle that challenge.
for example, as we’ve already, already intimated that we’re all very familiar with SLI, so, having a,a common. granular chart of accounts is an important [00:05:00] recommendation for any MSP to get command to their numbers. but, but yeah, PR perhaps, perhaps we could focus, maybe first of all on what, what an MSP actually needs to be doing to, to get their numbers in sufficient, sufficient good states, ready in readiness for good.
Good quality bookkeeping and management accounts. Angie, maybe you’d like to kick us off there?
Angie: Well, I mean, I think that it’s. Good for them to all be starting up using, a standardized chart of accounts and putting things in the same buckets and checking, you know, especially with their peer group, they are getting the same information. They can tell what best in class is and how to work towards those numbers and what are going into those accounts to provide those numbers. And I think that. probably payroll allocation is one of the main things I see that doesn’t happen when they come, when new MSPs are coming to me, almost all of them need payroll allocation set up to divide into those different lines of business. And so I [00:06:00] recommend definitely doing that and fairing away to get those accurate numbers that are coming from labour.
Since labour is such a large cost of business.
Adam: can I just, just sort of, dwell on that momentarily just in case anybody who’s not familiar, who’s listening to this podcast, payroll allocation. Angie, you are talking about making sure. That the, subdivisions of work that’s completed is allocated the appropriate payroll overheads so that your project team, labour is associated with project work and the service desk team, et cetera.
your sales guy, do you know what? He’s in a different bucket somewhere else. so his costs are separate to the engineering costs. that’s what you’re talking about there, isn’t it, Angie? Yeah.
Angie: Yeah. Yeah. And sometimes you can have like one, one tech that works in all lines of business. They could be in the break, fix and project and manage services. So you have to find a way to break out their labour into all. Three of those.
Adam: Yeah, absolutely. And, it’s a starting point, isn’t it, [00:07:00] for starting to truly understand gross margin. not as most accountants see gross margin, right? Because we wanna labour load that gross margin because that’s actually the biggest cost we’ve got. all the biggest cost MSPs have, right? So what are we doing?
why most accountants choose to put it in overhead below the line. I’ve no idea. But, but, so yeah, it’s a key, it’s a key fundamental way of measuring gross margin.
Daniel: And, do we have a tip for how to actually go about that? what, what tool would you normally do, make that calculation in and, some guidance around how to allocate.
Lauren: well I might take that one and my answer’s usually a very boring one, which is time sheets. so we often find, and echoing what Angie was saying about the cost allocation, often people come and perhaps that’s not enforced as much. So they’re actually not able to capture that information. There’s not a real focus on everyone doing, time sheets, even around the sales [00:08:00] team. So. There are certain other sort of admin functions that if you are using something like the SLI report, you can break it out further. Your sales person does perhaps do a little bit of, management potentially as well as their sales function, maybe some marketing as well, and just focusing around using, Time sheets I usually give up with the owner doing time sheets, so we usually understand that’s not gonna happen. but all of the other staff need to so that we can then get some good data to be able to. Look at their wages costs and allocate that correctly across those different business units.
So that is often one of the main things that, that’s missing as well. When we are looking at, doing a sort of, we call an SLI alignment, well that’s what I call it. When, when looking at a sort of a newish evolved member.
Adam: That’s, you know what? That’s such an interesting thing, time sheets. ’cause it’s something I rebelled against for years and years because I just saw it as a [00:09:00] pedantic, you know? Thing that just held engineers back. They didn’t like doing it, you know, and I had to get the ruler out and slap the wrists every time.
And I thought, you know, is this really worth it? isn’t this sort of, sort of holding them back as people? And,and then, you know, after being part of the community and seeing what other people were doing and talking to others and learning from others, you know, I went into it seriously and yeah.
Oh my God. It was just, it was pivotal, right? it’s absolutely pivotal and it, and you then realize it is actually a core discipline of any MSP to record time and allocate that time into the appropriate services in the right way. ’cause without that, you’re flying blind, aren’t you?
You know, you’re flying blind. You can’t measure, you can’t measure anything. You don’t know what to fix or what to improve. So, so I think it’s a, I think it’s a, a I think it’s brilliant, Lauren, that you are, you know, making that, a kind of fundamental part of, [00:10:00] extracting the value, you know, of kind of what your team does.
you’re sort of saying, actually, do you know what to get the best from us, you need to log all your time.
Lauren: It’s not often a popular, suggestion, but an important one.
Daniel: and a great, a great point there around, also perhaps the leader of an MSP leading by example. so Adam, maybe we’ll circle back
Adam: Well, no, I, I.
Lauren: I was gonna.
Angie: tried to make it a little bit easier by using, so if, you know, if they’re using ConnectWise, they’re already, you know, logging time kind of in their tickets and so we’re using, work roles to help with that. So inside of there you would just use a work role and then we run an hours by work role report and use that to allocate time.
Lauren: Yes. Sometimes it’s around. And I guess that’s where having that background in, those products particularly, ConnectWise in understanding how that can be [00:11:00] configured and how it flows into that finance part of the business. Itit is connected, from a bookkeeping and accounting perspective. those things that seem very much like a service desk component. Do flow into the finance, reports.
Daniel: Absolutely. So have we got one or two top tips there? ch chart of accounts and, labor. Labor loading allocation maybe is a second point and our fur point won’t be the MSP leader. providing an example. we’ll, we’ll save that for another episode. Right.
Lauren: Yes.
Daniel: So what’s, what’s another suggestion? What’s another top tip?
Lauren: well, for me, it seems, really around products and utilizing products and quoting. So sometimes people are not coming with a,a firm idea on how they want. Their billing to work around products [00:12:00] and, their sort of product stack. So in finance we can get, an in, an instruction to invoice something and there’s no consistency in how you’re gonna invoice it. So really making it strict that, the sales team need to use the existing service catalogue. They’re not just creating products on the fly. There’s been some thought into that, those products, so that when they do get sold. They flow through the system very nicely and then they sit in your correct area of your finance reports. You’ve not got sort of miscellaneous products that you’re selling. So I think some discipline around your products and how the sales team sell those is very helpful. It flows through from a service perspective. And then also we’re down sitting in finance sort of at the end of the line. It feels sometimes.
So if it’s gone in. A structured way, it makes it all, much easier.
Daniel: the key word there. I think and could be a wider tip topic is the discipline. [00:13:00] Word, the rest of the business has to work in such a way that it hands off to each and other, each and every other department. So if I am, if I’m as a sales person, I need to be, making sure I’m setting my, technical delivery team up for delivering a project or a service aligned to how I’ve sold it.
And and the same is true. From a billing perspective and the production of production management accounts. So, that, that discipline is a key phrase. we, we often, start around purchase orders, and. ha having some governance around how, perhaps not the recurring, items necessarily, but certainly one-time products, really cause confusion and unnecessary tension around the accounts production side.
ordering goods in March and billing them in April. and, not having any clue as to what bill relates to, to, to what invoice. So, so, have you come across that, do you have a [00:14:00] similar issue there?
Lauren: With people
not using purchase orders, maybe
Angie: Yeah, I run across it all the time too.
Lauren: Yes.
Angie: All the time. different months. Getting in invoices, paying the bills. definitely. So I, we like to use inventory a lot on ours. the inventory module inside of QuickBooks to help auto align that. So we’re not looking at every single bill to see when we invoiced for it to try to align them.
Lauren: Yes, that is very helpful, to be able to, align that, that revenue and cost. Side of things, but, I guess the use of purchase orders is really an extension. After the sales person has correctly put the product on the quote that’s been signed off, then your purchase order can aid with, again, how that’s going to be ordered and received and everybody knows what’s going on.
there’s a systemized approach too. Do that in in the business. So yeah, purchase orders are good. Yeah, [00:15:00] it’s all very, I think oftentimes with finance things, it’s the simple, in a way, sometimes obvious things that make a big difference, and it’s just making sure that you are utilising those tools that exist and not trying to bypass them.
Daniel: Yes. So again, looking at, well disciplined, leaders in the business to set the right example and, and support all of the functions of the business operating, operating together. does that mean we’ve actually managed to get free tips already, chart of accounts, labour, labour allocation for gross margin and discipline in engaging with all areas of the business and in particular finance.
Lauren: I get that. Yes, there’s, yeah. I.
Daniel: Amazing. So there we have it free. Free top tips from three corners of the world and. We can, I’m sure build upon that [00:16:00] with, with further recommendations and guidance. I guess we’ve picked three that are sort of top of mind for us, but I’m sure there’s lots of, subtlety around each one of those points.
And the devil is always in the detail in terms of having a great idea and implementing a great idea of obviously 1, 2, 2 very different. two very different, elements. So, maybe we could finish off with, with just exploring, how an MSP can help prepare for, Gaining control of their numbers.
what sort of processes could or should they be implementing internally before they, they engage with, with someone, with a finance person, whether it’s internal or external. And, and indeed maybe some, some experiences of our own that we’ve uncovered during onboarding.
Lauren: Angie, you want to go first with that one?
Angie: I would say. Release all information to your accountant. I find that there, there’s some sort of mystery that I learn about something several months down the line, sometimes a [00:17:00] year where I’m like, I did. I didn’t know you did that, or I didn’t know you had this extra account.
Lauren: I have to be honest, that’s, that was top of mind for me as well, Angie, like, we’re not mind readers. in finance and all, you are having everybody in the process. Anybody that has the ability to spend money in the business, understanding that they need to provide that information to their finance person. So that they can allocate it in the correct way so that management can make the right decisions. So the sales person that’s off with their credit card, that is important for them to. To provide that information back to the finance team. And there’s many tools now in, in which that’s very easy for people to be able to capture that data when they’re out and about.
different receipt handling things that, again, it’s all very small bits, but I like [00:18:00] to view the finance department. It’s all little bricks at the bottom, but you can’t have an amazing house if all the little bricks aren’t there. so that’s what those little pieces of data are. That’s what it enables you to build a very strong structure.
That’s sort of how I try to explain it to people in why do I need this receipt? Well, that’s what we’re trying to build for you.
Daniel: Get the cost in the right place. And, and of course the other, the other key aspect of, of receipts is, sales tax, and the reclaiming of sales tax.
Lauren: Well, yes.that’s, that is important. So we are sometimes fighting with the, the idea of some of what we do is around compliance and making sure that you are actually compliant with your local laws around that. But the benefits of that is we also have this. So that you can run your management accounts.
So it sort of solves multiple, problems, but it’s, it can be utilized in multiple [00:19:00] areas.
Daniel: and of course, the majority of, of MSP owners are from a, a technical or origination. I was slightly unusual in so far as I was a sales person by trade before, before becoming a business owner. But, equally not well equipped as a, as an engineer to, to know what was required from a good.
Good financial management perspective and lessons that I, I learned that the hard and long way, during, during my, experience. So, so maybe we could, we could finish off with, with our suggestions for how, MSP owners can start to really master this whole topic and perhaps take some of the tension. Some of the conflict out of the themselves and the rest of their business to make finance a much, a much more smoother and natural, part to their business rather than fighting against it. any suggestions there? Lauren.
Lauren: think depending, and as you mentioned some people, and a lot of the Ms P owners have come from a technical [00:20:00] space is to find a finance person you can work with that you’re not afraid to ask questions and to note what you don’t understand. often with the balance sheet in particular, that might be something you’ve not looked at before and just understanding how that fits into your business, and learning as you go and not being. Concerned if you don’t know the answers, to those finance things, it can be a bit, I guess, potentially intimidating if you feel like you don’t know these things. If you’re a technical person, you should know everything. maybe it feels like you’ve got your superhero cape on and you can solve everything. But, exploring that and really understanding and setting yourself a goal of understanding your finance reports. I think. Then you have that confidence to instruct the sales team that they have to do this. The technical staff have to do this. you can see yourself,
those benefits.
Daniel: really good, really good solid advice. So, full dis full disclosure from [00:21:00] Angie and, and being vulnerable from Lauren as, the key essential, elements for an MSP owner to engage with, with a finance partner, internal or external. that’s, I mean there, there’s lots of really interesting points there.
I think. we are pretty close to time though. Adam, any final thoughts from you?
Adam: well, gosh, this is, I mean, it’s just, I think it’s just great that we’re doing it. First of all, we’ve got, as you say, the three corners of the globe in the room today, sharing. the same market, talking to each other, forming relationships, sharing, sharing issues, sharing trends, talking about what’s happening right now, what’s happening in the future.
you know, we are doing this, aren’t we? Because, we, we’ve. Been aware of peer groups or been involved in peer groups in the past, and we’ve seen the benefit there and we’re starting our own little peer group, right? This is kind of what this is. So, so, I just think it’s great and, you know, we talk about this competition idea.
there’s so much business out there ultimately, you know, that there’s room [00:22:00] to, to cooperate, I think, you know, so I think, for me, this is great and, certainly we hope to help those, owners out there who are looking to, you know, from, for a geographical footprint across the world, perhaps.
certainly we’ll be, ready for those guys. but learning from each other. you know, and supporting each other, is a key thing. and going back to Lauren’s point, earlier around, what should owners be doing? I think just get started. I think, you know, if you’re gonna engage with us or Angie or Lauren, you’ve got professionals on board, you know, work alongside them, learn from them, understand what’s going on.
You’ve, you know, work with ’em to get the right numbers. start to understand what those numbers mean. Don’t be afraid to ask. Right. that’s what we’re here for, isn’t it? you know, and I think, there’s a tendency. Owner land to focus on your operations first, then focus on sales and marketing second.
And, you know, what do I really have to do? Finance, it seems to be like the, the last thing that’s kind of looked at, but it’s got equal importance. And if you [00:23:00] run outta cash, you’ve got massive problems, it can take your business down. So, so, it needs to be right up there and a priority for everybody.
Daniel: Wise words. Angie, Lauren, any final thoughts?
Angie: I’m. feel the same way. It’s, anytime to get started on making it better. Is a good time to start.
Daniel: Very good.
Lauren: I guess I, I echo those again, those comments just make a start. And, I would say be honest with your finance person. Um, they’re, they’re in your corner. they see the good and the bad. They know when things are going well. They know when things aren’t going well and, they’re on your side. So, so let them know what’s happening. is what I would say. It does need to be that trusted, position. like at any IT business, you’re a trusted resource for that, company. your end client, they trust you with everything. Their data, their business, your finance person should be that. so make sure you are with somebody that you can trust and have those, [00:24:00] you know, can be very difficult conversations sometimes if you’re running out of cash, they can help
or indeed you’ve got, you’ve got seemingly enough cash, but you don’t. Actually know if you’ve got enough money because you don’t have your management accounts up to date, so, flying a little blind. to run outta cash. Yeah.
Yep.
Daniel: brilliant. Lauren, Angie, Adam. It’s been, yeah, the first of this type of pod podcast episode that we produced.
I’m sure we’ll get, we’ll get lots of experience over the coming months and years to, to continue to do this and work together. And, yeah, been a real pleasure talking to you this evening or this morning, or this afternoon. Get to where you are in the world.
Lauren: Thank you.
Thank you. very much. Thank you. [00:25:00]