Sales administration or finance, where does procurement sit in your MSP?
It’s a question that divides the room, when asked at MSP peer groups.
It probably has a good deal to do with the size and financial maturity of your MSP.
When starting out, it all sits with one person, who holds all the moving parts in ‘RAM’ and probably uses the accounts tool for everything from quoting, purchasing, fulfilment and billing. Having everything in one place you would think keeps it simple, however even then there are issues with reconciliation, and invoice timing. In the early days it is likely even with one tool, it is not used properly and therefore gives inaccurate outputs.
As the team grows, administration, and specifically sales administration people join the team, bridging the gap between simpler transactions, solutions selling and account management.
Perhaps in this phase the MSP now has a reliable system for pricing and then procurement, for example a PO system is now in operation, and controls are in place when client invoices are raised and how supplier invoices are checked for accuracy, especially taking account of situations with DOA products, the replacements and worst still the laptop for the boss of the client. It never worked right, sucked up a load of account management and helpdesk time and eventually weeks later a replacement model is purchased to placate the client…more than consuming the original £200 margin in the first laptop!
Then as the finance team takes more of a role in procurement, certainly AP (Accounts Payable) the interface between sales, sales admin and finance becomes critical, and forces the complexity of day-to-day business into the right buckets to support accurate and timely management accounts. That original boss’s laptop needs to be on the balance sheet as stock, not in the P&L for last month…and the business needs to find a new home for it efficiently to reduce the loss incurred on the opened and unloved laptop!
Whatever state of financial maturity remember our 3 ‘must haves’ for MSP procurement:
1 It’s a profit centre
“The first money saved is the first money made”, a quote from BBC’s The Apprentice that resonated, as is so true. Good procurement will lead to more competitive client quotes with better margin and decisively cleansed issues (such as the boss’s original laptop disposal) will minimise the losses from trading.
2 It’s time critical
Unlike bookkeeping which can largely be done in the background, procurement is as current as the service desk and needs to be available before, during and post the trading day. A good tip here is to establish SLAs internally and with clients to allow sufficient time to properly execute the quote and pricing process. Set expectations that are realistic will all involved.
Integration with billing and management accounts is crucial for the accuracy and timeliness of financial measures. A ‘solid’ stock position confirmed on the 1st of the month, will allow your bookkeeper to journal out P&L CoS to the balance sheet for the previous month, removing often big swings in GP, and a cleaner view of profit or loss for that month!