12 Jan Reconciliation is like life support for cloud business
If your revenue growth isn’t as strong as the increasing bill Microsoft sends you, reconcile your bills, stat! You should be building profits, not losing them. For emerging CSPs, we’re going to explore what reconciliation is. For CSPs investing in growth over 2018, we unpack the risks and benefits.
What is reconciliation?
Reconciliation is a vital business practice which is aimed at securing the financial health of a company (Investopedia, 2018). Recording transactions accurately and collecting outstanding payment from customers is crucial for success.
Why is it important?
Reconciliation enables you to identify and fix errors quickly. If you’re efficient enough, customers may not even experience any lag or downtime.
Reconciliation uncovers patterns in customer behaviour, such as non-payment, and gaps in cash flow. Patrick Henry at Entrepreneur.com highlighted that 75% of venture-backed start-ups fail, including cloud businesses. Remaining healthy in this industry relies upon the implementation of a reconciliation process and stressing its importance to team members.
Risks of ignoring the process
Reconciliation is to your business as foundations are to a skyscraper: without it, you are vulnerable to catastrophe. Microsoft’s CSP programme shifts the responsibility to remain on par with legal and financial requirements entirely to the CSP. This means that if you don’t check in regularly for new information, you could fall behind.
Microsoft will continue to bill you every month, for the number of licences you sell on to your customers. Whether they purchase bundles or individual products and services, any changes you make to your business’ consumption from Microsoft affects the bill you receive. If you don’t keep up with your customers’ changes and ensure that you collect your revenue, you’ll be unable to pay Microsoft. This has the potential to open up financial sinkholes and even bankrupt your business, not to mention the reputational damage for you and your team as individuals.
Remember that salaries and overhead costs still need to be paid, adding to your list of potential woes for not reconciling efficiently and effectively. Run the math quickly and think about how long your cloud business could genuinely survive without a good reconciliation process.
Looking at things from another angle, the potential rewards of getting the reconciliation process right are profound. Operational costs can be kept in check (because you’re regularly scrutinising expenditure, not just against your Microsoft bill) and your profit margins can increase as a result. Reducing your stress levels about whether customers will or won’t pay you on time means you can devote your resources to innovating other areas of your business, like building attractive bundles to grow your customer base. From any perspective, reconciliation extends the longevity of your business and gives you the upper hand over competitors who don’t do it well enough.
Reconciliation against the Microsoft bill is another nifty feature of GlobillCSP, so draw on the experience of our expert team with a free CSP health check at UK Partner Day and boost your cloud business longevity.