It’s all very well dodging the economic downturn by hopping on the cloud bandwagon, but you might find this also puts you out of reach of the industry’s established funding models. It’s a truism that one of the problems holding back British business is getting access to credit and other forms of funding. The government has done …
So, he's visited my office then !
> They meekly accept longer terms from their customers, fail to chase aged debt for fear of upsetting clients ...
In the meantime, staff suffer with pay cuts and short time while customers enjoy not paying for stuff for over 2 years in some cases. And all the time, the boss can't understand why people are unhappy. Anon for obvious reasons !
The MSP, SaaS provider has the option of turning off or turning down the tap as a way of solving an impasse or, at least, helping it reach a conclusion. Nothing like the threat of halving the number of concurrent users to help nudge that overdue invoice along.
Compare that to a traditional software/hardware business that has to resort to with-holding support or court action to retrieve equipment or monies owed.
A guide for the UK.
There is an excellent guide written by Andrews and Arnold (the ISP) about how to manage late payers, what to put in your contract, and what you can do without special terms in your contract (more than you think it turns out). As an ISP they mainly sell non-tangible services, so this guide is very useful indeed!
Have a read at http://www.paylate.co.uk/
Late payment is inherent in any trade on open credit. There are indeed ways to address this and minimize its effect and no doubt the author has experience of this. The more critical element is however how new and growing MSP's can fund growth which invariably requires up-front cost in people before increased revenue streams are achieved. Asset Based Lenders (ABL's) are chewing the cud and not being too helpful at present given the nature of billing.
Credit in Cloud
In the early days of SaaS we didn't ever credit check or get insurance, you have the ultimate weapon of turning off the service. If you're talking managed assets or data being switched off, the potential loss for non payment by a customer is enormous which acts as a big incentive to keep paying.
Funding models for MSPs can be an exciting business as the annuity or consumption model means slow then fast ratchet of revenues at increased margin over time as assets are leveraged. It's actually a far more attractive model to lend against then traditional buy/sell. Once again UK funding community lags the US on this forward thinking.