The Lean MSP – Episode 02: Auditing Licenses

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Introduction

“What’s up? This is Kevin Clune

Welcome to The Lean MSP.

Where we look to take on the challenges of operating an MSP in today’s economic landscape.

This means staying lean, working smarter, and achieving more with fewer resources

Throughout this series, I want to occasionally hit on ways that MSPs can cut expenses.

We went through this process ourselves in order to squeeze as much out of the business as possible.

This was incredibly important for us as we prepped the business to be acquired.

Not only did we look better on paper, but after months of expense cutting, our cash flow started to see some helpful increases and helped us make other decisions that benefitted the business.”

Undocumented Charges

“The area that I want to focus on today, is Licensing and subscriptions.

I don’t have to tell you that MSPs hold a ton of licenses. It’s basically what this business model is all about.

As our company grew, we eventually realized that we needed to get a grip on tracking these.

We had charges hitting our AMEX from these obscure offshore software companies that no one had any clue what they were for.

Here is typically how this happens..

Someone on our help desk is working a ticket, and when Googling the solution ( as all seasoned Help Deskers do)

The find some $29 year tool on like the 3rd page of a comment thread and ask if they can buy it.

What do we say when this happens?

Go for it, we’ll just cancel after you use it.

Fast forward two years and now you are seeing a charge on your credit card from some company called XYZinc.net and you have no clue what it is for.

Really, because you are afraid that if you cancel, it might break something for one of your customers.”

Cancelling Ghost Licenses

“So, this was our problem, and our solution was to just pull the bandaid off.

I scoured our monthly statements and just cancelled everything I could that was not traced directly back to some kind of service item in our contracts.

In fact, if a month went by that I didn’t cancel something, I would almost be disappointed.

You are probably wondering, did cancelling random charges break things and wreak havoc on our help desk?

Aboslutely. Occasionally it did.

But most of the time, nothing happened.

And when it did, it was very easy to find out which customer this charge should be allocated to and then charge them for it whenever it was appropriate.”

Centralized License Management

“In a perfect world, we buy all of our software and subscriptions for our customers through one central portal that makes it easy to track.

I know companies like Ingram micro are trying to achieve this and are at least trying to solve this problem.

Unfortunately, unless you started your business yesterday, this is probably not what your situation looks like.”

Attacking The Problem

“My advice when going through this process is to really attack it.

If you tiptoe your way around this, you aren’t going to see the results you need to make it worth your while month after month.

Seeing those costs go down each month is what gets the ball rolling and what creates that shift in attitude that you need to better manage your expenses.

Look at your statements and accounting software and try to figure out if each charge should be Cost of Goods Sold or an Internal Expense, and to which customer or business process it should be allocated.

If you can’t figure this out, it entirely possible that the item can be cancelled and it won’t make a difference.

You are also guaranteed to find charges that you should be invoicing your customer for, either as part of their managed services bundle or separately.

Whether you decide to recoup the expense or not, at a minimum you should recognize it somewhere on your invoice or contracts and make it known that it exist.

That’s all for episode 02. Thank you all for listening, and I hope you have a great week.”