What AR Means for an MSP's Cash
Accounts receivable is revenue you have earned and not yet banked. For an MSP it is mostly recurring agreement invoices, project invoices, hourly work outside the agreement, and resold hardware and licenses. Every dollar in AR is a dollar you have usually already spent on technician time or paid to a vendor.
AR is the input to DSO, which converts the balance into days of revenue. Watch the Days Sales Outstanding KPI for the trend and the aging report for the detail.
The Aging Report
The aging report groups what each client owes by how overdue it is. The older buckets are the ones that turn into write-offs, disputes and awkward renewal conversations.
| Bucket | What It Usually Means at an MSP |
|---|---|
| Current | Invoiced and not yet due |
| 1 to 30 days late | A slow approval or a missed card update |
| 31 to 60 days late | A dispute, a cash problem, or nobody chasing |
| 61 days and older | A collections problem that needs the owner involved |
Review it weekly, sorted by balance. In most books a small number of clients hold most of the overdue money, and those are the calls worth making first. Add a note to each overdue line saying who owns the follow-up and when it was last chased, so the report becomes a work list rather than a snapshot.
Where Large Balances Build Up
- Project work invoiced in one bill at the end, especially migrations that run long.
- Hardware ordered for a client and paid to the distributor before the client pays you.
- Hourly work outside the agreement that gets batched into a big monthly invoice.
- True-ups for seats or licenses that the client did not expect and now questions.
Recurring agreements billed in advance, with a card or direct debit on file, keep AR small and predictable. Deposits and milestone billing do the same for projects, as covered in how to scope and price a project.
Collecting Without Damaging the Relationship
Put the rules in the managed services agreement before you need them: payment terms, late fees, and the right to pause non-critical work when an account is past due. Then apply them the same way to every client, because an exception for one friendly client becomes the norm for all of them.
Keep collections separate from service where you can. A technician should not be the person asking about an overdue invoice, and the account manager should know the balance before every QBR. A QBR with an unpaid balance on the table is the right moment to raise it calmly, face to face, instead of in a fourth reminder email.
Common Questions
Is unbilled work part of accounts receivable?
No. AR only includes invoiced amounts. Work done but not yet invoiced is unbilled revenue, and a large unbilled balance is its own warning sign.
When should I write off an old invoice?
When collection is no longer realistic and your accountant agrees it meets the write-off rules you follow. Record the reason so the same terms do not repeat with the next client.
Should I stop service for an unpaid client?
Only if your agreement allows it and you give written notice first. Pausing projects and non-urgent requests is usually safer than touching security tools or backups.
Can I sell or finance my receivables?
Some lenders offer invoice financing, but it costs margin and does not fix slow payers. Fix billing timing and payment methods first.