Credit control for IT and managed service providers

1. 1

   Collect recurring fees by direct debit

   Set up direct debit mandates at onboarding for all monthly contract and licence fees.

2. 2

   Take payment before ordering hardware

   Ask for full or part payment before placing orders for equipment or annual licences.

3. 3

   Bill projects in stages

   Invoice a deposit at kick-off and further amounts at agreed milestones.

4. 4

   Explain variable invoices

   Include user and device counts on usage-based invoices so clients can check them quickly.

5. 5

   Remind before and on the due date

   Automated reminders keep manual-pay clients on time, and flag failed direct debits immediately.

6. 6

   Set a written suspension policy

   Include a clear, contractually agreed process for suspending non-critical services after a set period overdue, with notice.

7. 7

   Escalate long-overdue accounts

   Add statutory interest and move to formal steps if a client remains unpaid after reminders and notice.

IT clients are almost always businesses, so the Late Payment of Commercial Debts (Interest) Act 1998 applies. You can claim statutory interest at 8% above the Bank of England base rate and fixed compensation of £40, £70 or £100 unless your contract provides a substantial alternative remedy.

Any right to suspend services should be written into your contract with clear notice periods. Take care not to disrupt services in a way that breaches your contract or data protection duties, such as access to the client's own data.

This is general information, not legal advice.

Work out what you can claim with our late payment interest calculator.

A fictional MSP supports Hartley Brooks Ltd with 40 users at £55 per user per month, plus licences, totalling about £3,100 per month. The client pays by bank transfer and is regularly three weeks late, while the MSP pays its distributor on fixed terms.

The MSP moves the contract to direct debit at renewal and uses automated reminders for project invoices. A £7,800 server migration invoice slips overdue and is chased with a firm notice mentioning statutory interest and £70 compensation. It is paid within ten days. Figures are illustrative.

Direct debits sometimes fail because of a cancelled mandate or low balance. Treat each failure as an overdue invoice: send a same-day notification with a card payment link, retry where your provider allows, and escalate quickly if the client does not respond.

Many MSP cash flow problems trace back to contracts written before the business grew. Review your standard agreement for:

• Payment by direct debit as the default method.
• Licences and subscriptions billed in advance for the contract term.
• Hardware and annual licences paid before ordering.
• Deposit and milestone terms for projects.
• Statutory interest and compensation for late payment.
• A clear, proportionate suspension process with notice periods, protecting client data access.
• Minimum terms and notice periods for cancelling recurring services.

Recurring revenue businesses should measure more than revenue:

• Percentage of monthly recurring revenue collected by direct debit.
• Failed direct debits per month, and how quickly they are recovered.
• Hardware and licences ordered before payment was received.
• Project invoices more than 30 days overdue.
• Days sales outstanding compared with your supplier payment terms.

AutoSettle chases project, hardware and ad hoc support invoices from Xero, QuickBooks or Sage, and follows up failed direct debits with a card payment link. It can escalate gradually, from friendly reminders to formal notices, while you approve any step that affects the client relationship, such as a suspension warning.