Mid-month changes and monthly license true-ups

A managed services invoice is only as accurate as the counts behind it. Clients hire people, retire laptops and add licenses throughout the month. If the billing process does not catch those changes, revenue leaks out quietly in the form of users you support but never invoice, or licenses you pay a vendor for and never pass through.

Two decisions keep this under control: how you handle changes that happen partway through a month, and how you check each month that the invoice matches reality.

Choose a proration rule and write it down

When a client adds three users on the 11th, you need to decide what to charge for the rest of that month. The common choices are:

• Daily proration: charge for the exact number of days remaining.
• Half-month rule: changes before a cutoff date bill a full month, changes after it bill nothing until next month.
• Full month: any addition bills the full month, and removals take effect at the next billing period.
• No mid-month charge: changes are picked up on the next regular invoice only.

Here is an illustrative example with round numbers. You charge $100 per user per month. A client adds 3 users on the 11th of a 30-day month, leaving 20 days including the 11th.

Under daily proration, the charge is 3 × $100 × 20/30 = $200. Under the half-month rule with a 15th cutoff, the addition comes before the cutoff, so the charge is 3 × $100 = $300. Under the full-month rule, it is also $300. Under no mid-month charge, it is $0 this month and $300 starting next month.

The dollar differences on one change are small. Across a whole client base and a full year, they add up, and inconsistent handling adds up faster. Pick a rule, put it in your agreements, and set your PSA to apply it the same way for every client.

Removals deserve the same attention. Many MSPs credit removals only at the next billing period, partly because underlying license commitments may not drop immediately. Whatever you choose, it should match how your own vendor costs behave, or you will absorb the difference.

Run a true-up every month

A true-up compares three numbers for each client: what the agreement says, what your systems show the client is using, and what you invoiced.

For user and device counts, pull the current number from your source of truth, such as the RMM for devices or the client's tenant or directory for users. For resold licenses, pull the assigned or provisioned count from the vendor portal or distributor report. Compare each one to the quantity on the recurring invoice.

Differences fall into a few groups:

• Under-billed: the client uses more than you invoice. Update the agreement quantity and decide whether to bill back any missed months under your contract terms.
• Over-billed: you invoice more than the client uses. Correct it and issue a credit if your agreement calls for one. Clients notice eventually, and catching it first builds trust.
• Unassigned licenses: you pay a vendor for seats nobody is using. Either reassign or reduce them, subject to the vendor's commitment terms.

For example, if you bill a client for 50 licenses and the vendor report shows 53 assigned, you have 3 unbilled seats. At $100 per seat, that is $300 a month you are paying for and not collecting.

Make it a process, not a project

True-ups fall apart when they depend on someone remembering. A few habits help:

• Pull counts on the same day each month, before the recurring invoice run.
• Use a simple reconciliation sheet per client: agreement quantity, system count, vendor count, invoiced quantity and the action taken.
• Route change requests through tickets, so every add or remove has a date and a requester.
• Assign one owner for the true-up and a second person to review exceptions.
• Record adjustments in the PSA agreement, not as one-off invoice lines, so the next month starts from the right number.

Back-billing deserves care. Your agreement should say how far back you can correct under-billing, and a large surprise invoice can strain a relationship even when you are entitled to it. Some MSPs correct going forward and back-bill only a limited period.

From an accounting view, these are ordinary revenue and credit entries, but large credits or back-billings can make one month's revenue look odd. Note them in your close so the numbers are explainable.

This guide is general information, not accounting or tax advice. Proration, credits and back-billing depend on your agreements and circumstances, so confirm your approach with your CPA.