A guide for owners thinking about a future sale, covering why recurring, automated collections tend to come out better in a quality-of-earnings review than ad hoc invoicing, and what's worth tidying up before a buyer starts looking.
Most of the MSP owners we talk to aren't planning to sell any time soon, but a good number of them will get an approach anyway, because the sector is in the middle of one of the busiest consolidation cycles IT services has seen. Around 466 MSP deals closed in 2025, roughly 20% more than the year before, and EBITDA multiples have climbed from somewhere between 4x and 6x before 2020 to a median of around 9x today, with the best businesses commanding a noticeable premium over average ones.
Once a buyer is serious about an acquisition, they'll usually commission a quality-of-earnings (QoE) review, which is the part of due diligence that tests whether the profit in your accounts is real, whether it's likely to continue and whether it actually turns into cash. Billing and collections end up at the centre of that work, and they're also one of the areas owners tend to think about least until someone starts asking questions.
This piece is written with an eventual exit in mind, but very little of it depends on you selling. A billing setup that would stand up to a QoE review is the same setup that gets you paid on time and frees your team from spending the end of every month chasing invoices, so it's worth getting right whatever your plans are.
What Does a QoE Review Look At?
A QoE review is normally carried out by an accounting firm working for the buyer, and while it draws on the same numbers as an audit, it's asking a different question. An audit checks whether your accounts are correct, whereas a QoE is trying to work out how sustainable your earnings are and, ultimately, how much the buyer should be willing to pay for them.
For an MSP, the reviewers usually start with your revenue mix, separating contracted monthly recurring revenue from project work, hardware resale and break-fix. Recurring revenue is valued much more highly than one-off income, but only when the buyer can see that it's backed by a contract and is actually being collected each month, rather than invoiced and left to drift.
From there they'll do what's called a proof of cash, tying what you invoiced to what arrived in the bank month by month. Small gaps will prompt questions, and anything nobody can explain is likely to be adjusted out of the earnings figure the price is based on. Alongside that they'll look at your debtor days and aged receivables, because debt that has been sitting at 60 or 90 days is often written down in the review, and that write-down comes straight off what you're paid.
Working capital is the other big area. Most deals agree a normal level of working capital that the business has to hand over at completion, and if your receivables move around from month to month because collection depends on who has time to chase, that figure turns into a negotiation that rarely goes the seller's way. Reviewers will also look for billing leakage, such as vendor licenses you pay for but don't recharge, seats added partway through a month that never make it onto an invoice or add-ons that have quietly fallen off a contract, since any of these suggests the margin in your accounts is weaker than it appears.
Why Do Automated Collections Score Better?
Two MSPs can report exactly the same MRR and still get very different treatment in a QoE, and the difference usually comes down to how that money is collected. In the first business, invoices go out of the PSA at the start of each month. A few clients are on direct debit, most pay by bank transfer whenever they get round to it, and someone in the office emails the late payers when they have a spare hour. Project and hardware invoices are raised manually, reconciliation happens in Xero at month end and every so often a payment gets matched to the wrong invoice and has to be untangled later.
In the second business, every recurring client pays by direct debit or card on file, set up as part of signing the contract. If a collection fails it retries automatically, project and deposit invoices are sent with a payment link attached, reminders go out on a fixed schedule and each payment is reconciled against the right invoice on the day it clears.
The revenue looks identical on paper, but a reviewer will see the second business very differently. Its cash arrives on predictable dates, so a buyer can model it with confidence, and because every payment ties back to an invoice and a mandate, the proof of cash is something you can pull from a report rather than rebuild by hand. Fewer invoices end up in the ageing report, which means less gets written down, and the buyer doesn't have to worry that collections will fall apart if the one person who knows which clients need a nudge decides to leave.
This matters even more when the buyer is a roll-up. Groups that have already absorbed several MSPs know how much time and money goes into untangling different billing cycles, payment terms and collection habits after a deal, and a business that already runs on standardised, automated billing is simply cheaper to bring into the group. That's part of the reason less standardised MSPs tend to sell for lower multiples, since the buyer can see the clean-up work ahead and adjusts the price to cover it.
What Should You Clean Up Before a Buyer Looks?
You don't need a sale on the horizon to make any of these changes, and most of them are worth doing within the next quarter regardless. The biggest single improvement for most MSPs is getting recurring clients onto automatic payment, whether that's direct debit or a card on file, and making it the default for every new contract. If you already use a direct debit provider and have been put off switching, it's worth knowing that in the UK, mandates can usually be moved without asking clients to reauthorise anything, and that worry alone keeps a lot of MSPs on tools they outgrew some time ago.
Project and hardware billing deserves its own attention, because one-off invoices are where most of the MSPs we speak to have the most trouble. Taking deposits upfront on large hardware orders and sending every ad hoc invoice with a way to pay attached removes a lot of the waiting around that comes with this kind of work.
About the Author: Carlos Rey is the co-founder of Adfin, a modern payments company that helps businesses get paid faster and easier.