For managed service providers, handling client payments efficiently is crucial to maintaining healthy cash flow and growth. Your business suffers when payments are held up for days in processing. Your clients grow frustrated trying to navigate confusing payment portals. Meanwhile, your team wastes hours reconciling transactions across multiple systems. These are common challenges MSPs face when using payment processors that weren’t designed with their unique business model in mind.
Understanding Payment Processing Options for MSPs
Generic vs. Industry-Specific Solutions
When it comes to payment processing, MSPs typically have two options. The first is working with generic payment processors like Stripe, Square, or QuickBooks Payments, which serve businesses across all industries. These companies are what we refer to as “generic payment processors” because they’re designed to serve any type of business rather than focusing on specific industries. The second option is choosing an MSP-specific payment processor designed exclusively for IT service providers – we’ll explore the benefits of this approach later in this article.
The Complexity of MSP Billing
MSPs have unique billing requirements that set them apart from typical retail or other service businesses. A single MSP might need to handle:
- Monthly recurring revenue from managed services contracts
- Variable project billing with different payment terms
- Hardware and software purchases with varying markup rates
- Emergency support hours billed at premium rates
- Multiple payment methods across different client types
- Customizable autopay arrangements by location, by customer, by agreement
This complexity requires a payment processing solution that understands and supports these various billing scenarios. Generic payment processors weren’t built with this complexity in mind, which leads to significant operational challenges.
The Multi-Vendor Challenge
Generic payment processing solutions often require MSPs to manage multiple vendor relationships. One vendor handles the payment portal, another processes credit cards, and yet another manages ACH payments. Each additional vendor adds complexity and potential points of failure to your payment processing system.
Valiant Technology’s leadership team discovered the financial impact of this complexity when analyzing their processing costs: “With the prior platform, it wasn’t just a platform fee. There were some other processing fees, and there was a gateway fee, and a few different things. Every month they fluctuated, so you never really knew exactly what it was going to be.”
These fluctuating costs make it difficult for MSPs to predict and manage their payment processing expenses. Moreover, when payment issues arise, each vendor might blame the others, leaving the MSP stuck in the middle while trying to resolve client payment problems.
Why MSPs Need Specialized Payment Tools
The challenges MSPs face with generic payment processors led to the development of MSP-specific payment solutions. These platforms understand the unique needs of managed service providers, including:
- Integration with PSA (Professional Services Automation) tools
- Handling recurring monthly services
- Processing variable project invoices
- Managing hardware and software purchases
- Automating payment reconciliation
- Providing client self-service options
Benefits of Industry-Focused Solutions
When payment processors are built specifically for MSPs, the difference is clear in every aspect of the service. Instead of trying to adapt generic payment tools to fit MSP workflows, these specialized processors are designed from the ground up to handle the unique requirements of IT service providers.
The advantages show up in practical ways: automated reconciliation with your PSA and accounting platforms, simplified payment collection for recurring services, and professional payment portals that enhance rather than detract from your brand. Most importantly, these solutions understand the MSP business model, eliminating the need for reserves or extended hold times that can strain your cash flow.
“My favorite feature is not even customer facing,” notes Justin Best. “It’s the amount of time it saves my bookkeeping people when reconciling payments. The way deposits are handled allows most of them to be processed automatically by QuickBooks Online.”
Common Migration Concerns
Many MSPs hesitate to switch payment processors because they worry about disrupting their existing payment workflows. These concerns are understandable – after all, payment processing is critical to business operations. MSPs worry about several key risks:
Payment Data Security: The thought of transferring sensitive client payment information to a new system raises valid concerns. What happens to stored credit cards and bank account information? How can you ensure this data transfers securely and accurately? The risk of payment information being lost or, worse, mismatched between clients could create significant problems.
Business Continuity: During a transition, MSPs worry about maintaining consistent cash flow. Will there be a gap in payment processing capabilities? How long will the change take? What happens to scheduled payments and recurring transactions?
Client Experience: Perhaps the biggest concern is how clients will react to the change. Will they need to re-enter their payment information? Will they find the new system confusing or frustrating? The last thing any MSP wants is to disrupt their professional relationship with clients over payment processing issues.
However, these concerns, while valid, often prove to be overestimated. “I had probably held off a month too long just because I was a little nervous,” admits Valiant Technology’s leadership. In fact, many MSPs find that switching to a specialized payment processor actually improves their client experience. As Justin Best notes, “It was really direct that people started just using the new payment platform. They just logged in and paid their invoices and set up new payment methods.”
The True Cost of Multiple Vendors
The financial impact of consolidating to a single payment processor extends far beyond basic processing fees. While Valiant Technology reports saving “between 75 and 80 percent of their monthly processing and platform fee,” the true value comes from operational efficiency and simplified business management.
Consider the hidden costs of managing multiple vendors:
Financial Complexity: Each vendor has their own fee structure, billing cycle, and payment terms. Your accounting team must track and reconcile multiple statements, often with varying deposit schedules and fee calculations. This complexity increases the risk of errors and makes accurate cash flow forecasting more difficult.
Administrative Overhead: Managing relationships with multiple vendors requires significant time and effort. Your team needs to maintain multiple sets of credentials, learn different systems, and coordinate with various support teams. When issues arise, valuable time is wasted determining which vendor is responsible and coordinating resolution between parties.
Integration Challenges: Multiple vendors mean multiple integration points with your PSA and accounting systems. Each integration needs to be maintained and monitored, creating additional technical overhead and potential points of failure in your payment processing workflow.
Training Requirements: Your team needs to understand multiple systems, interfaces, and processes. New staff members require more extensive training, and maintaining documentation for various platforms adds another layer of complexity to your operations.
By consolidating to a single, comprehensive payment processing solution, MSPs can eliminate these hidden costs and inefficiencies. A unified platform means one system to learn, one vendor to contact for support, one reconciliation process, and one predictable fee structure. This simplification not only reduces direct costs but also frees up valuable time and resources that can be better spent serving clients and growing your business.
The Alternative Payments Way
Alternative Payments demonstrates how an MSP-specific payment processor should work. We offer a straightforward pricing model: 2.9% + $0.30 for Visa/MasterCard and 3.5% + $0.30 for American Express, regardless of rewards programs or card types. This transparent pricing eliminates the confusion and fluctuation common with generic processors.
The platform’s ease of use stands out to clients like Jennifer Daniel, CFO of ECX Systems: “What’s really nice now is we’ll get a new customer and we’ll send them the invoice with login instructions at the bottom. They just do it. It requires nothing from us.”
“I always get exactly the amount that is on my invoice deposited into my checking account regardless of payment method,” adds Justin Best. This predictability, combined with automated reconciliation and robust payment reminders, helps MSPs optimize their cash flow and reduce administrative overhead.
Making the Right Choice for Your MSP
When evaluating payment processors, consider the total impact on your business. Look beyond basic processing rates to understand:
- Integration capabilities with your PSA and accounting software
- Time spent on payment administration and reconciliation
- Client payment experience
- Transparency of fees and pricing
- Level of support and responsiveness
As Justin Best puts it, “I really liked that Alternative Payments is able to handle both the portal and the processing and not give me separate contacts. If I have to go fix something, I get it resolved from a single source.”
The Bottom Line
The choice between generic and MSP-specific payment processors isn’t just about moving money from one account to another. It’s about finding a payment processing solution that understands and supports your MSP’s unique needs. While generic processors can handle basic transactions, processors built specifically for managed service providers deliver the seamless experience, integration capabilities, and professional tools that help your business thrive.
