Guide
How to bill prepaid IT hours as an MSP in Quebec
Block hours can be billed prepaid or as used, and the contract must fix the time increment, the validity and what happens to unused hours. As a general rule, GST and QST are due on the earlier of two dates, payment or due date, so on the amount paid in advance. OKTO PSA draws the bank down from tickets.
This guide gives general rules, not tax or legal advice.
Should you bill block hours prepaid or as used?
A prepaid block pays you up front and commits the client to coming back to you. Billing as used follows the actual work and takes more tracking on your side. Both hold up; what matters is that the client knows from day one which one they are buying.
A prepaid block of hours is sold as a bundle of hours paid in advance, with a validity period, a rule for unused hours and a price per hour outside the block.
| Criterion | Prepaid block | Billed as used |
|---|---|---|
| Cash in | Before the work | After the work |
| Hourly price | Often a little lower, in exchange for the commitment | The full rate |
| Risk for the client | Unused hours | A variable invoice |
| Tracking for you | A balance to keep and explain | Hours to invoice on time |
What time increment should you pick?
MSPs often count in 15-minute increments. Whatever you pick, write it in the contract: it is the number one source of disputes over a balance.
The increment
15 minutes, 30 minutes or down to the minute. A short increment feels fairer but produces more lines to explain.
The minimum per call
Does a two-minute call cost a full increment? Say so before the client finds out.
Rounding
Up, down or to the nearest increment. One rule, applied to everyone.
After-hours work
Do evenings or weekends draw down at the same rate? If not, write the multiplier.
What do you do with unused hours?
There are three approaches, and the contract has to pick one. Each has a cost for you or for the client, and it is better to know it before signing.
They carry over
Hours move to the next period, often with a validity limit. The client is happy; the service you owe grows if nobody uses them.
They expire
When the validity ends, the hours lapse. It is clear and simple, but the client must have read and accepted it in writing.
They are refunded or converted
Rarer. They can become a credit on another invoice. Spell out the conditions so you do not improvise in a dispute.
Whether they carry over or expire, the rule has to be written before the first hour is sold, not invented when the client asks where their hours went.
On the accounting side
When you recognize revenue on a prepaid block, at purchase or as hours are used, is an accounting question, not a billing one. Ask your accountant how they treat hours that expire.
When are GST and QST due on a prepaid block?
As a general rule, on the earlier of two dates: the day the payment is made or the day it is due. A block that is invoiced and paid in advance is therefore taxed on the amount paid in advance, not hour by hour as the work gets done.
What the official sources say
As a general rule, GST and QST become payable on the earlier of two dates: the day the client pays or the day payment is due. A deposit or a prepaid block follows the same rule. The details (instalments, a block with no invoice) are best confirmed with Revenu Québec or the Canada Revenue Agency.
| Line (fictional example) | Amount |
|---|---|
| Prepaid block of 40 hours at $120 | $4,800.00 |
| GST (5%) | $240.00 |
| QST (9.975%) | $478.80 |
| Total of the block invoice | $5,518.80 |
A caveat before you rely on this text
This guide gives the general rule, not tax advice. Your situation (your client’s status, a block paid in several instalments, a block with no invoice) can change the timing. Have your approach confirmed by your accountant or by Revenu Québec.
Which clauses belong in an hour bank contract?
Six, at a minimum. Each one heads off an awkward call six months from now. Have your legal adviser read the final text: this guide does not replace their advice.
Validity period
How many months the block stays usable, and from which date.
Fate of unused hours
Carry-over, expiry or conversion, with the conditions for each.
Increment and minimum
The time increment, the minimum per call and the rounding.
What is covered
Routine support, projects, emergencies and after-hours work, one by one.
Hours outside the block
The hourly price once the bank is empty, and the notice given before going over.
Renewal and balance
What happens at the end, and how often the client receives their balance.
How does OKTO PSA handle all this?
It takes the bank, the validity and the carry-over as contract settings, then draws hours down from the time logged on tickets. The recurring invoice links to the same contract, with the taxes of the client’s province.
Write the rule once
Hours, validity in months and carry-over are set on the contract.
Log time on the ticket
The technician has nothing else to do: the draw-down follows.
Invoice the block and the rest
The block invoice and the hours outside the block go through billing, with GST, QST or HST by province.
Correct with a credit note
If a sent invoice is wrong, the credit note replaces it.
What ships and what does not
Feature details are on IT contracts and hour banks and on IT billing, taxes and QuickBooks.
- Coverage rules and the Hours to bill screen are modules you turn on.
- Not yet: the client cannot see their hour balance in the portal. Plan to send it yourself.
- OKTO PSA does not decide your tax or accounting treatment: that is your accountant’s job.
Frequent questions
The questions we get asked
Your question is not here?
Write to us. A person in Trois-Rivières answers, within one business day.
Ask your questionPrepaid brings in cash before the work and commits the client, but you have to track a balance. Billing as used follows the real work and means invoicing on time. Both hold up, as long as the contract says which one the client is buying.
MSPs often count in 15-minute increments, but writing the value into the contract matters more than the value itself. Also state the minimum per call and the rounding rule.
It can carry over, expire or convert to a credit. The contract should pick one before the sale and the client should accept it in writing. How to account for those hours is a question for your accountant.
As a general rule, on the earlier of the day the payment is made and the day it is due. A block paid in advance is therefore taxed on the amount paid in advance. Have your case confirmed by your accountant or Revenu Québec.
Yes. The contract carries the hours, the validity in months and the carry-over, and time logged on tickets is drawn from the bank. The client cannot yet see their balance in the portal.
Put your hour bank contract to the test
Bring your contract template. We will show you how the bank, the carry-over and the invoice attach to it.
OKTO Solutions, Trois-Rivières, Quebec