TL;DR
ConnectWise time entries don't sync to Xero directly. They become invoice lines (for T&M billing) or get absorbed into agreement billing (for managed services). Connect Zero syncs the resulting invoice. Agreement billing produces one flat line in Xero; T&M billing produces per-hour lines. Most MSPs run both billing models on the same customer base, roughly 70/30 split. The split shapes the Xero revenue mix.
The two billing models in plain terms
Every MSP we work with runs two billing models, often on the same customers. Agreement billing is the recurring managed-services fee; a flat monthly amount for a defined service envelope. T&M (time and materials) is per-hour billing for work that falls outside the agreement envelope: project work, ad-hoc support requests, after-hours emergency work.
The agreement model dominates the revenue mix for most MSPs. A typical Australian 12-person MSP doing AUD 1.5 million in revenue has 70 to 75 percent agreement revenue and 25 to 30 percent T&M revenue. That split has been stable across our customer base for the last two years; the move-up MSPs (toward 85 percent agreement) tend to be the ones running on tighter capacity-planning discipline.
The reason the two models matter for the sync architecture is that they produce structurally different Xero invoices. Agreement invoices have one flat line at a predictable amount. T&M invoices have a variable number of lines, each with hours, rate, and total. The reconciliation, the BAS treatment, and the cash-flow forecast all see different patterns depending on which model dominates.
How agreement billing reaches Xero
An MSP customer on a managed-services agreement pays a flat monthly fee. The ConnectWise side tracks the agreement (start date, monthly fee, included service envelope, overage rate). When the monthly billing cycle runs, ConnectWise generates an invoice with one line: the flat agreement fee, with tracking categories for Location and Revenue Type set per the customer's record.
The Connect Zero sync reads the invoice, maps the agreement line to the appropriate Xero revenue account (typically "Managed Services Revenue" or equivalent), preserves the tracking categories, and creates the invoice in Xero. The Xero invoice has one line: AUD 2,500.00 ex-GST, AUD 250.00 GST, AUD 2,750.00 inc-GST.
The time entries underneath the agreement remain in ConnectWise. The MSP's service team logs hours against the customer's agreement; ConnectWise tracks the hours-used vs hours-available calculation for capacity planning. The hours don't flow to Xero because the customer isn't being billed per hour; they're being billed at the agreement rate.
This means the Xero invoice for an agreement customer is structurally identical whether the customer used 5 hours or 25 hours that month. The hours are operational data; the invoice is financial data. The two are linked in ConnectWise but separated in Xero.
How T&M billing reaches Xero
A customer paying T&M (or an agreement customer in overage) has a different invoice shape. The ConnectWise side accumulates time entries throughout the month; engineer name, hours worked, billing rate per the customer's rate table, description. At month-end (or per the customer's billing cycle), ConnectWise generates an invoice with one line per time entry, or per consolidated time-entry group depending on the MSP's billing rules.
A typical T&M invoice has 8 to 20 lines for a project-billed customer. For example:
| Date | Engineer | Hours | Rate (AUD) | Line total | Description |
|---|---|---|---|---|---|
| 3 May 2026 | Jane Smith | 2.5 | 220.00 | AUD 550.00 | Server migration planning |
| 8 May 2026 | Sam Lin | 4.0 | 220.00 | AUD 880.00 | Network reconfig |
| 14 May 2026 | Jane Smith | 3.5 | 220.00 | AUD 770.00 | Migration execution |
| 22 May 2026 | Sam Lin | 1.5 | 220.00 | AUD 330.00 | Post-migration support |
| Total | 11.5 | AUD 2,530.00 |
The Connect Zero sync reads this invoice and creates a Xero invoice with the same 4 lines (or however many; the line count is preserved). Each line carries the same tracking categories (Location, Revenue Type = "Projects" or "T&M"). The Xero invoice total matches the ConnectWise invoice total to the cent.
The benefit of preserving the line structure is reporting. Xero can answer "how much T&M did Jane bill in May?" by filtering on the description or by combining with the ConnectWise time-entry report. The Xero invoice carries enough metadata to support drill-down without forcing the bookkeeper back into ConnectWise.
The overage case: agreement plus T&M on the same invoice
A customer on an agreement who uses more hours than the agreement envelope produces an invoice that has both shapes. The flat agreement line covers the included hours (AUD 2,500 for the 20-hour envelope). The overage lines cover the hours above the envelope (4.5 hours at the overage rate of AUD 180 = AUD 810).
The ConnectWise side generates this as one invoice with two sections: the agreement section (one line, AUD 2,500) and the T&M section (one or more lines, AUD 810). Connect Zero passes the invoice through to Xero with the same structure: one line for the agreement fee, one to four lines for the overage time entries.
This is the highest-fidelity billing pattern and the one we recommend MSPs settle on once they've stabilised their agreement template. The customer sees what's included and what's extra; the MSP captures the value of the work outside the envelope; the Xero P&L slices cleanly between agreement revenue and T&M overage revenue.
Reconciliation considerations
For MSPs running the six-step monthly reconciliation, the agreement-vs-T&M split is the lens to drill into when totals don't match.
The five reconciliation symptoms specific to time-entries-to-invoicing flow.
- Agreement billing missing for one customer. The agreement billing cycle didn't fire in ConnectWise. Fix: re-run the billing cycle for that customer.
- Overage charges missing from a known overage customer. The agreement's overage flag is off in ConnectWise. Fix: enable overage on the agreement; re-run billing.
- T&M line count off between ConnectWise and Xero. Some lines were consolidated by ConnectWise's line-grouping rules. Fix: review the consolidation rules in ConnectWise; the variance might be intentional.
- Engineer rate change mid-month. Time entries before the change use the old rate; after, the new rate. Fix: this is correct behaviour; verify the rate-change date matches the timesheet.
- Time entry reclassified as non-billable after invoicing. The Xero invoice has a line that ConnectWise no longer shows as billable. Fix: issue a credit note in ConnectWise; the credit syncs to Xero.
Capacity planning beyond Xero
The Xero side only sees the invoiced revenue. The capacity-planning view; hours used vs hours available, engineer utilisation, agreement-vs-T&M time mix; lives in ConnectWise reports because the underlying data is the time entries, not the invoices.
For MSPs whose CFO wants to see capacity-planning data and financial data side-by-side, the right pattern is a BI dashboard (Power BI, Looker) pulling from both Xero (revenue) and ConnectWise (hours, utilisation), joined at the customer or agreement level. Connect Zero exposes a webhook for sync events that BI tools can subscribe to; the joining at the reporting layer is the MSP's choice of BI vendor, not the sync layer's job.
Some MSPs run this entirely from ConnectWise reports without a separate BI tool. ConnectWise has native reports for utilisation, agreement profitability, and capacity-vs-load. They aren't as polished as a custom BI dashboard but they're free with the PSA licence.
Pricing structure interactions
An MSP's pricing structure shapes the agreement-vs-T&M mix more than any other factor. Three common pricing structures and their typical mix:
| Pricing structure | Typical mix | Xero invoice volume |
|---|---|---|
| All-inclusive agreement (rare) | 100% agreement, 0% T&M | 1 invoice per customer per month |
| Per-endpoint agreement with overage | 80% agreement, 20% T&M (overage) | 1 invoice per customer per month with mixed lines |
| Per-hour project + flat support agreement | 60% agreement, 40% T&M | 1 agreement invoice + 1 to 4 project invoices per month per active customer |
| Pure T&M (rare for MSPs, common for consultancies) | 0% agreement, 100% T&M | 1 invoice per project per month |
The middle two patterns cover roughly 90 percent of MSPs. The all-inclusive pattern is rare because most MSPs find they need an overage mechanism to handle unpredictable spikes in demand. The pure T&M pattern is rare for MSPs because the customer relationship-management benefit of agreements (revenue predictability, capacity planning) is too large to give up.
What Connect Zero does and does not do
Connect Zero syncs the ConnectWise invoice (whether agreement, T&M, or mixed) to Xero, preserving line structure, tracking categories, and tax codes. It does not touch the time entries themselves. It does not generate invoices in ConnectWise (that's ConnectWise's billing engine). It does not transform agreement billing into T&M or vice versa.
What it does, deliberately well: read the invoice ConnectWise has produced, map it to the right Xero accounts and tracking categories, write it to Xero with full line fidelity, attach the customer-facing invoice PDF if one is generated. See the Connect Zero hub for the full feature list, the setup guide for the configuration walkthrough, and pricing for the AUD numbers.
For the comparison with WiseSync (which handles agreement-vs-T&M identically; this is industry-standard behaviour, not a vendor differentiator), see vs WiseSync. Related context: the 2026 buyer's guide covers the broader vendor evaluation; the 30-minute MSP month-end close covers the close routine these invoices flow into; the tax mapping guide covers the GST and VAT treatment on agreement and T&M lines
Frequently asked questions
Does ConnectWise time data sync to Xero?
Not directly. Time entries in ConnectWise become invoice lines (for T&M billing) or get absorbed into agreement billing (for managed services). The invoice is what flows to Xero. Connect Zero syncs the invoice; the time entries themselves stay in ConnectWise as the source of truth for billable hours.
What is the difference between agreement billing and T&M for MSPs?
Agreement billing is a flat monthly fee for managed services covering a defined service envelope (e.g. "unlimited remote support for 25 endpoints, AUD 2,500 per month"). T&M is per-hour billing for work outside the agreement envelope (e.g. "project work at AUD 220 per hour"). Most MSPs do both; the split is roughly 70/30 in our customer base.
How does Connect Zero handle time entries against an agreement?
Agreement time entries are absorbed into the agreement billing in ConnectWise; they don't produce a per-hour invoice line in Xero. The Xero invoice shows the flat agreement fee. The hours are visible in ConnectWise reports for capacity planning.
What about agreement overage hours?
Time entries in excess of the agreement envelope flow through as T&M lines on the agreement invoice. The Xero invoice shows the flat fee plus a line for the overage hours at the contracted overage rate. This is handled in ConnectWise's billing engine; Connect Zero passes the invoice through unchanged.
About this article
Written by the Connect Zero team, an Australian-built ConnectWise to Xero sync sold by Auswide IT, an Australian MSP integration vendor based in Adelaide. We run agreement billing on our own books and have written T&M-only contracts for project work. Last updated 24 May 2026.
