Cycle billing is an invoicing strategy that involves the creation and updating of outstanding balances on customer accounts on a daily basis. This approach makes it possible to prepare a single invoice that covers an entire period or cycle, rather than billing customers for goods and services on an instance by instance basis. There are benefits associated with the cycle billing model that apply to both the supplier and the customer.
Many different types of businesses make use of cycle billing. Utility companies routinely update customer accounts on the amount of usage incurred for a given period or cycle. Typically, the billing period will be thirty days, or one calendar month. During that time, the customer account is updated from time to time, reflecting the customer’s use of the service provided. At the end of the current cycle, the invoice for the entire thirty days is finalized and forwarded to the customer for payment.
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Various telecommunications services also make use of cycle billing. For example, a teleconference bureau will often calculate the cost of each conference call held by a given customer, and add the charges and detail to an invoice that is prepared specifically for that cycle. Assuming the customer holds a weekly conference call, the invoice for the cycle will carry information and charges related to each of those calls, usually arranged in chronological order on the invoice.
The use of cycle billing provides benefits for everyone involved. For the supplier, using this model rather than issuing individual invoices for each order or event means that less time is spend in preparing, checking, printing, and mailing invoices to customers. Since all the activity for a single billing cycle appears on one invoice, the supplier also saves time and resources on the back end, when payments are received and must be posted in the company’s accounting records.
For customers, cycle billing makes it possible to have only one invoice to manage during the cycle, rather than dealing with a steady stream of invoices that must be paid. The customer also saves time and possibly money, if paying each invoice incurs some type of expense, such as postage or a fee for the acceptance of an online payment. Many customers focus more on the convenience of this approach, especially if there is little to no expense in submitting multiple payments.
Cycle billing is normally employed when the relationship between customer and supplier is governed with a contract or is of some type of ongoing nature. It is not unusual for the customer to undergo a credit check before the supplier establishes this type of arrangement with the potential customer. The model works well for credit card accounts, utilities, and even for tabs at local clubs or shops. Businesses that sell goods via mail order or online storefronts may not use this method, preferring to bill each order as it is placed and request payment up front.