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Cycle billing involves updating customer balances on a daily basis and issuing a single invoice at the end of a billing period. It is used by utility and telecommunications companies and offers benefits for both suppliers and customers, including time and cost savings. Cycle billing is typically used for ongoing customer-supplier relationships and cannot be used for mail order or online storefronts.
The billing cycle is a billing strategy that involves creating and updating 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 charging customers for goods and services, instance by instance. There are benefits associated with the cycle billing model that apply to both the supplier and the customer.
Many different types of businesses use cycle billing. Utility companies routinely update customer bills on the amount of usage incurred over a given period or cycle. Typically, the billing period will be thirty days or one calendar month. During this period, the customer’s account is updated periodically, reflecting the use of the service provided by the customer. At the end of the current cycle, the invoice for the full thirty days is finalized and forwarded to the customer for payment.
Several telecommunications services also make use of cycle billing. For example, a teleconferencing department will typically calculate the cost of each conference call placed by a given customer and add the charges and details to an invoice prepared specifically for that cycle. Assuming the customer holds a weekly conference call, the cycle invoice will carry information and charges related to each of these calls, usually arranged in chronological order on the invoice.
Using the billing cycle offers benefits for everyone involved. For the supplier, using this model instead of issuing individual invoices for each order or event means less time is spent preparing, checking, printing and sending invoices to customers. Because all activity for a single billing cycle appears on one invoice, the vendor also saves time and resources on the backend, when payments are received and must be posted to the company’s accounting records.
For customers, cycle billing makes it possible to only have one invoice to manage during the cycle, rather than dealing with a constant stream of invoices that must be paid. The customer also saves time, and possibly money, if paying each invoice incurs some sort of expense, such as postage or a fee for accepting an online payment. Many customers focus more on the convenience of this approach, especially if there is little or no expense involved in sending multiple payments.
Cycle billing is typically employed when the customer-supplier relationship is governed by a contract or is of some sort of ongoing nature. It is not uncommon for the customer to undergo a credit check before the supplier enters into this type of agreement with the potential customer. The template works well for credit card bills, utilities, and even tabs at local clubs or stores. Companies that sell merchandise by mail order or through online storefronts cannot use this method, preferring to charge each order as it is placed and ask for payment upfront.
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