Cycle billing definition
/What is Cycle Billing?
Cycle billing occurs when an organization issues invoices to its customers on a rotating schedule. This concept varies from the more common practice of issuing all invoices on the date when a delivery or service occurs. It is commonly used by utilities and subscription services that deal with very large billing volumes.
Advantages of Cycle Billing
By engaging in cycle billing, a business can flatten the volume of billing work to be completed on any given day. This allows it to maintain a lower staffing level in the billing department.
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Disadvantages of Cycle Billing
There are several disadvantages of cycle billing, which are as follows:
Delayed cash flows. Cycle billing can have a negative impact on cash flows, since some invoices may be delayed several days past when they would normally be issued to customers.
Reduced interest income. Since cycle billing can delay cash flows, this implies that the organization’s interest income will be lower, since it does not have the cash to put into interim investments.
Example of Cycle Billing
For example, customers whose last names begin with A through C are billed on the first day of the month, followed on the next day by those customers whose last names begin with D through F, and so on.