Whether your business relies on invoices, a subscription model, or a hybrid approach, the ability to collect payments without creating extra work is important. Direct billing helps businesses simplify customer billing and can make revenue more predictable.

People sometimes assume that direct billing involves paper statements, collection phone calls, or specialised industries, such as healthcare. But many modern businesses, from startups to large corporations, use direct billing. The global market for this service was valued at about $1.0 billion in 2023 and is expected to reach $2.5 billion by 2032.

Below, we’ll explain what direct billing is, why different types of businesses use it, and how Stripe can help.

What’s in this article?

• What is direct billing?
  
• What are the benefits of direct billing for businesses?
  
• What industries commonly use direct billing?
  
• How do you set up a direct billing process?
  
• How can Stripe help with direct billing?
  
• What are common mistakes in direct billing?
  

What is direct billing?

Direct billing is a payment arrangement in which a service provider or seller sends bills directly to the customer, often according to a set schedule and with an expectation of prompt payment. The format might vary – some businesses mail paper statements, while others send digital invoices – but the central concept is that organisations bill their customers without using intermediaries or requiring in-person payments.

Service-based organisations that provide ongoing work, such as monthly consulting work, might use direct billing so invoices are emailed to clients automatically. In healthcare, a clinic might choose to bill patients directly rather than involve insurers. In e-commerce, a business might offer a credit programme that sends a statement to the customer each month to collect payment after purchase.

What are the benefits of direct billing for businesses?

Companies choose direct billing for several reasons, including convenience and reliability. Below are a few notable benefits for businesses.

Predictable invoicing cycles

Direct billing allows a business to control when invoices go out. That enables you to align your billing cycles with your cash flow needs. For instance, if your organisation pays certain expenses in the middle of the month, you can time your invoice dates so money arrives by then. This structure can sustain a healthy payment cadence and reduce accounting guesswork.

More accurate records

Because you’re sending bills directly, you can track everything in one place. Each invoice corresponds to a specific service period or product delivered, and you can mark it as paid as the money arrives. That makes it easier to reference previous statements, generate payment history reports, or share updates with your accounting team.

Flexibility for your customers

Some customers need time between receiving goods or services and paying for them, while others prefer consolidating all bills into one invoice. Direct billing covers both: you deliver the product or service at the agreed time and send a single invoice summarising those charges. This is appealing to people who don’t want to pay up front and don’t want to pay for each delivery separately.

Stronger customer relationships

When you allow customers to pay later, you’re extending a level of courtesy and trust. This can make customers more likely to return and recommend your services to others. It’s a meaningful dynamic that can set you apart in a crowded marketplace.

Scalability

If your organisation grows, direct billing can scale with you. Even as you send more invoices each month, the underlying process remains the same. This consistency keeps day-to-day operations moving, even as you add new customers or services.

What industries commonly use direct billing?

Although almost any business can choose to bill directly, certain types of companies adopt direct billing more frequently. Here are some industries where direct billing can be an indispensable part of daily operations.

Professional services

Many agencies, consultancies, and specialised service providers rely on direct billing. They often issue clients consolidated invoices for the total hours worked or projects completed during a monthlong period. This arrangement acknowledges the ongoing relationship with the client.

Healthcare providers

Although insurance often plays a role in healthcare billing, some practices still charge patients directly for procedures, appointments, or services that aren’t covered. Sometimes, providers will bill a patient after a procedure is completed and require the patient to settle the invoice by the due date.

Rental or property management firms

Property managers and landlords often use direct billing to collect rent or fees from tenants. These businesses can send direct invoices for utilities or repairs, with the option to roll all expenses into one monthly bill.

Wholesale and distribution

Businesses that handle large shipments sometimes extend net terms to their customers, which means the customer receives the products immediately but pays later. In these arrangements, direct billing ensures that the invoice matches the goods shipped and includes any discounts or promotional pricing. This system is standard in supply chains.

Legal or accounting firms

Similar to consultancies, legal and accounting practices frequently use direct billing to charge clients for services rendered over a specific period. These services can range from research to phone consultations to in-person meetings, and billing at the end of the month (or quarter) combines the fees owed.

How do you set up a direct billing process?

Here’s how to build – or refine – a direct billing system.

Define your billing policy and payment terms

• Decide how often you plan to invoice customers (e.g. weekly, monthly).

• Set payment due dates. Some businesses use net 30, while others prefer net 15 or net 60.

• Clearly outline any late fees, discounts for early payment, and other relevant details.

• Communicate these terms with customers before you bill them.

Gather customer information

• Ensure you have accurate contact information for invoices, such as the correct email address or billing department contact.

• Determine which payment methods you’ll accept. Many organisations accept payment by credit card or bank transfer.

• Confirm any required tax details or identification numbers.

Choose your billing platform or tool

• Choose how you’ll generate and send invoices. You can use dedicated invoicing software such as Stripe, which automates invoice generation and payment tracking, or you can create invoices manually.
  

Create a standardised invoice template

• Include your organisation’s name, address, and contact details, as well as the customer’s information, an itemised list of products or services, quantities, prices, and the total due.

• Include a clear due date, along with instructions on how to pay.

• Attach any relevant contract or reference number so customers know what the invoice includes.

Send invoices on a consistent schedule

• Stick to your chosen billing timeline. If you said invoices go out on the first of the month, get them out promptly.

• Keep an organised list or system that tracks when invoices are sent and payments are received.

• Consider sending automated reminders for overdue invoices. Some businesses send a gentle nudge a day after the due date if they haven’t received payment.

Monitor and reconcile payments

• Monitor which invoices have been paid and which are outstanding.

• Mark invoices as settled once payment arrives, and record any partial payments if applicable.

Address disputes or errors quickly

• Respond promptly if a customer challenges part of the invoice or if there’s a data mismatch so issues don’t escalate.

• Correct mistakes right away to protect customer relationships and encourage timely settlements.

Keep good records

• Store your invoices, payment confirmations, and communications with customers in a central repository so they are readily accessible.
  

How can Stripe help with direct billing?

Stripe’s tools help businesses better manage all kinds of payment flows, including direct billing. Here’s how Stripe can help with your billing strategy.

Customisable invoicing

Stripe Invoicing lets you create templates that reflect your brand. You can enter line items, add taxes, and specify due dates or late fees. Once you’re set up, sending an invoice can be as simple as entering the customer’s email address and hitting send.

Flexible payment options

Stripe supports numerous payment methods, from digital wallets to international options. Customers can pay online through a link embedded directly in the invoice.

Automated reminders and dunning process

Tracking down overdue payments can be a burden. Stripe has built-in automations to encourage customers to pay when bills are overdue. You can configure how often these reminders go out and their tone. Some organisations prefer to let Stripe handle these notices so they’re not emailing customers about overdue invoices.

Integration with other systems

Many companies use Stripe in conjunction with accounting software or customer relationship management (CRM) platforms. This connectivity allows Stripe to send invoices that sync automatically with other records, which can save time and minimise errors.

Security and compliance

Businesses need to follow mandatory payment security guidelines, especially when sensitive cardholder data is involved. Stripe invests heavily in transaction security and adheres to industry standards to reduce your compliance burden.

Subscription-friendly features

Some organisations treat direct billing as part of a subscription flow and charge repeat clients on a set schedule. Stripe Billing allows businesses to store payment details and manages recurring invoices.

What are common mistakes in direct billing?

Although billing can simplify your financial operations, there are some common mistakes to watch for.

Using vague or inconsistent payment terms

Confusion and disputes can arise if customers don’t understand when payment is due or that there are penalties for late payments. Be consistent and avoid using conflicting language in your contracts, invoices, and verbal agreements.

Not following up on overdue invoices

Allowing overdue invoices to go unpaid can create real challenges. Having a system that flags unpaid bills and automates follow-up messages can help you manage outstanding accounts. It also lets customers know that the business takes due dates seriously.

Failing to keep adequate records

Even if you send accurate, prompt invoices, a lack of documentation can make your financials challenging to read or interpret. Manually updating a ledger is one option; another is using software that automates this process. Organising records and having them ready to share can also help when customers have questions or during tax season.

Failing to confirm customer details

Sending an invoice to the wrong email address can delay your billing process. Ensure you’re collecting accurate contact information upfront and double-check it occasionally to see if it’s still valid. If there’s a new point of contact or a revised email address for the billing department, make those updates immediately.

Sending hard-to-read invoices

Cluttered invoices with too many line items or unclear pricing can confuse customers and slow down payment. Provide enough detail to be transparent, but don’t overwhelm the customer with information. Provide a neat summary that outlines each item or service plus the total owed.

Relying too much on manual processes

Sending manual invoices works for some businesses, but if you’re scaling up or have a small staff, you can lose bills. Automating the routine parts of direct billing – such as invoice generation and reminder emails – can reduce human error.

Ignoring local rules or regulations

Certain regions have specific requirements for invoicing practices, including how taxes are calculated or displayed. Failure to comply can result in penalties or legal complications. If you’re billing customers across borders, double-check the regulations for each region.