Billing might seem complex at first and demand significant time and effort from your staff. Adopting a consistent, well-structured billing procedure, though, can benefit your business and customers. This can keep your revenue flowing with fewer issues and give your finance team a reliable set of guidelines. Meanwhile, customers receive timely, accurate invoices that are easier to settle.

Below is a guide to billing procedures: why they matter, how to build them effectively, and how Stripe can support you.

What’s in this article?

• What is a billing procedure, and why is it important?
  
• How do you create an effective billing procedure?
  
• What role do payment terms play in billing procedures?
  
• How do billing procedures differ across industries?
  
• What are the challenges of managing a billing procedure?
  
• How Stripe can help with billing
  

What is a billing procedure, and why is it important?

A billing procedure is the method you use to send invoices, receive payments, and track transactions. It outlines your revenue cycle, from the moment you decide on a price for a product or service to the moment a payment fully settles in your account. Whether you email invoices to clients or charge them automatically with subscription billing, a billing procedure ensures you know when and how to collect payments.

A reliable billing procedure can:

• Establish expectations: Customers know when they’ll receive invoices, how much they’ll owe, and how long they’ll have to pay.

• Promote trust: Clear rules help avoid confusion. If a customer can see that your payment requests follow a documented routine, they’ll better understand overdue notices or billing cycles.

• Enable consistent cash flow: When payments arrive on schedule, you can calculate your monthly revenue more easily.

• Reduce the risk of errors: Organised billing records make it simpler to see a payment’s status. You can fix mistakes early instead of discovering them when you reconcile accounts.

A well-documented billing system contributes to your business's overall stability. Even if you have a loosely defined system – for example, you might occasionally send a PDF invoice – putting a formal procedure in writing benefits those involved.

How do you create an effective billing procedure?

Creating a billing procedure starts with a thoughtful assessment of your service or product and ends with ongoing testing to determine whether the process is working. Here are steps to help you develop a procedure that works for your business:

Identify who, when, and how

• Who: Decide who is responsible for sending invoices or subscription charges. This might be an individual on your finance team or an automated system that generates invoices once an order is fulfilled.

• When: Set a schedule. Are you charging at the point of sale or sending monthly statements? Should invoices go out on the last day of each month or right after you deliver a product? Establishing a rhythm avoids random payment requests and lets customers know when to pay.

• How: Decide whether you’re using paper invoices, digital invoices, or an online subscription tool. Choose the format that matches how your customers prefer to pay.

Formalise your invoice design

The way your invoice looks can affect your collection rate. Simple, readable invoices make it easier for customers to see what they owe. They should include these basic details:

• Business name and contact information: Make it effortless for customers to contact you with questions.

• Unique invoice number: Use a numbering system that can be tracked in your accounting records.

• Itemised charges: Show exactly what you’re billing for, down to the line item if needed.

• Due date: State the deadline and payment terms (e.g. net 15, net 30). If there are any late fees, explain those, too.

• Accepted payment methods: Let customers know whether you accept cards, bank transfers, or other methods.

Automate where possible

Automated billing can minimise data entry mistakes and the time your team spends chasing overdue invoices. It can also help you send reminders on a regular schedule.

Maintain clear communication

A phone call or email reminder close to the due date can prevent a missed payment from becoming a bigger problem. Use friendly, factual language that references the invoice details. Let the customer settle payment with a single click.

Monitor, refine, and adjust

Once you create a procedure, monitor it. Look at how many customers pay on time, how often you have to resend invoices, or where confusion is occurring. Tweak the process based on results.

What role do payment terms play in billing procedures?

Payment terms define how much time a customer has to settle what’s owed, and they outline additional factors such as discounts for early payment and penalties for late payment. Payment terms affect revenue timing and the customer experience. If the terms are too strict, you could damage your working relationships with clients. If they’re too lenient, you could damage your cash flow.

The right payment terms depend on your business type, your typical client, and your customer relationships. Once you make a decision, it’s best to follow it. Here are common payment terms you might encounter:

• Net 15, net 30, or net 60: The customer has 15, 30, or 60 days, respectively, from the invoice date to pay.

• 2/10 net 30: The customer gets a 2% discount if payment arrives within 10 days. If the customer doesn’t pay within that early window, the entire invoice is due on Day 30.

• Prepayment: The customer pays before goods or services are delivered. This is often a requirement for custom orders or high-risk scenarios.

How do billing procedures differ across industries?

Businesses need a method for charging customers, but the way that method looks can depend on the industry. One business might use monthly recurring billing, while another might send progress invoices. In each case, the nature of the product or service and any industry regulations inform the structure of the billing procedure.

Here are examples of how billing procedures tend to work in different major industries:

• Consulting and professional services: Consulting and professional services often rely on time tracking, milestone billing, or retainers. They might tie rates to hourly or project fees or set payment terms to be 50% up front and 50% on project completion.

• Retail and e-commerce: Retail and e-commerce businesses usually accept payment immediately at checkout, though they sometimes offer subscriptions for recurring orders (e.g. monthly subscription boxes). Automated invoices and receipts that require minimal manual intervention are common.

• Manufacturing: Manufacturing businesses might bill clients in phases: partial payment to begin production, another portion mid-way, and the final payment when goods are shipped. Payment timelines can be longer in this industry, especially in B2B transactions.

• Healthcare: Healthcare billing involves insurance claims and multiple sources of payment. Billing procedures include preapprovals, statements to patients, and follow-ups for any outstanding balance.

What are the challenges of managing a billing procedure?

Challenges can arise in billing procedures, especially as a business expands and volume increases. Here are a few common issues:

• Late payments and bad debts: When customers don’t pay on time, that can affect your ability to manage your expenses, including rent and payroll. Consistent reminders and late fee policies help, but there’s a possibility a customer will vanish or refuse to pay. On average, 8% of B2B invoices in the United States become bad debts. Having a solid escalation plan (e.g. contacting a collection agency) is sometimes necessary.

• Human error and inconsistent processes: If you don’t document your billing procedure, each employee might send invoices in their own style. This can lead to inconsistent records or inaccurate charges if someone forgets a small detail. Double-checking for accuracy and having a system for oversight can limit mistakes.

• Changing regulations: Sales tax laws can shift, new privacy regulations can emerge, and cross-border payment rules can change. A billing process that worked fine last year might need an overhaul if new rules take effect. Watching for compliance is time-consuming, but ignoring it can lead to penalties.

• Complex payment arrangements: Some businesses have special payment options. For instance, a client might pay only after you hit certain project milestones, or they might use multiple payment methods for a single invoice (part cheque, part bank transfer). Handling these arrangements can be complicated when your procedure is built around a simpler scenario.

• Billing at scale: As your business sells to more customers, the quantity of invoices increases. Processing them can become time-intensive, and tracking overdue amounts gets harder. Automation and a strong finance team can keep your business from getting overwhelmed.

How Stripe can help with billing

Stripe Billing is a product that supports recurring revenue, one-off invoices, and a range of other payment models. Here are ways Stripe can help with your billing:

• Subscription management: Stripe provides recurring payment tools for subscription businesses. You can customise billing cycles, set trial periods, and manage subscription tiers. The system automatically invoices customers at the right intervals and keeps payment methods on file.

• One-off invoices: Stripe lets you send invoices to customers via email and lets them pay online using a variety of payment methods. You can customise the invoice design, incorporate your brand’s look, and keep your work organised within the Stripe Dashboard. You can also schedule automatic reminders for customers who haven’t settled on time so you don’t have to rely on personal follow-ups.

• Automatic tax calculation: Tax rules can be tricky, especially if you sell in multiple locations. Stripe Tax removes some of that complexity by calculating and collecting the right taxes based on your customer’s location. This can decrease guesswork and possible compliance worries. You can add this feature to your Stripe Billing workflow so each invoice includes accurate tax amounts.

• Multiple payment methods: Stripe supports cards, bank transfers, local payment methods, and more. This can improve your chances of getting paid promptly because customers can choose their preferred payment methods.

• Integration and reporting: Stripe connects with many accounting platforms so you can keep your books synchronised without doing extra data entry. The Dashboard gives you a quick view of your revenue pipeline with insight into paid, unpaid, and overdue invoices. Built-in analytics let you see patterns in late payments or identify subscription churn, which helps you refine your billing process.

• Fraud prevention: Stripe’s risk management tools can help filter out suspicious transactions and lower your exposure to fraudulent actors. You can apply custom rules or rely on Stripe’s built-in intelligence. This is especially useful if you operate in multiple countries or handle high-value transactions.

• Customisation: Stripe’s application programming interfaces (APIs) let you adapt the billing experience to your needs. You can integrate them with your existing website or app to create a uniform payment flow or use pre-built forms for a faster launch. You can also manage user permissions so certain team members see only the relevant parts of the Dashboard.