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    What Does Billing in Arrears Mean

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    michelle dizon
    Billing in arrears means sending an invoice to customers after a job is completed, rather than requiring advance payment upfront. This allows customers to pay for services after receiving them. While it can impact cash flow due to delayed payments, it ensures customers pay for what they receive and offers flexibility. Alternatives include advance billing, retainers, or deposits to mitigate risks for businesses, but arrears billing is common for ongoing utilities and services where usage varies.

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    What Does Billing in Arrears Mean

    Uploaded by

    michelle dizon
    56 views3 pages
    Billing in arrears means sending an invoice to customers after a job is completed, rather than requiring advance payment upfront. This allows customers to pay for services after receiving them. While it can impact cash flow due to delayed payments, it ensures customers pay for what they receive and offers flexibility. Alternatives include advance billing, retainers, or deposits to mitigate risks for businesses, but arrears billing is common for ongoing utilities and services where usage varies.

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    Billing in arrears means sending an invoice to customers after a job is completed, rather than requiring advance payment upfront. This allows customers to pay for services after receiving them. While it can impact cash flow due to delayed payments, it ensures customers pay for what they receive and offers flexibility. Alternatives include advance billing, retainers, or deposits to mitigate risks for businesses, but arrears billing is common for ongoing utilities and services where usage varies.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    56 views3 pages

    What Does Billing in Arrears Mean

    Uploaded by

    michelle dizon
    Billing in arrears means sending an invoice to customers after a job is completed, rather than requiring advance payment upfront. This allows customers to pay for services after receiving them. While it can impact cash flow due to delayed payments, it ensures customers pay for what they receive and offers flexibility. Alternatives include advance billing, retainers, or deposits to mitigate risks for businesses, but arrears billing is common for ongoing utilities and services where usage varies.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    What does billing in arrears mean?

    Billing in arrears means that you send a bill to customers after a job is
    complete. This is in contrast to billing in advance, which
    requests advance payment to cover the cost of expenses and supplies.
    When you are paid in arrears, you don’t receive this payment until
    after you’ve delivered your goods or services.
    Invoices or bills sent in arrears are not necessarily late. For example,
    imagine that a plumber comes round and instals a boiler for a
    homeowner. After it’s installed, he emails the homeowner an invoice.
    Even if the homeowner pays the invoice on the spot, it’s considered
    paid in arrears because it’s sent after the work has been carried out.
    On the other hand, the term ‘payment in arrears’ is used in reference to
    overdue payments. This might be due to factors such as errors on the
    invoice, incorrect delivery, or a dispute regarding the work completed.

    What are the pros and cons of being


    paid in arrears?
    Billing in arrears makes sense for many businesses. As a business
    owner or consumer, you probably are billed in arrears for things like
    utilities. This ensures you pay for the service you’ve received, rather
    than underpaying or overpaying. Billing in arrears is often more
    efficient for ongoing services where usage varies.
    Advantages of arrears billing
    1. Reduces the need for issuing refunds for advance overpayment
    2. Ensures full payment for products or services provided
    3. Offers a high level of flexibility to both business and buyer

    Disadvantages of arrears billing:


    1. Impacts cash flow with delayed payment cycles
    2. Creates the need to send payment reminders to customers
    3. Risk of missing payments if the customer does not pay

    Alternatives to being paid in arrears


    The primary alternative to billing in arrears is billing in advance.
    When you bill in advance, you’ll send the invoice for the full amount
    due before work begins. While this is more advantageous to the
    business, it requires a high level of trust from customers who might be
    wary of paying for something they haven’t received. Additional options
    include paying on retainer, using a scheduled payment calendar, or
    asking for an upfront deposit.

    How to reduce the risks of arrears


    billing
    If you decide that you prefer to be paid in arrears rather than use these
    alternatives, there are plenty of ways to mitigate the risk.
     Run a credit check on potential customers before entering any
    new contract.
     Automate your invoicing process with software.
     Schedule regular payment reminders to help customers pay their
    debts.
     Make your payment terms very clear at the top of the invoice.
     Offer a selection of payment methods and use
    embedded payment links.
     Set up a recurring payment schedule with automatic payment
    collection.
    GoCardless offers a simple way to minimise invoicing risks. We
    use Direct Debit to put businesses in control over their payments. You
    can collect invoice payments on the day they’re due directly from your
    customer’s bank account. Our Success+ intelligent retries feature
    collects up to 70% of payments that fail the first time around, helping
    to mitigate any associated risk of non-payment. We also integrate
    with over 300 partners including top accounting software
    like Xero and QuickBooks for full visibility over invoices.

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