Is it billing or billings?
Billings are the invoice amounts billed to customers. This can be over a certain time period, like a month or a full year. Simply put, billings are when you actually collect money from your customer.
Billings are the amount of money the company has billed customers for during the accounting period. Billings are typically a good indicator of the company's cash flow because they represent money the company expects to receive soon.
Billings are what you invoice your customers. It's the money you collect from your customer, as opposed to the formal commitment when the contract was signed. This metric is closer to cash and cash flow than bookings (although not identical, as cash lags depending on payment terms and collections).
But your billings don't translate directly into revenue, because you can only recognize revenue once you have delivered your service. If you bill $12,000 for the year and the customer pays you promptly, you'll have the cash in your account, but you can only recognize a portion of it as revenue.
BILLINGS represent actual sales that have been made and have been invoiced to customers. Billings usually translate directly into revenue. BACKLOG represents products sold to customers that cannot be invoiced because the product is not available in inventory or for delivery to the customer.
Billing and payment are two concepts that work hand-in-hand but are still quite different from each other. Billing is more focused on issuing invoices and tracking payments, while payment processing is mainly about taking payments and transferring them into your account.
The amount that is billed but not yet earned is represented as a liability on the contractor's balance sheet until the associated work is completed.
It is determined by adding the total revenue recognized in a specific period to the change in deferred revenue during that period. Essentially, calculated billings capture the sales made to both new and existing customers.
Percentage of Completion (POC) = Costs / Estimated Costs. Revenue = POC x Estimated Revenue. Over/Under Billing = Total Billings – Earned Revenue.
Bookings do not have a standard definition in Generally Accepted Accounting Principles (GAAP). So this varies across companies. However, bookings are a forward-looking metric, that typically indicates the value of a contract signed with a prospective customer for a given period of time.
Can revenue be higher than billings?
Remember, billing represents cash flow, and should be greater than your project revenue by as much as 5-10%.
The Rule of 40 is a principle that states a software company's combined revenue growth rate and profit margin should equal or exceed 40%. SaaS companies above 40% are generating profit at a rate that's sustainable, whereas companies below 40% may face cash flow or liquidity issues.
This delay can significantly strain a company's financial resources, emphasizing the importance of competent cash flow management. A critical aspect of this is the practice of overbilling, also commonly known as billings in excess of costs, where the amount billed to clients exceeds the costs incurred at a given time.
Booked But Not Billed Adjustments means an amount to be added or subtracted from, as applicable, Consolidated EBITDA for any applicable period equal to (a) 0.8 multiplied by (b) the difference between (x) the contracted revenue that would have been earned during such period from each booked but not billed contract of ...
Revenue backlog is a non-GAAP reporting number, and thus does not appear on the balance sheet. Revenue backlog is a financial measure that many organizations manage and report to senior management and boards.
billing noun [U] (INFORMATION)
information, especially about a performance: Unfortunately, the show never lived up to (= was not as good as) its billing.
An invoice and a bill are documents that convey the same information about the amount owing for the sale of products or services, but the term invoice is generally used by a business looking to collect money from its clients, whereas the term bill is used by the customer to refer to payments they owe suppliers for ...
an act or instance of preparing or sending out a bill or invoice. the total amount of the cost of goods or services billed to a customer, usually covering purchases made or services rendered within a specified period of time.
What is billing in accounting. In simple terms, billing refers to the process of raising and sending invoices to customers and requesting them to settle the dues. Invoices are documents that serve as a source of record-keeping for businesses and as a means of requesting payment from customers.
Progress billing is one of the different types of invoices a business can use for ongoing projects. Typically used for large-scale construction projects, progress billing bills for work completed along the way. Instead of invoicing at the end of a project, progress billing occurs incrementally as the project advances.
Do underbillings increase revenue?
Underbilling, or "costs in excess of billing," occurs when the invoiced amount for completed work is less than the earned amount based on the project's progress. This leads to a revenue shortfall, adversely affecting cash flow and potentially the ability to fund ongoing and future initiatives.
Revenue is based on the delivery of the product or service, so Monthly Revenue = Billings / Months per Invoice. In this same example, the Monthly Revenue is $100 / 12 = $8.3, and the Annual Revenue is $100.
Bookings can include deals that are not yet finalized or implemented, whereas revenue only accounts for completed transactions. While bookings can provide insight into the company's future revenue potential, revenue reflects the company's current cash flow.
Billed revenue is when an invoice is sent to a customer. Earned revenue is when a service or product has been provided. As an example, if a software company issues an annual invoice for $12k, the billed revenue will be $12k as soon as the invoice is sent to the customer. The earned revenue will be $1k per month.
Overbilling in construction primarily occurs when a contractor bills for contracted labor and materials before that work is actually completed. For example, a contractor has completed only 40% of a project but they bill for 50% of the total contract value. That means their customer pays the overbilled amount of 10%.
