DEFINITION of 'Bill And Hold'
A form of sales arrangement in which a seller of a good bills a customer for products but does not ship the product until a later date. In order for a transfer of ownership to occur, certain conditions must be met. These conditions include: payment for the goods, that the goods be segregated from all other similar goods by the seller, and that the goods be finished and ready for use.
This is also referred to as "bill in place".
BREAKING DOWN 'Bill And Hold'
The bill and hold arrangement may be beneficial for the parties involved, but great care must be taken by both parties to ensure that all of the criteria are met. If the arrangement does not meet all of the stated criteria, there will be no transfer of ownership. This means that revenue can't be recognized by the seller, and no assets or inventory can be recorded by the buyer related to this transaction.
There have been many scandals surrounding a bill and hold arrangement, and care must be taken when analyzing this type of arrangement.