Billing Cycle

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DEFINITION of 'Billing Cycle'

The interval of time during which bills are prepared for goods and services that a company has sold. A billing cycle is recurring and is most often set to repeat on a monthly basis. For example, a company may send bills out on the first day of the month for services provided the previous month.

BREAKING DOWN 'Billing Cycle'

Billing cycles guide companies on when to charge customers and help businesses estimate how much revenue they will receive. They also enable internal departments, such as accounts receivable, to monitor how much revenue has yet to be collected. The recurring cycle also lets customers know when they can expect to be charged.

The date at which the billing cycle begins depends on the type of service being offered and the customer’s needs. For example, an apartment complex may send a bill for rent on the first of every month, regardless of when tenants had signed their individual leases. This style of billing cycle can make accounting easier, as well as making the payment due date easier for tenants to remember. Companies may also choose to use a rolling billing cycle. A cable provider may set a customer’s billing cycle to align with when that customer began service.

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