Bill-And-Hold Basis

DEFINITION of 'Bill-And-Hold Basis'

A method of conducting sales by billing the customer on the same day the transaction occurs, but not delivering the goods until a later date. Using the bill-and-hold basis is sometimes regarded as a controversial practice because allowing the seller to receive payment now, but making them wait a length of time before transferring the product could be used to inflate revenues meant for subsequent quarters.

BREAKING DOWN 'Bill-And-Hold Basis'

The bill-and-hold basis is one method of revenue recognition. According to the Securities and Exchange Commission, it is the buyer's responsibility to request that a transaction be on a bill-and-hold basis and must have substantial business purposes in doing so. In addition to those criteria, any goods sold under this basis must be finished goods at the time of sale and not be available to fulfill any other orders.

In 1998, Sunbeam CEO, Al Dunlap used a bill-and-hold strategy in order to make Sunbean's financial performance better than it really was by artificially inflating Sun Beam's revenue by 18%. Eventually, Dunlap was relieved of his station as the board of directors realized that he did not do anything to materially improve the company's financial situation.

RELATED TERMS
  1. Bill And Hold

    A form of sales arrangement in which a seller of a good bills ...
  2. Bill Of Sale

    A document that details in writing a sale of goods or transfer ...
  3. Transaction Date

    The date upon which a security or other financial instrument ...
  4. Average Cost Basis Method

    A system of calculating the cost basis on mutual fund positions ...
  5. Shakeup

    A series of events and processes that a company's management ...
  6. Revenue Recognition

    An accounting principle under generally accepted accounting principles ...
Related Articles
  1. Managing Wealth

    What Determines Your Cost Basis?

    In any transaction between a buyer and seller, the initial price paid in an exchange for a product or service will qualify as the cost basis. When it comes to securities and related financial ...
  2. Investing

    Understanding Revenue Recognition

    Revenue recognition is an accounting term describing how and when a company records revenue in its accounting records.
  3. ETFs & Mutual Funds

    Don't Lose Your Shirt On Mutual Fund Sales

    Mutual funds aren't guaranteed profit-makers, but with the right calculations and timing, you can avoid major losses.
  4. Investing

    Arm's Length Transaction

    An arm’s length transaction describes business deals in which the buyer and seller act independently and with no interest in the other’s benefit.
  5. Managing Wealth

    Cost Basis Basics

    The term "cost basis" refers to the original value of a security you own. When you sell a stock, bond or mutual fund, you use the cost basis to determine your profit or loss, which in turn affects ...
  6. Investing

    The Importance Of Analyzing Accounts Receivable

    While investors often focus on revenues, net income, and earnings per share, they should not overlook the importance of analyzing accounts receivable.
  7. Investing

    What does Deferred Revenue Mean?

    Deferred revenue is advanced payments received by a company for products or services that it has not yet rendered or shipped. Another term for deferred revenue is unearned revenue. Whereas normal ...
  8. Managing Wealth

    Know Your Stock Cost Basis

    Understanding equity cost basis is critical for tracking the gains or losses of an investment.
  9. Markets

    A Common Base for Understanding Changes in Value

    A discussion of basis points as well as basis point calculations using Excel.
  10. Personal Finance

    What IRS Form 8949 Is For

    Selling a painting or that lake property? Disposing of your fossil fuel stocks? You need to know about this IRS form.
RELATED FAQS
  1. When do you use installment sales method vs. the cost recovery method?

    Take a deeper look at the installment sales method and the cost recovery method of recognizing business sales revenue and ... Read Answer >>
  2. What is the difference between revenue and sales?

    Learn to distinguish between a company's revenue and its sales, and see why the distinction is important when analyzing a ... Read Answer >>
  3. Are arm's length transactions always better than transactions not at arm's length?

    Transactions not at arm's length have real tax and other consequences for individuals and businesses, but they are not necessarily ... Read Answer >>
  4. What are the advantages and disadvantages of horizontal integration?

    Understand the criteria for recognizing revenue recognition. Learn the principles behind when a company can consider its ... Read Answer >>
  5. How are transfer prices set?

    Read a brief overview about the complex world of transfer pricing, including the "arm's length" guidelines established by ... Read Answer >>
  6. How does accrual accounting differ from cash basis accounting?

    The main difference between accrual and cash basis accounting is the timing of when revenue and expenses are recognized. ... Read Answer >>
Hot Definitions
  1. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment ...
  2. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  3. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  4. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  5. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  6. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
Trading Center