Complete Guide to Billing Cycles: Types, Best Practices, and Tools

Billing cycles determine how quickly your company brings in revenue after a deal closes. A well-run billing process keeps cash flowing for healthy operations and helps you maintain strong customer relationships. When billing is delayed or unclear, it can create friction that drives customers away rather than toward renewals or expansions.

In this guide, we'll cover the different types of billing cycles, best practices for managing them, and how to choose the right tools to turn your billing process into a strategic advantage. Let’s dive in.

A billing cycle is the recurring, scheduled time period between the dates when a company bills its customers, usually 30 to 60 days. During this cycle, a company tracks product or service usage, if applicable, calculates any changes to the bill, and generates invoices that are sent to customers regularly. Customers typically have clearly defined payment terms, often (but not always) due before the next invoice is sent. For example, a company may bill monthly, but the customer may have negotiated a 45-day payment term.

Billing cycles can vary from company to company, based on a variety of factors. While the 30-day cycle is a common standard, the actual length is contractual and depends on your business model, customer negotiations, and cash flow needs. In my experience, the cycle varies depending on your business type, revenue model, and customer expectations. For example, a business-to-business (B2B) software-as-a-service (SaaS) company might bill on a quarterly or annual cycle.

In contrast, a business-to-consumer (B2C) company might consider shorter cycles, such as weekly or biweekly. Meanwhile, government contracts often extend more than 90 days. What matters is that it makes sense for your business and your customers.

Billing cycles also often align with fiscal calendars, which can differ from one company to another. Other times, the alignment is more strategic — tied to customer cash flow or needs for internal revenue recognition. Smaller companies may need faster payments to pay their staff while larger companies may have other income sources to help sustain the business.

No, billing cycles can be set for any number of days, usually every 30, 45, or 60 days. While net 30 is often the standard across industries, billing cycles can differ depending on the company, the industry, or even individual customer accounts.

Historically, billing statements might have taken weeks to process, and keeping cycles standardized was important. Modern technology allows you to automate and run billing cycles as often as needed. If a customer negotiates a 60-day cycle instead of a 30-day cycle, it's not a deal-breaker, although standardization is still preferred because it keeps things simpler and more organized.

Billing cycles typically include:

• Usage tracking: The system monitors customer activity, consumption, or subscription status during the billing period.
• Calculation: At the end of the period, the system calculates total charges based on usage, subscription tiers, or agreed-upon rates.
• Invoice generation: The system produces detailed invoices with line items, taxes, and payment terms.
• Delivery: Invoices are sent to customers via email, mail, or online customer portals.
• Payment processing: Customers submit payments through various channels (auto-pay, online portals, checks).
• Account updates: Once payment is received, customer accounts are updated, and the next billing cycle is likely already underway.

If you're using billing software integrated with Salesforce automation software, chances are you're running billing on a rolling basis at least every 30 days — even if you only ask customers for payment less frequently. Running billing cycles more frequently makes it easier to predict payments and calculate operating income.

Another reason to run billing cycles frequently is that customers don't always sign up for your product or service at the same time. Some billing cycles are based on the anniversary of the day a prospect became a customer. Tracking this can be a huge manual task, unless you use billing software.

As mentioned, some industries may have a type of billing cycle that works best based on the product and timing. Here are some examples of common billing cycles:

• Calendar-based: Bills are generated on specific dates, such as the first day of each month or the end of a quarter. All customers are billed at the same time, which simplifies batch processing.
• Anniversary billing: Each customer's billing cycle begins on their signup date. For example, if someone subscribes to a streaming service on the 15th, they are billed on the 15th of each month.
• Usage-based: Charges are determined by how much product or service is consumed during the cycle, which is usually a fixed period, such as monthly. The system tracks customer activity, consumption, or usage during the billing period and bills accordingly. Utilities are a common example of usage-based billing.
• Hybrid cycles: Combine different types of elements, such as monthly cycles and usage overages calculated separately. For example, you might pay a static monthly fee for your mobile service, but if you go over the messaging limits specified in your contract, you'll see that overage reflected on your next statement.
• Seasonal: Aligned with business seasonality, some industries — such as retail, tourism, and agriculture — experience higher or lower volumes of business at certain times of the year. These businesses may adjust their billing cycles to help manage expected fluctuations.
• Milestone-based: In some fields, such as manufacturing or construction, large machinery or projects can take years to complete. Billing in these cases is often milestone-based, with billing cycles negotiated for every 30, 60, or 90 days, for example, over a two-year period, and only after certain goals are achieved. This helps ensure steady progress.

Your billing cycle is more than a schedule‌ — ‌ it directly controls your cash flow and shapes the customer experience long after the deal is closed. Here are some critical things to keep in mind:

Shorter billing cycles boost cash flow but increase administrative costs. Revenue management software can help by automating processes and providing real-time visibility into cash flow impacts.

Consider what works best and makes sense from your customers' perspective, as well as their payment preferences. Customers will expect similar price quotes (which tools like Agentforce can help with) and billing cycles to other companies within your industry.

Find a balance between billing frequency and the resources needed to process invoices and collect payments. Automating billing cycles with software can help streamline the process and improve accuracy.

Contractual clauses will impact your billing cycle, and you'll need to determine due dates, late fees, and grace periods that align with your cycle length.

Some industries have specific billing cycle requirements or consumer protection rules, such as the General Data Protection Regulation (GDPR), which impacts businesses that handle data from customers living in the European Union.

Here are some examples of how billing cycles differ across industries and how that affects sales teams. While not an exhaustive list, these examples illustrate the wide variation in quotes and contract terms. Depending on your industry, both external factors and billing cycles can influence your discount strategies, negotiations, and revenue forecasting.

Software subscription models typically use monthly or annual cycles, allowing customers to choose their preferred option. SaaS billing cycles create recurring revenue and help with forecasting and planning ahead for renewals. Annual or monthly prepayments also provide immediate revenue recognition. On the flip side, discounting for longer contract terms (which customers often expect) can reduce the revenue per customer. Subscription management platforms can automate the complexities of handling upgrades, downgrades, and proration calculations.

For consulting or services projects, it sometimes makes sense to use milestone or progress-based billing (e.g., in a very simple example, an independent contractor might require 50% upfront and 50% upon service delivery). But more complex projects over a longer period of time may more closely resemble usage-based billing, taking into account time and materials for each month. In this case, monthly billing remains the best way to accurately track a project to completion. Sales teams need to clearly align deal terms with project phases and customer procurement processes.

A business with monthly billing offers a level of predictability for sales teams. Either a monthly rate is fixed, or an annual rate is broken down into graduated or equal monthly payments. Services may be priced at a set rate, renewable for a finite or indefinite period.

Utilities and telecom companies typically bill monthly, even though usage can fluctuate from month to month. It may be financially beneficial to use a hybrid model, billing upfront for fixed costs and for actual usage in arrears. This works for customers because they pay ahead for guaranteed services and afterward for additional consumption, which is within their control. For the business, it’s also a safeguard, ensuring regular payment and reducing risk if the customer’s actual usage is more than they can pay. Sales teams may be impacted by seasonality and need to adjust quoting and deal terms to align with industry trends and historical data. Quoting tools should include tiers or flexible pricing models based on forecasted usage.

In manufacturing, invoicing is often tied to shipments or product delivery, so quotes need to reflect those triggers. This is another case where milestone or progress-based billing may make the most sense, as sometimes the delivery timeframes are long and are rarely, if ever, consumption-based. Depending on your accounts payable processes, payment terms might require receipt of payment within net 30 or net 60 days after shipment or delivery.

In healthcare, budget cycles are typically annual, and sales teams must coordinate contract timing and billing terms with the fiscal year. Medical billing cycles also need to safeguard patient health information under federal law, requiring encrypted billing systems and restricted access to patient data.

Companies that sell through partners or channels often have complex billing arrangements, making partner relationship management software and channel revenue management software essential. These businesses may need specialized tools to track commissions and rebates or split billing between direct and indirect sales.

Billing can be complicated, but the more you simplify the process, the smoother everything will run. Here are a few best practices:

Whether your company's billing cycles run long or short, it's best to keep them consistent and predictable. Customers should receive bills on a regular, dependable schedule, even if their individual payment terms vary. Your enterprise resource planning (ERP) software will handle cash matching and reconcile invoices with payments received.

Make it easier on yourself by ensuring invoices go out on time. Modern AI for sales solutions can automate customer communications about billing schedules and payment reminders. When billing is inconsistent or contains manual errors, invoices can pile up, making it harder for the customer (and you) to reconcile which invoices they've paid and what remains. Automation can handle recurring invoicing, notifications, payment processing, and more.

Billing cycles affect the customer experience. Communicate invoicing and payment expectations using a sales engagement platform to automate and personalize billing messages. Send billing notifications in advance so customers aren't surprised by their bill and don't miss their payment deadline. If there are industry regulations to follow, how you store and transmit billing data is crucial, and this information should also be shared with customers, as their consent might be needed.

Whenever possible, automate the process for the customer. Self-service options include providing customers with access to a portal where they can view account details and past or current invoices, update their payment methods, or set up automatic payments. For usage-based or subscription models, it's beneficial to allow customers to track their usage in real time or monitor subscription details.

Perform routine monthly reviews to ensure revenue is recorded accurately. Your finance team will examine various factors, including sales revenue and deferred revenue, to assess the business's health and decide whether strategic adjustments are necessary. Sales teams should also use sales analytics tools to monitor key metrics like collection rates and billing accuracy — and identify areas for improvement or automation.

Choosing the best billing software often depends on your company's size and revenue model. Many tools are available to support various parts of the revenue cycle — from sales planning to billing point solutions to full revenue management platforms. When invoicing becomes hard to manage, it's time to invest in billing software.

Large companies may be ready for fully integrated billing and revenue management. Revenue management software helps ensure compliance and accuracy. It also seamlessly integrates with your sales solutions, including CRM systems and Sales Cloud. Use automation to forecast payment patterns and optimize billing schedules.

Here are a few considerations:

• Complexity: Some solutions may be best suited to subscription models, while others require usage tracking or the ability to build multiple pricing tiers.
• Integrations: Ensure the billing software integrates seamlessly with your CRM, ERP, accounting system, payment processors, and other business tools, so you can bill on schedule and reconcile payments.
• Scalability: Choose a solution that can scale with your business in terms of customer volume, pricing complexity, and feature needs.
• Compliance: Look for tools that manage tax calculations, regulatory reporting, and data security needs for your industry and markets. Software should offer clear audit trails, compliance reports, and real-time insights into billing status.
• Reporting: Select software that provides detailed analytics on billing performance, revenue recognition, and customer payment trends.
• Customer experience: Consider how the software affects your customers through payment portals, invoice design, and communication features.

Establishing billing cycles is essential for streamlining your sales and revenue. Running the cycles clearly and accurately is also a critical part of the customer experience. The smoother it is for you, the smoother it will likely be for your customers.

Solutions like Sales Cloud and Revenue Cloud work together to unify selling and billing in one platform. Find out more about how integrated billing software can benefit your organization.