Billings
Why it matters
Billings looks ahead of revenue, so it shows what is coming. Billings that rise steadily suggest revenue will follow. Watched alone, though, it can flatter a business. One that invoices a year upfront will show a spike in billings every renewal season while its delivered revenue stays flat. A founder who only reads the spike may think growth has arrived.
How to apply it
- Record billings when an invoice is sent, not when the contract is signed or the cash arrives.
- Compare billings with recognised revenue each month to spot a widening gap.
- Compare billings with cash collected to catch customers paying more slowly.
- Split billings into new business and renewals, since they behave differently through the year.
- Read billings, revenue and cash together, never one alone.
What it is
Billings counts what has been invoiced. It sits between two other numbers that are easy to confuse with it. Revenue is recognised as the service is delivered. Cash is what has actually arrived in the bank. An invoice goes out first, the work is delivered over time, and the money lands when the customer pays.
For subscription companies, billings is often calculated as revenue plus the change in deferred revenue, which is the part of invoices that covers service not yet delivered.
Common mistakes
- Reading billings as revenue. A year invoiced upfront is billed in one month and earned over twelve.
- Reading billings as cash. Unpaid invoices are billed but not collected.
- Counting a signed contract as billings before an invoice is sent.
- Forgetting credit notes and refunds, which reduce billings.
- Looking at a single month. Annual renewals make billings seasonal, so compare with the same month last year.
- Using billings alone to judge growth, without recognised revenue and cash alongside.
