What are billings?

Definition

Billings are the amount actually invoiced to customers in a period. On the books, this is the invoice total, not the signed contract and not always this period's earned revenue.

An ad agency that sends an $8,000 campaign invoice has billed $8,000 that day. The ads may not have been made yet.

The Income Statement still waits on revenue recognition rules. Billings record the invoice, not the earned month.

This figure is invoiced value. It is not cash until the client pays.

Where it shows up

Balance Sheet: Related to receivables and deferred revenue created when the invoice goes out.

P&L: Related to invoiced amounts, which may or may not be earned yet.

Cash flow: Decreases in receivables, reported cash from operating activities increases.

See also: Invoice · Bookings · Deferred Revenue

When you look at your P&L, you will not see a line titled billings. You will see agency income only in the months the work is earned.

When billings are high, more invoices went out this period. When they are low, fewer invoices went out, even if last month's jobs are still being collected.

The Balance Sheet is where the invoice lands first. Unpaid invoices sit in accounts receivable, and unearned invoices sit in deferred revenue.

On the Statement of Cash Flows, collecting those receivables is an operating inflow. Sending the invoice, by itself, does not raise cash.

Some teams put billings on a Key Metrics Dashboard beside bookings. That pairing is a management view, not an extra income account.

How it works

The agency finishes a scope, or agrees to bill a retainer before the work starts, and sends the invoice. That invoice amount is billings in the period it goes out.

If the work is not earned yet, the bookkeeper debits accounts receivable and credits deferred revenue. The invoice created a receivable and a liability, not a P&L sale.

If the work is already earned, the same debit hits accounts receivable and the credit can go to revenue. The invoice then matches the earned month.

Cash is a later step. Cash application debits cash and credits accounts receivable, and it is not a second billing.

Progress billing is this idea in stages. A campaign billed at kickoff, midpoint, and launch is three invoices, each counted in the month it is sent.

Bookings can be larger than this figure when a signed contract has not been invoiced yet. A $24,000 annual retainer signed in January and billed $2,000 a month books $24,000 once and bills $2,000 twelve times.

Do not treat the signed contract as this total. The signed value is bookings, and this total waits on the invoice.

Do not treat the bank deposit as this total. Cash can arrive before the invoice as a customer deposit, or after it as a collection.

Stay with the invoice file when you read the month. The contract file explains what was signed, and this figure explains what was billed.

A debit memo that raises an already billed job is extra billings in the period the memo goes out. Payment terms on those invoices do not change the billed total; they only set when cash should arrive.

Keep the invoices that support the period total. Anyone tying receivables to the billing log should be able to see which tickets went out.

Example

An ad agency invoices $8,000 on June 1 for a brand campaign that starts June 15. June billings include that $8,000.

The work is not earned on June 1, so the books hold a receivable and a liability:

Debit: Accounts receivable $8,000

Credit: Deferred revenue $8,000

June's Income Statement does not show $8,000 of campaign revenue from this invoice. The $8,000 sits on the Balance Sheet until the work is earned.

When the campaign is delivered later in June, the agency debits deferred revenue and credits revenue for $8,000. Billings do not move again, because the invoice already went out on June 1.

If the client pays on July 3, July cash rises and accounts receivable falls. July does not get another $8,000 of billings.

Common mix-ups

Billings are not bookings. Bookings are the contract value signed in a period, and this figure is the amount actually invoiced.

Billings are not revenue. Revenue is the earned slice when the work is done, and an invoice can go out before or after that day.

Billings are not cash collected. A collection clears the receivable, and it is not a second invoice.

Related terms

• Invoice: The document that bills a customer and creates a receivable.
• Bookings: The contract value signed in a period, whether or not it has been billed.
• Deferred Revenue: Cash collected from customers before the work is delivered.
• Accounts Receivable: Money customers owe the business for goods or services already delivered.
• Revenue: The total value of goods and services the business earned in a period.
• Progress Billing: Invoicing a customer in stages as work is completed.
• Payment Terms: The agreed deadline and conditions for paying an invoice.
• Cash Application: Matching incoming customer payments to the right open invoices.
• Debit Memo: A document that increases what a customer owes or adjusts a vendor balance.
• Backlog: Signed work that has not yet been delivered or recognized as revenue.
• Cash Flow From Operations: Cash generated or used by the day-to-day running of the business.