What is a recurring invoice?

Definition

A recurring invoice is a customer bill that your system creates on a set cycle, such as the first of every month. On the books, each cycle typically raises accounts receivable and records revenue the same way a one-off bill would.

It is still a bill, not a subscription metric. The repeating schedule is what makes it different from a bill you type by hand each time.

Each cycle is its own document and its own receivable. Paying January does not close February.

On the accrual basis, you record that cycle when you issue it, even if the florist has not paid yet. On the cash basis, many shops skip the receivable and wait until that month's money arrives.

Where it shows up

Balance sheet: Located in the current assets section, as the receivable each cycle creates.

P&L: Related to the revenue each cycle bills.

Cash flow: Related to nothing until that cycle's invoice collects.

See also: Invoice · Recurring Revenue · Accounts Receivable

When you look at your Balance Sheet, you will not see a line named for the repeating bill. You will see the open receivable from the cycles that have not been paid yet.

When that receivable is high, several cycles may still be open. When it is low, the florist is current or pays as soon as each bill goes out.

The Income Statement does not list the repeating document as a line. Each cycle's revenue hits the P&L when that cycle is billed.

On the Statement of Cash Flows, creating next month's bill does nothing to cash. Cash from operations rises only when that cycle is collected.

A shop can have a healthy monthly schedule and still be waiting on last month's check. The schedule is the billing habit, not proof the money is in.

How it works

A typical path starts with an agreement. You and the customer set the amount, the work, and the calendar, such as $400 on the first of every month.

You save that pattern in your billing system. The system then creates a new bill on each date without you typing it again.

How a recurring invoice usually works:

• Save amount, work, and calendar in the billing pattern
• Let the system create a new bill on each cycle date
• Raise receivable and revenue for that cycle only
• Apply cash to the open cycle; later cycles stay separate
• Update the pattern going forward without rewriting past cycles

When the date hits, the new bill raises the receivable and records that cycle's sale. The customer now owes that cycle until they pay.

Each cycle carries its own due date. Net 30 on the March bill does not change the April bill.

If the amount changes, you update the pattern going forward. Past cycles already issued stay as they were.

If you pause the pattern, no new bill is created on the next date. Open cycles already sitting as receivables stay open until they are paid or credited.

When the customer pays one cycle, cash application matches the money to that bill. Cash goes up and that cycle's receivable goes to zero. Later cycles are separate documents.

If they pay two months at once, you apply the money to the open cycles, oldest first unless they say otherwise. The pattern itself does not change.

This page stays on the repeating bill. A monthly revenue metric is a different reading.

Do not confuse the pattern with deferred revenue. Deferred revenue is cash taken before the work; this page is the bill that goes out on a calendar.

Example

A bookkeeping shop bills a florist $400 on the first of every month for ongoing books. On March 1 the system creates that month's bill.

The shop records:

Debit: Accounts receivable $400

Credit: Revenue $400

Accounts receivable, an asset, and revenue both go up by $400. Cash has not moved.

The Balance Sheet holds a $400 receivable for March. The Income Statement shows $400 of March billing.

April 1 creates a new $400 bill the same way. March and April are two documents, two receivables, and two revenue hits.

If the florist pays March on March 10, only March clears. April remains open until that cycle is paid.

If the shop later raises the monthly amount to $450, May's bill uses $450. March and April stay at $400.

Common mix-ups

A repeating bill is not the same thing as recurring revenue. Recurring revenue is the stream you expect; this page is the document that actually goes out each cycle.

A repeating bill is not deferred revenue. Deferred revenue is cash collected before the work; this page can go out before or after cash arrives.

A repeating bill is not one invoice that stays open forever. Each cycle is a new document with its own receivable.

Related terms

• Invoice: The document that bills a customer and creates a receivable.
• Recurring Revenue: Revenue that repeats on a subscription or contract schedule.
• Monthly Recurring Revenue: Normalized subscription revenue for a single month.
• Deferred Revenue: Cash collected from customers before the work is delivered.
• Payment Terms: The agreed deadline and conditions for paying an invoice.
• Net 30: Payment terms requiring the full invoice to be paid within thirty days.
• Cash Application: Matching incoming customer payments to the right open invoices.
• Accounts Receivable: Money customers owe the business for goods or services already delivered.
• Contract: The binding agreement that sets what will be delivered and what will be paid.
• Billings: The amount actually invoiced to customers in a period.