Recurring invoice definition
/What is a Recurring Invoice?
A recurring invoice is an invoice that is issued to the same customer in the same amount at regular intervals. There may be situations where a business issues invoices for exactly the same amounts to its customers, month after month. Such invoices usually relate to ongoing subscriptions, leases, or service contracts.
Recurring Invoice Best Practices
If there is a recurring invoice situation, a business probably includes these billings in its month-end invoicing activities. If so, it represents a workload in the midst of the closing activities that can be avoided simply by issuing them in advance. If you already know the amount of each invoice, it is quite possible to process and mail the invoices several days in advance. If customers are accustomed to having these invoices dated as of the last day of the month, you can simply set the date on these invoices to the last day of the month.
Advantages of Recurring Invoices
There are several advantages to issuing recurring invoices, which are as follows:
Faster customer payments. The recipients may process these invoices for payment sooner, since they receive the invoices sooner.
Assured processing. A system for consistently issuing recurring invoices reduces the risk that invoices will not be issued at all.
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Disadvantages of Recurring Invoices
The only downside of issuing recurring invoices early is to make sure that prices have not changed before issuing the early invoices. This can happen when there is a contractually-authorized change in price, so be sure to review all related contracts before issuing the invoices. Otherwise, you may find that you have lost a significant amount of revenue that may be difficult to retrieve from customers.
Example of a Recurring Invoice
As examples of recurring invoices, a landlord may issue a rent invoice to its lessees every month, while a maintenance company may charge a fixed monthly fee to its customers to review and update their air conditioning systems. These invoices are considered to be recurring invoices, since they are in the same amount, and are issued on a repetitive basis.