In each of these scenarios, the final bill or paycheck amount can’t be determined until the designated period is completed. When does arrears billing make sense?Īrrears billing is extremely useful for businesses who pay their employees hourly, companies that bill in cycles or periods, restaurants who need to add tips to paychecks, and businesses that have sales commissions. Having a lot of outstanding invoices can affect your credit and ability to receive financial assistance.Ĭompanies also have less incentive to prioritize you since you already owe them money, and you will likely receive better service if the company knows you pay often and on time. On the business side, it’s smart to keep as many of your accounts payable out of arrears as possible. If you consistently run into this issue, you could tack on extra fees for invoices older than 30 days to provide additional incentives to pay on time. It can also be frustrating when you have multiple invoices in arrears and cannot use that cash even though the customer has the intention of paying.
One of the few times a payment being in arrears is a bad thing is when a customer is refusing to pay or when you fear that a customer is so far into arrears (meaning they have multiple payments they are behind on), that you will never receive the money you’re owed. The customer thought they paid but didn’t.There is a dispute over the goods or services.An invoice was never made at the time of the service.Other reasons why a payment could be in arrears: If a payment is late, then that’s also considered in arrears. If a payment happens after a service is completed, then that’s considered in arrears. Receiving a customer’s payment for a bill that is overdue.Paying a company after they’ve completed a service for you.There are two main categories for payments in arrears: "Arrears" may also refer to payment that is late or overdue.īeing paid in arrears isn’t inherently bad, it’s just a way of categorizing payments that occur after a service has been provided. What does billed in arrears mean?īilled in arrears (also "invoice in arrears", "paid in arrears", or "arrears billing") refers to billing and payments that occur after a service is completed, as opposed to up-front or in advance. Unfortunately, we don’t have the ability to rename arrears, but we can explain it in a way that makes sense.
It’s a noun, and it really feels like you should add “an” before it, but you don’t. Being billed in arrears is an awkward-sounding term, and it’s that semantic clumsiness that makes it more confusing than it should be.
0 kommentar(er)
