Net Billings
Financials
Industry:
Sector Agnostic
Short Definition
Net Billings is the total customer invoices issued in a period, excluding taxes and net of credits (e.g., refunds or adjustments). It measures invoiced activity before revenue timing or cash collection differences.
Short Definition
Net Billings is the total customer invoices issued in a period, excluding taxes and net of credits (e.g., refunds or adjustments). It measures invoiced activity before revenue timing or cash collection differences.
Short Definition
Net Billings is the total customer invoices issued in a period, excluding taxes and net of credits (e.g., refunds or adjustments). It measures invoiced activity before revenue timing or cash collection differences.
Why it matters for Investors
Cash flow predictor: Net Billings forecast near-term inflows (Net Billings ≈ future collections, minus Δ Accounts Receivable).
Sales execution check: Measures how quickly signed deals convert to billed revenue—high Net Billings signal strong pipeline conversion.
Future revenue indicator: Tracks deferred revenue growth (Net Billings > Revenue means locked-in future earnings).
Why it matters for Investors
Cash flow predictor: Net Billings forecast near-term inflows (Net Billings ≈ future collections, minus Δ Accounts Receivable).
Sales execution check: Measures how quickly signed deals convert to billed revenue—high Net Billings signal strong pipeline conversion.
Future revenue indicator: Tracks deferred revenue growth (Net Billings > Revenue means locked-in future earnings).
Why it matters for Investors
Cash flow predictor: Net Billings forecast near-term inflows (Net Billings ≈ future collections, minus Δ Accounts Receivable).
Sales execution check: Measures how quickly signed deals convert to billed revenue—high Net Billings signal strong pipeline conversion.
Future revenue indicator: Tracks deferred revenue growth (Net Billings > Revenue means locked-in future earnings).
Formula
Practical considerations:
Inclusions: Subscriptions, one-time fees, and usage if invoiced—full face value before credits.
Deductions: Subtract credits (refunds/disputes) to get the true owed amount (e.g., $100 invoice - $10 credit = $90 net).
Timing: Invoice issuance date only—ignore signing or payment dates.
Taxes: Exclude VAT/GST/sales tax as pass-throughs (not your revenue).
Formula
Practical considerations:
Inclusions: Subscriptions, one-time fees, and usage if invoiced—full face value before credits.
Deductions: Subtract credits (refunds/disputes) to get the true owed amount (e.g., $100 invoice - $10 credit = $90 net).
Timing: Invoice issuance date only—ignore signing or payment dates.
Taxes: Exclude VAT/GST/sales tax as pass-throughs (not your revenue).
Formula
Practical considerations:
Inclusions: Subscriptions, one-time fees, and usage if invoiced—full face value before credits.
Deductions: Subtract credits (refunds/disputes) to get the true owed amount (e.g., $100 invoice - $10 credit = $90 net).
Timing: Invoice issuance date only—ignore signing or payment dates.
Taxes: Exclude VAT/GST/sales tax as pass-throughs (not your revenue).
Worked Example
Beginning deferred revenue (Mar 1): $310,000
Account/Item | Invoice/Activity | Bill date | δ (Billed in March ($)) | ε (Recognized in March ($)) | γ (Deferred Revenue ($)) | Category | Notes |
|---|---|---|---|---|---|---|---|
A | Monthly subscriptions for March | Mar 1 | $100,000 | $100,000 | $0 | Revenue now | Service delivered in March |
B | One-time setup (delivered in March) | Mar 10 | $20,000 | $20,000 | $0 | Revenue now | One-time, delivered now |
C | Usage/overage for March | Mar 31 | $10,000 | $10,000 | $0 | Revenue now | Billed after usage |
D | Upfront annual invoice (service starts Apr) | Mar 5 | $30,000 | $0 | +$30,000 | Deferred (advance) | Prepaid for future months |
E | Release of prior prepayments (from deferred) | — | $0 | $25,000 | −$25,000 | Deferred release | March service funded from earlier invoices |
Totals (March):
Net Billings (invoices − credits) = Σ Column δ (assumes $0 credits this month) = $100,000 + $20,000 + $10,000 + $30,000 +$0 = $160,000 (All billed amounts flow here—shows what customers owe now, post any credits (none in this example))
Revenue recognized (March) = Σ Column ε = $100,000 + $20,000 + $10,000 + $0 + $25,000 = $155,000 (What you "earned" this month by delivering service—includes releases from prior deferred)
Change in deferred revenue (Δ) = Σ Column γ = $0 + $0 + $0 + $30,000 - $25,000 = $5,000
Ending deferred revenue (Mar 31) = $310,000 + $5000 = $315,000 (Beginning Deferred Revenue + Δ Deferred Revenue = Ending Deferred Revenue)
Check: Net Billings = Revenue + Δ Deferred Revenue → $160,000 = $155,000 + $5,000
Notes:
What “deferred” means: Customers prepaid; you’ll earn it later as you deliver.
Not cash: Net Billings are invoices; cash timing sits in Accounts Receivables (A/R) & collections.
Revenue: Amount earned this month based on services provided
Quick audit: Always verify Net Billings = This month’s revenue + change in deferred.
Worked Example
Beginning deferred revenue (Mar 1): $310,000
Account/Item | Invoice/Activity | Bill date | δ (Billed in March ($)) | ε (Recognized in March ($)) | γ (Deferred Revenue ($)) | Category | Notes |
|---|---|---|---|---|---|---|---|
A | Monthly subscriptions for March | Mar 1 | $100,000 | $100,000 | $0 | Revenue now | Service delivered in March |
B | One-time setup (delivered in March) | Mar 10 | $20,000 | $20,000 | $0 | Revenue now | One-time, delivered now |
C | Usage/overage for March | Mar 31 | $10,000 | $10,000 | $0 | Revenue now | Billed after usage |
D | Upfront annual invoice (service starts Apr) | Mar 5 | $30,000 | $0 | +$30,000 | Deferred (advance) | Prepaid for future months |
E | Release of prior prepayments (from deferred) | — | $0 | $25,000 | −$25,000 | Deferred release | March service funded from earlier invoices |
Totals (March):
Net Billings (invoices − credits) = Σ Column δ (assumes $0 credits this month) = $100,000 + $20,000 + $10,000 + $30,000 +$0 = $160,000 (All billed amounts flow here—shows what customers owe now, post any credits (none in this example))
Revenue recognized (March) = Σ Column ε = $100,000 + $20,000 + $10,000 + $0 + $25,000 = $155,000 (What you "earned" this month by delivering service—includes releases from prior deferred)
Change in deferred revenue (Δ) = Σ Column γ = $0 + $0 + $0 + $30,000 - $25,000 = $5,000
Ending deferred revenue (Mar 31) = $310,000 + $5000 = $315,000 (Beginning Deferred Revenue + Δ Deferred Revenue = Ending Deferred Revenue)
Check: Net Billings = Revenue + Δ Deferred Revenue → $160,000 = $155,000 + $5,000
Notes:
What “deferred” means: Customers prepaid; you’ll earn it later as you deliver.
Not cash: Net Billings are invoices; cash timing sits in Accounts Receivables (A/R) & collections.
Revenue: Amount earned this month based on services provided
Quick audit: Always verify Net Billings = This month’s revenue + change in deferred.
Worked Example
Beginning deferred revenue (Mar 1): $310,000
Account/Item | Invoice/Activity | Bill date | δ (Billed in March ($)) | ε (Recognized in March ($)) | γ (Deferred Revenue ($)) | Category | Notes |
|---|---|---|---|---|---|---|---|
A | Monthly subscriptions for March | Mar 1 | $100,000 | $100,000 | $0 | Revenue now | Service delivered in March |
B | One-time setup (delivered in March) | Mar 10 | $20,000 | $20,000 | $0 | Revenue now | One-time, delivered now |
C | Usage/overage for March | Mar 31 | $10,000 | $10,000 | $0 | Revenue now | Billed after usage |
D | Upfront annual invoice (service starts Apr) | Mar 5 | $30,000 | $0 | +$30,000 | Deferred (advance) | Prepaid for future months |
E | Release of prior prepayments (from deferred) | — | $0 | $25,000 | −$25,000 | Deferred release | March service funded from earlier invoices |
Totals (March):
Net Billings (invoices − credits) = Σ Column δ (assumes $0 credits this month) = $100,000 + $20,000 + $10,000 + $30,000 +$0 = $160,000 (All billed amounts flow here—shows what customers owe now, post any credits (none in this example))
Revenue recognized (March) = Σ Column ε = $100,000 + $20,000 + $10,000 + $0 + $25,000 = $155,000 (What you "earned" this month by delivering service—includes releases from prior deferred)
Change in deferred revenue (Δ) = Σ Column γ = $0 + $0 + $0 + $30,000 - $25,000 = $5,000
Ending deferred revenue (Mar 31) = $310,000 + $5000 = $315,000 (Beginning Deferred Revenue + Δ Deferred Revenue = Ending Deferred Revenue)
Check: Net Billings = Revenue + Δ Deferred Revenue → $160,000 = $155,000 + $5,000
Notes:
What “deferred” means: Customers prepaid; you’ll earn it later as you deliver.
Not cash: Net Billings are invoices; cash timing sits in Accounts Receivables (A/R) & collections.
Revenue: Amount earned this month based on services provided
Quick audit: Always verify Net Billings = This month’s revenue + change in deferred.
Best Practices
Monthly tie-out: Reconcile to revenue/deferred and A/R for clean books—catch credit spikes early.
Segment deeply: By product/customer to predict collections and trends (e.g., high credits in enterprise = negotiation issues).
Monitor billing schedule: Annual upfront boosts Net Billings early; monthly evens it—fit to cash needs for runway math.
Watch net vs. gross: Gap reveals refund leakage (churn proxy, aim <5%); growth > revenue flags backlog build for valuation.
Industry tip: In SaaS, net recurring Billings ties to ARR health; in e-com, deduct returns aggressively for accurate GMV.
Best Practices
Monthly tie-out: Reconcile to revenue/deferred and A/R for clean books—catch credit spikes early.
Segment deeply: By product/customer to predict collections and trends (e.g., high credits in enterprise = negotiation issues).
Monitor billing schedule: Annual upfront boosts Net Billings early; monthly evens it—fit to cash needs for runway math.
Watch net vs. gross: Gap reveals refund leakage (churn proxy, aim <5%); growth > revenue flags backlog build for valuation.
Industry tip: In SaaS, net recurring Billings ties to ARR health; in e-com, deduct returns aggressively for accurate GMV.
Best Practices
Monthly tie-out: Reconcile to revenue/deferred and A/R for clean books—catch credit spikes early.
Segment deeply: By product/customer to predict collections and trends (e.g., high credits in enterprise = negotiation issues).
Monitor billing schedule: Annual upfront boosts Net Billings early; monthly evens it—fit to cash needs for runway math.
Watch net vs. gross: Gap reveals refund leakage (churn proxy, aim <5%); growth > revenue flags backlog build for valuation.
Industry tip: In SaaS, net recurring Billings ties to ARR health; in e-com, deduct returns aggressively for accurate GMV.
FAQs
What are credits in Net Billings?
Credits are refunds or adjustments (e.g., for billing disputes or service issues)—subtract them from gross Billings (full invoice amounts) to get Net Billings (the true amount customers owe). Track credits separately to spot patterns like high churn from poor service.What if Net Billings < Revenue?
This happens when you earn more from prior deferred revenue than you bill new (e.g., catching up on old upfront payments). It's common in mature SaaS but signals slowing new billing—check if it's from low sales or healthy deferred release.Can Net Billings be negative?
Yes, though rare—Net Billings turns negative if credits/refunds exceed new invoices in the period (e.g., massive returns or disputes). It's a major red flag for churn or billing errors; investigate immediately to protect cash flow.Why Net Billings over gross Billings?
Net Billings reflects real economic value (after refunds/credits); gross Billings is raw invoicing volume. Use both for full picture—Net Billings for accurate forecasting and investor discussions, gross Billings for sales volume trends.
FAQs
What are credits in Net Billings?
Credits are refunds or adjustments (e.g., for billing disputes or service issues)—subtract them from gross Billings (full invoice amounts) to get Net Billings (the true amount customers owe). Track credits separately to spot patterns like high churn from poor service.What if Net Billings < Revenue?
This happens when you earn more from prior deferred revenue than you bill new (e.g., catching up on old upfront payments). It's common in mature SaaS but signals slowing new billing—check if it's from low sales or healthy deferred release.Can Net Billings be negative?
Yes, though rare—Net Billings turns negative if credits/refunds exceed new invoices in the period (e.g., massive returns or disputes). It's a major red flag for churn or billing errors; investigate immediately to protect cash flow.Why Net Billings over gross Billings?
Net Billings reflects real economic value (after refunds/credits); gross Billings is raw invoicing volume. Use both for full picture—Net Billings for accurate forecasting and investor discussions, gross Billings for sales volume trends.
FAQs
What are credits in Net Billings?
Credits are refunds or adjustments (e.g., for billing disputes or service issues)—subtract them from gross Billings (full invoice amounts) to get Net Billings (the true amount customers owe). Track credits separately to spot patterns like high churn from poor service.What if Net Billings < Revenue?
This happens when you earn more from prior deferred revenue than you bill new (e.g., catching up on old upfront payments). It's common in mature SaaS but signals slowing new billing—check if it's from low sales or healthy deferred release.Can Net Billings be negative?
Yes, though rare—Net Billings turns negative if credits/refunds exceed new invoices in the period (e.g., massive returns or disputes). It's a major red flag for churn or billing errors; investigate immediately to protect cash flow.Why Net Billings over gross Billings?
Net Billings reflects real economic value (after refunds/credits); gross Billings is raw invoicing volume. Use both for full picture—Net Billings for accurate forecasting and investor discussions, gross Billings for sales volume trends.
Related Metrics
Commonly mistaken for:
Gross Billings (Total invoiced before credits/refunds)
Net Revenue (Portion earned under accounting rules, not invoiced amount)
Collections (Cash received, which can lag billings)
Gross Bookings (Signed customer commitments, future potential, not invoiced yet)
Related Metrics
Commonly mistaken for:
Gross Billings (Total invoiced before credits/refunds)
Net Revenue (Portion earned under accounting rules, not invoiced amount)
Collections (Cash received, which can lag billings)
Gross Bookings (Signed customer commitments, future potential, not invoiced yet)
Related Metrics
Commonly mistaken for:
Gross Billings (Total invoiced before credits/refunds)
Net Revenue (Portion earned under accounting rules, not invoiced amount)
Collections (Cash received, which can lag billings)
Gross Bookings (Signed customer commitments, future potential, not invoiced yet)
Source of:
Components:
Index