Billing glossary

An add-on is a one-time fixed charge applied outside the recurring plan, used for things like setup fees, professional services or one-off purchases.

Aggregation is the rule that collapses many usage events into the single billable quantity for a period, such as a count of events, a sum of a property, a maximum value, or a count of unique identifiers.

Annual recurring revenue, or ARR, is the value of a business's recurring contracted revenue expressed as an annual figure, with monthly recurring revenue, or MRR, being the same measure over a month.

ASC 606 is the US accounting standard governing revenue from contracts with customers, which sets out a five-step model for determining how much revenue to recognise and when.

A billable metric is the definition of what a billing system counts and how, turning a stream of raw usage events into a single number a price can be applied to.

Billing in advance means invoicing a customer at the start of a service period, before the service has been delivered.

Billing in arrears means invoicing a customer after the service period has ended, once actual consumption for that period is known.

A billing period is the recurring interval over which usage is accumulated and charges are calculated, and it determines the date an invoice is generated.

Bookings are the total value a customer has contractually committed to, billings are what has been invoiced to them so far, and revenue is what has been earned and recognised, which means the three almost never match in the same period.

Cash collection is the process of turning issued invoices into received payment, covering payment capture, retries, reminders and the reconciliation of what actually arrived.

Churn rate is the proportion of customers, or of revenue, lost over a period, measured against the total at the start of that period.

A coupon is a discount applied to a customer's invoices, deducted from the invoice amount before tax.

A credit note is a document that reduces or cancels an amount already invoiced, used to correct an error, refund a customer or settle a dispute without deleting the original invoice.

Deferred revenue is money a business has received but not yet earned, recorded as a liability until the service it pays for has been delivered.

Dunning is the process of communicating with customers to remind them of overdue invoices and attempt to recover the outstanding amounts.

Entitlements define what a customer can access and how much they can use, based on their subscription or contract.

Graduated pricing charges each tier of consumption at its own rate, so a customer pays the first tier's price for the first block of units, the second tier's price for the next block, and so on.

Gross revenue retention is the percentage of revenue retained from an existing cohort of customers over a period, counting contraction and churn but excluding any expansion, so it can never exceed 100%.

Hybrid pricing combines a recurring subscription fee with usage-based charges, so a customer pays a predictable base amount plus a variable amount tied to consumption.

IFRS 15 is the international accounting standard governing revenue from contracts with customers, issued by the IASB, and it applies the same five-step model as the US standard ASC 606.

An invoice is the document that states what a customer owes for a given period, itemising each charge, any discounts and the tax applied.

Metered billing is a model where a customer is charged for the volume they actually consume, measured as usage events and priced at the end of each billing period.

A minimum commitment is a contractual floor a customer agrees to pay over a defined period, whether or not their consumption reaches that amount.

Net revenue retention is the percentage of revenue retained from an existing cohort of customers over a period, including expansion, contraction and churn, but excluding revenue from new customers.

Outcome-based pricing charges for a result the product delivers, such as a resolved support ticket or a completed transaction, rather than for consumption or access.

Overage is the charge applied to consumption above an allowance included in a plan or contract.

Package pricing sells consumption in fixed blocks at a set price, so a customer buys a whole unit of capacity whether or not they use all of it.

A payment provider is the service that captures money from a customer's card, bank account or other payment method on behalf of a business.

Per-seat pricing charges a fixed amount for each user with access to the product, so revenue scales with headcount rather than with consumption.

Prepaid credits are a balance a customer buys up front and draws down as they consume, so usage is deducted from money already paid rather than invoiced afterwards.

Proration is the adjustment of a recurring charge so a customer pays only for the portion of a billing period during which a subscription or plan change was active.

Remaining performance obligations, usually shortened to RPO, is the total contracted revenue a business has not yet recognised, covering both amounts already invoiced and amounts still to be billed under signed contracts.

Revenue leakage is earned revenue a business never collects, because usage went unmetered, a discount outlived its term, an invoice was wrong, or a payment failed and was never chased.

Revenue recognition is the accounting process of recording revenue in the period it is earned, which is when the goods or services have been delivered, rather than when the customer was invoiced or paid.

Revenue share is a commercial arrangement where one party is paid a percentage of the revenue generated through their product or platform, rather than a fixed fee.

Tiered pricing is any model where the unit price changes as consumption crosses defined thresholds, so later units cost a different amount from earlier ones.

A true-up is a reconciling charge issued at the end of a contract period when a customer's actual consumption fell short of, or exceeded, what their commitment assumed.

Unbilled revenue is revenue a business has earned but not yet invoiced, recorded as an asset until the invoice is issued.

Usage-based pricing is a model where the amount a customer pays scales with how much of the product they consume, rather than with a fixed subscription fee or a seat count.

Volume pricing charges every unit consumed at the rate of the single tier the total volume reaches, so crossing a threshold reprices the entire quantity.