Invoicing

What is Invoicing?

Invoicing is the process of creating and sending a formal document that requests payment for products or services delivered. An invoice itemizes what was provided, the associated costs, applicable taxes, and when payment is due. It functions as both a payment request and a legal record of the transaction between seller and buyer.

For businesses managing recurring subscriptions or usage-based pricing, invoicing involves aggregating usage data, applying pricing rules, calculating taxes across jurisdictions, and integrating with payment processors and accounting systems.

Why It Matters

Invoices directly impact cash flow timing. Unclear or inaccurate invoices slow payment and increase customer support volume. Invoice errors create reconciliation problems and can damage customer relationships.

For companies with complex pricing models, the invoice is often the primary explanation of charges. When amounts vary based on usage or include prorated adjustments, clear invoice presentation becomes essential for customer understanding and dispute prevention.

Core Invoice Components

A complete invoice includes:

Identification

• Unique invoice number

• Issue date

• Service period covered

• Payment due date

Party Information

• Seller legal name, address, and tax identification

• Customer billing contact and address

• Purchase order number (if required)

Line Items

• Description of products or services

• Quantity and unit price

• Line item totals

• Subtotal

Tax and Payment

• Applicable taxes by jurisdiction

• Total amount due in specified currency

• Payment methods accepted

• Payment terms

How Invoicing Works

Subscription Billing

Billing systems generate recurring invoices automatically based on subscription schedules. The system tracks subscription start dates, renewal cycles, plan changes, proration, discounts, and automated payment attempts.

Usage-Based Billing

Consumption-based pricing requires a multi-step process:

1. Data Collection - Capture usage events throughout the billing period

2. Aggregation - Calculate totals by customer and metric

3. Rating - Apply pricing rules to determine charges

4. Invoice Generation - Create line items from calculated charges

5. Delivery - Send invoice and process payment

This must handle tiered pricing, minimum commitments, overages, and credit applications.

Payment Terms

Payment terms specify when payment is due and any early payment incentives:

• Net 30/60/90 - Payment due within specified days after invoice date

• Due on Receipt - Payment expected immediately

• 2/10 Net 30 - 2% discount if paid within 10 days, otherwise due in 30 days

• EOM - Payment due by end of month

B2B SaaS typically uses Net 30. Enterprise contracts may negotiate Net 60 or Net 90. Consumer subscriptions generally use immediate payment or automatic billing.

Regional Requirements

European Union

Multiple EU countries mandate electronic invoicing with specific technical formats like Peppol BIS. VAT handling differs from sales tax, including reverse charge mechanisms for B2B cross-border transactions.

United States

No federal e-invoicing mandate exists for commercial transactions. Sales tax calculation requires jurisdiction-specific logic based on customer location and product taxability rules that vary by state.

Other Jurisdictions

Countries including Mexico, Brazil, India, and Singapore require electronic invoicing in specific formats with real-time reporting to tax authorities.

System Integrations

Invoicing systems connect to:

Upstream Sources

• CRM for customer data

• Usage metering for consumption data

• Contract management for pricing terms

• Product catalog for descriptions

Downstream Systems

• Payment gateways for processing

• Accounting systems for revenue recording

• Tax compliance tools for reporting

• Collections tracking for overdue accounts

Billing platforms like Meteroid provide these integrations to automate data flow and maintain consistency.

Common Challenges

Usage Billing Complexity

Invoicing consumption-based pricing requires aggregating potentially millions of events, applying complex pricing logic, and presenting results clearly. Customers need both raw usage numbers and understandable charge calculations.

Multi-Currency Operations

International billing requires currency decisions: bill in customer's local currency or company's base currency, when to lock exchange rates, and how to handle conversion transparency.

Tax Calculation

Determining correct tax jurisdictions and rates requires understanding customer location, service delivery location, and jurisdiction-specific rules. Digital services face particular complexity with varying regulations.

Mid-Cycle Changes

Plan upgrades, downgrades, refunds, and service credits require prorated charge calculations and credit balance tracking across billing periods.

Format Requirements

Enterprise customers often require specific invoice formats, field inclusions, or delivery methods to integrate with their accounts payable systems.

Delivery Methods

Email

The standard delivery method sends PDF attachments. Automated systems handle delivery, track opens, and trigger payment reminders.

Customer Portals

Self-service portals provide access to current and historical invoices, downloads in multiple formats, and payment method management.

API Access

Programmatic access allows automated processing and integration with customer financial systems.

Electronic Data Interchange

Large enterprises often require EDI integration through standardized formats like ANSI X12 or EDIFACT for automated processing.

Automation Requirements

Manual invoice generation doesn't scale. Automated systems should handle:

• Scheduled generation based on billing cycles

• Automated delivery through configured channels

• Payment processing integration

• Failed payment retry logic

• Dunning sequences for overdue accounts

• Exception alerts

The goal is minimal manual intervention while maintaining controls for exceptions.

When to Implement Advanced Invoicing

Basic invoicing tools work for simple subscription businesses. Consider purpose-built billing platforms when you:

• Use usage-based or hybrid pricing models

• Bill across multiple currencies or tax jurisdictions

• Need detailed usage breakdowns on invoices

• Require complex proration or credit handling

• Face regulatory requirements like e-invoicing mandates

• Integrate with multiple downstream systems

• Generate thousands of invoices monthly

Manual management of complex invoicing creates operational overhead and error risk that typically justifies specialized billing infrastructure as volume scales.