What Is Automated Billing?

Even a company with record-setting sales could struggle to pay its bills if its customers didn’t pay their invoices on time — or at all. Indeed, a healthy cash flow hinges on having an accurate, streamlined billing system that generates and delivers invoices and collects and processes payments quickly and as on-time as possible. The earliest of startups may be able to handle these tasks manually or by using simple software, but as a business grows, its volume of orders increases and its pricing plans become more complex, even the most straightforward workflow can become overwhelming and prone to errors that take time and resources to correct.

This is where automation proves its worth, not only relieving billing teams of task-centered minutiae but also bolstering the business’s financial stability and customer relationships. This article explores the ins and outs of automated billing in a discussion of key features, benefits and real-world applications across various industries.

What Is Automated Billing?

Automated billing is a software-based system businesses use to send invoices to their customers and process their payments. By automating most or all of the financial tasks that kick in the moment a customer purchases a good or service, businesses of all sizes can significantly reduce the administrative burden on their accounting and accounts receivable (AR) staff, maintain a positive cash flow and prevent revenue leakage. Integrating automated billing with accounting and customer relationship management (CRM) software is also important for maintaining accurate financial and customer records.

Key Takeaways

• Automated billing systems streamline invoicing and payment processes, reduce manual errors and administrative burdens, and lead to faster and more accurate billing cycles.
• They typically provide customers with multiple payment methods, handle various pricing models and automatically send out payment reminders.
• Different industries encounter specific billing challenges.
• Business leaders must determine which aspects of billing to automate. Otherwise, they risk creating new billing issues.

Automated Billing Explained

An automated billing system aggregates data from purchase orders, customer account information, billing plans and more to speed up the billing cycle and quickly generate accurate invoices. It then automatically sends bills to customers; tracks, receives and processes payments; and follows up on overdue bills — all without the need for manual intervention but often with the aid of artificial intelligence (AI) to analyze billing and payment activities, which yields insights that support better financial management and decision-making. For example, if the system identifies a rise in late payments, businesses may decide to adjust the timing or frequency of the payment reminders that are automatically sent to customers, with the goal of reducing the number of overdue balances.

An automated billing system also ensures that all transactions are fully recorded in the company’s financial records. Other advanced features include customizable billing cycles and compliance with regulatory standards.

Challenges With Manual Billing

Issues related to manual billing processes may seem like a problem confined to the AR department, but they can negatively impact the entire business’s cash flow, liquidity and ability to pursue growth opportunities. Additional challenges associated with manual billing include:

• Time-consuming: Billing is a multistep process that encompasses gathering data often housed in separate systems; generating, reviewing and mailing invoices; collecting and processing payments; and following up with late-paying customers. It’s exacting work that, when performed manually, can slow down the entire billing cycle and delay the inflow of cash.
• Increased operational costs: Manual billing results in higher operational costs, in the forms of payroll and wages, office supplies (e.g., printer paper, ink and postage) and even utilities, as staff must work longer hours. These costs add up quickly, impacting profitability and diverting funds that could be better spent elsewhere.
• Scalability issues: As businesses grow, their transaction volume is likely to expand as well, making manual billing processes unsustainable without additional resources. A scalable business solution allows businesses to adapt to market demands and take advantage of new opportunities that come their way.
• Regulatory and compliance risks: Manual billing processes are prone to human error, especially if sales increase. Incorrect invoices, missed filing/disclosure deadlines and improper record-keeping place businesses at risk of noncompliance with financial regulations and standards, which can result in fines, legal issues and reputational damage.
• Security concerns: Businesses must protect their customers’ information at every step. The manual handling of sensitive customer data, including bank account and credit card numbers, exposes businesses to a host of security risks. For example, physical documents — which may be handled by numerous employees — can easily be lost, stolen or stored in unsecure areas. And without the proper controls, data can be manipulated, resulting in fraudulent invoices that violate laws, damage customer relationships and harm a business’s reputation.

How Does Automated Billing Work?

Automated billing turns the collection and integration of information from multiple databases into a seamless, end-to-end workflow. Here is what the process looks like in practice, using the example of a fictitious HVAC company.

• Field technicians complete the installation of a multizone air conditioning system at an office building. The supervisor logs the job details, including the number of labor hours and materials used, into a mobile employee portal. This action begins the billing process.
• The automated billing system “reads” the information and inputs it into the customer’s account.
• Based on preapproved templates and prices, the system generates an invoice that includes service details, itemized costs, relevant taxes and due date. The invoice is also automatically populated with the customer’s stored billing information.
• The invoice is emailed to the customer with a link to an online, secure customer portal for payment.
• The system sends payment reminders to customers at a predetermined frequency as the due date nears.
• The customer logs in to their account and chooses their preferred method of payment (credit card, ACH, mobile app, etc.). The payment is processed in real time.
• The system automatically issues a receipt to the customer.
• If the customer misses the payment deadline, the system may send a few reminders to the customer and an alert to the billing department, which may need to intervene.
• Last, all transactions are recorded in the company’s general ledger, allowing the business to track customer payment behavior, ensure proper revenue recognition and generate related financial reports.

Benefits of Automated Billing

Nearly nine out of 10 accounting professionals believe that “automation in financial operations makes their firm more profitable and efficient,” according to a 2023 survey. The ability to close their accounting books within a few days was also mentioned. By automating their billing processes, companies can look forward to the following benefits as well.

• Improved billing efficiency: Automated billing systems reduce the time and effort required to create and send invoices. As a result, businesses can process high volumes of transactions both quickly and accurately, contributing to the likelihood of on-time payments and minimizing days sales outstanding, which measures the average number of days it takes a business to get paid for the goods and services they provide.
• Streamlined billing processes: By unifying all financial information required to bill a customer in a single platform, automated billing systems streamline the entire billing cycle. This simplifies invoice generation, reduces or eliminates errors and ensures that all transactions are recorded properly and to the penny.
• Secure payment processing: From credit cards to third-party payment services and apps, customers want to pay their bills using their method of choice. With automated billing systems, businesses can offer these options, without sacrificing security. These systems typically include encryption and advanced authentication measures to protect both the customer’s and the business’s sensitive financial information. This reduces fraud and theft.
• Financial insights: Automated billing systems provide real-time financial insights through detailed reporting and analytics that businesses can use to monitor key performance indicators (KPIs), such as DSO and AR aging, which tracks unpaid invoices that could ultimately become bad debt. Proper analysis — bolstered by AI — can also detect bottlenecks and uncover ways to optimize revenue and cash flow management.
• Improved scalability: As businesses grow, leading automated billing systems can scale along with them to handle increased transaction volumes without the need for additional labor or even a new billing system. It’s a best practice for businesses to regularly stress-test and update their systems — or make sure their cloud provider does this — to be sure that the system can handle heavier loads.
• Automatic reminders: Reminders reinforce the timely payment of bills and improve overall collection rates, contributing to better cash flow management. Automated billing systems reduce the need for human intervention by sending customers payment-due alerts and dunning letters about overdue payments. Businesses can set how frequently these reminders are sent, with some systems able to customize the schedule based on customer payment history and specific credit terms, such as when they’re at risk of losing out on an early-payment discount.
• Reduced administrative burden: By automating repetitive billing tasks, businesses can reduce administrative burdens and free up staff to focus on more strategic activities, ultimately increasing productivity. For example, an AI-powered chatbot can answer simple billing questions, such as requests for balances and due dates, leaving staff available to tackle more complex issues, like collections.
• Enhanced accuracy: Manual data entry and invoice processes are susceptible to human error and overlooked mistakes. By automating these tasks, especially through software with built-in data validation capabilities, businesses can be confident that their invoices are perfect, thus reducing the likelihood of bookkeeping inconsistencies or disputes resulting from mischarged and frustrated customers.
• Customization and flexibility: Through scenario-modeling and forecasting capabilities, automated billing systems let businesses understand the impact of different billing options. For example, if a business wants to offer an early payment discount to certain customers, billing software can calculate how different discount levels will affect revenue and cash flow, so that decision-makers can make sensible choices that support the company’s financial goals.
• Better customer service: Timely and error-free invoicing, flexible payment options, easy access to up-to-date billing information and history, proactive reminder notices and the ability for customers to self-serve all make for an excellent customer experience that fosters loyalty. An automated billing system can quickly identify and resolve customer issues or hand off pertinent details to a live representative, which improves first-contact resolution rates.
• Increased security: Automated billing systems incorporate advanced encryption and security features to protect sensitive data and ensure compliance with financial regulations. This builds trust with customers and safeguards the business against potential breaches. Businesses without internal cybersecurity experts on staff often choose to partner with external software vendors that regularly test and update their systems to adapt to the latest threats and trends.

Businesses That Benefit From Automated Billing

As we’ve just reviewed, automated billing systems provide a plethora of benefits that would appeal to businesses in a multitude of trades. However, specific automation needs can vary significantly among industries. Here are nine well-known fields that benefit from automated billing and some of the unique ways they leverage this technology.

• Telecommunications companies have millions of customers and offer myriad plans for their bundled services, including telephone, mobile/wireless, TV, cable and internet. An automated billing system can handle these steep volumes of transactions and plan variations, adjust bills based on usage and make the necessary modifications when customers switch plans or add/remove devices on existing plans.
• Utility providers, such as those that dispense electricity, gas and water, depend on automated billing to calculate customers’ bills based on fluctuating consumption rates. These systems also integrate with smart meters and internet-connected devices that monitor usage in real time and base bills on actual consumption. This also allows utility providers to detect irregular usage patterns that might signal an impending service disruption. Should one occur, however, the billing system will make sure customers are subsequently charged fairly, thereby reducing the likelihood of billing disputes.
• Software as a service (SaaS) providers use automated billing to manage recurring payments, oversee free trials and process plan upgrades or downgrades. Additionally, SaaS systems can automatically notify customers when their payment methods are set to expire or plans are about to end, minimizing interruptions and creating a smoother billing experience.
• Healthcare providers must integrate vast amounts of information, such as patients’ contact information, insurance coverage, services rendered, payment history and appointment data, to name a few. Automated billing systems can handle the intricacies of patient charges for treatments, medications and insurance claims, ensuring regulatory and insurance compliance and communicating to patients any adjustments to billing due to changes in treatment plans or insurance coverage. In addition, the ability to integrate with electronic health records means billing is more accurate and efficient, leading to faster reimbursements.
• Real estate and property management firms often manage multiple revenue streams, stemming from the collection of rent, maintenance fees, utilities and other property-related charges. Adding to the complexity is variation among tenants with regard to both dollar amounts owed and payment due dates. With automation, these firms can ensure error-free and timely billing, factoring for different lease terms and consumption of services.
• Subscription-based services, such as streaming entertainment platforms and meal-delivery services, use automated billing for the consistent handling of recurring payments and account management. These systems accept a variety of payment forms and alert subscribers about upcoming renewals and expiring payment methods. They also ensure smooth transitions for users who want to change their plans, which maintains a seamless service experience.
• Legal firms and consultancies typically have diverse billing structures in which they’re paid by the hour, on retainer or by project. With automated billing, businesses can merge these methods into one centralized platform, ensuring that clients receive detailed, precise bills that reflect the provided services.
• Retail and ecommerce businesses turn to automated billing to manage a wide range of product prices, discounts, shipping costs and international transactions that involve currency conversion. The system minimizes losses caused by miscalculated order fulfillment costs and adapts to real-time demand data, mitigating the risks of unexpected cost increases due to economic shifts or supply chain disruptions.
• Educational institutions, such as schools, universities and online learning platforms, use automated billing software to manage course fees, subscription packages and additional expenses, such as facility fees or meal plans. Students can modify or update their plans quickly if, for example, they decide to switch classes or upgrade their meal plan, minimizing educational/service gaps generated by delayed account updates and red tape.

Features of Automated Billing Software

Automated billing software equips companies with a robust toolkit for financial management. Naturally, decision-makers must first assess their goals to identify which features will allow them to accomplish their strategic objectives. Below are 11 key features to consider.

• Automated invoicing: Automated billing software generates appropriate invoices according to predefined rules and schedules, eliminating manual processes that may delay invoice creation and receipt of payments.
• Customizable billing cycles: Automated billing software accommodates various customer payment schedules, such as monthly, quarterly or annually, and updates cash flow forecasts accordingly.
• Flexible pricing models: Automated billing tools work with a variety of pricing models, including flat rates, usage-based, tiered pricing and bundled offerings.
• Subscription management: Automated billing software manages complex subscription features, such as free trials, renewals, tier changes and cancellations. It also proactively informs customers of any upcoming changes, issues or new subscription options, decreasing the chances of missed payments, frustrated customers and lost revenue.
• Payment processing integration: Customers expect to be able to choose among options regarding how and when they pay their bills. With automated billing software, businesses can accept payments via digital wallets, multiple credit card types, electronic fund transfers and more. Additionally, customers can pay their invoices 24/7, regardless of the business’s operating hours — an especially important feature for international businesses.
• Dunning management: Following up on overdue payments, known as the dunning process, is a key part of curbing revenue losses, improving cash flow and reducing the risk of bad debt. Automated software sends payment reminders, retries failed payment methods and flags delinquent accounts that might require human intervention.
• Multicurrency and multilingual support: Ecommerce and international businesses often work with multiple currencies and languages. Automatic billing software instantly converts currency and uses sophisticated technology, such as AI, to accurately translate text. These tools allow businesses to operate globally and cater to a diverse customer base while minimizing costs.
• Real-time reporting and analytics: The comprehensive reporting and analytics tools built into many automated billing systems provide businesses with real-time insights about customer behavior and operational and financial performance. Same-day or real-time visibility reports of most interest to businesses, according to an AR-related survey, are about cash flow forecast (66%), unapplied payments (56%) and payment channels (51%).
• Tax compliance: By automating tax calculations and following local and international tax regulations, automated billing software ensures that businesses remain compliant and avoid penalties, even when operating in multiple jurisdictions. Automation also improves financial projections by providing more exact tax estimates and forecasts.
• Customer portal access: Self-service customer portals let customers view their invoices, update payment information and manage their subscriptions at their convenience. This enhances the overall customer experience, while freeing up customer service representatives to work on more complex issues or growth strategies.
• Security features: Paper records and disconnected/unsecured systems leave customer and business data unprotected and at risk. Many automated billing systems have robust, built-in security measures, including data encryption, access controls and audit trails, that go a long way toward protecting sensitive financial information and maintaining customer trust.

Choosing the Best Automated Billing System for Your Business

An automated billing system is not a one-size-fits-all proposition. Decision-makers must carefully evaluate their needs and options before selecting a system that fits their business. The process begins by assessing the business’s specific billing requirements, including the volume of transactions, pricing models offered and the need for integration with existing systems, such as an accounting, CRM or enterprise resource planning (ERP) platform. The system should also be able to scale and adapt to various billing scenarios, including subscriptions, one-time payments and usage-based billing. Look for a solution with security, reporting, compliance and payment features, and keep in mind that the most flexible, scalable and always-on systems are cloud-based.

Once you have identified and prioritized the business’s requirements, it’s time to compare reviews and recommendations about both the prospective systems and vendors behind them. Take advantage of free trials or request a hands-on demonstration to assess the software’s user-friendliness, functionality and reliability. As with any major purchase, factor for return on investment, total cost of ownership, customizations and included vendor support. Careful evaluation of these criteria, along with input and approvals from key stakeholders, will help you select the system most suitable for your business.

Automate Your Billing Processes With NetSuite

Let’s cut to the chase: Companies must be paid for their products and services if they’re to stay in business. With NetSuite SuiteBilling, subscription-based businesses have access to a powerful set of automated billing tools integrated right into their ERP system. SuiteBilling streamlines and manages the entire billing process, automating complex billing scenarios, such as prorating or consolidating charges throughout the billing period. It also includes dunning management to help recover failed payments.

SuiteBilling handles numerous pricing models, from simple flat-rate fees to tiered plans and sophisticated usage-based bundles. Using NetSuite’s intuitive and customizable dashboards, businesses can define their billing schedules, set up future-dated invoices and automatically apply discounts or price increases quickly and accurately. In addition, SuiteBilling’s real-time reporting capabilities provide leaders with visibility into key billing metrics, such as churn and forecasted recurring revenue. By automating billing workflows, businesses can eliminate manual processes and increase operational efficiency, ultimately creating a leaner and more profitable operation while improving customer satisfaction.

Automated billing systems can transform a business’s invoicing and payment processes, but only when selected following careful consideration of the business’s specific needs. Automated billing software provides decision-makers with real-time insight into customer behavior, handles various pricing models and ensures compliance with tax laws and other financial regulations. Automated billing software also eases the business’s administrative workload, allowing staff to focus on strategic growth initiatives, while minimizing the risk of revenue loss due to unreliable customers, miscalculated bills, security breaches and inability to scale.

Automated Billing FAQs

What is bill automation?

Bill automation handles a company’s billing process, from invoice generation to payment collection and recording. It is made possible by software that replaces labor-intensive manual work, minimizes errors, creates more efficient billing processes and frees up staff to focus on more complex strategic goals.

What is automatic billing at a retail store or warehouse?

At retail stores or warehouses, automated billing typically involves systems that generate invoices and process payments for physical goods sold, without the need for human intervention. Businesses usually integrate these systems with their point-of-sale and/or inventory management software to ensure correct billing, real-time inventory updates and efficient payment processing.

How does a billing machine work?

A billing machine automates invoice and receipt generation. It often integrates with sales and inventory systems to pull relevant data, calculate totals (including taxes) and print and/or send digital invoices to customers. By automating these features, businesses can speed up their checkout process, improve accuracy and enhance customer service.

Can you automate medical billing?

Yes, medical billing can be automated using specialized software that manages patient information, treatment details and insurance claims. Automation can streamline and speed up the billing process and decrease the frequency of errors. However, due to the complexity of healthcare regulations, healthcare companies should implement quality control and accountability measures to regularly ensure compliance and check accuracy.

How does automated billing handle different currencies and tax rates?

Automated billing systems can be customized to follow global financial regulations and exchange-rate data. They can then automatically apply the correct currency and tax rates based on the customer’s location and any other predetermined settings, allowing businesses to adhere to current standards when invoicing for international transactions.

How does automated billing software deal with late payments?

To manage late payments, automated billing software tracks overdue invoices and automatically sends reminders and notifications to customers. It can also implement dunning processes, including retrying failed payment methods, escalating reminders and flagging accounts to ensure that accounts receivable teams do not overlook any missing payments when automated methods fail.