BillWare glossary · 100 terms

Billing and Payments Terms

The vocabulary of invoicing, getting paid, and managing accounts receivable, from A to Z.

A

Accounts payable (AP): Money a business owes its suppliers for goods or services it has received but not yet paid for. AP is recorded as a liability on the balance sheet. One company's accounts payable is its supplier's accounts receivable.; Example: A bakery receives a 2,000 dollar flour delivery on net 30 terms, so the amount sits in its accounts payable until it pays the supplier.
Accounts receivable (AR): Money customers owe a business for goods or services already delivered but not yet paid for. AR is recorded as an asset on the balance sheet. Managing it well means invoicing promptly, making payment easy, and following up on overdue balances.; Example: A marketing agency finishes a 5,000 dollar project and sends the invoice, so the 5,000 dollars becomes accounts receivable until the client pays.
Accounts receivable automation: Software that handles invoicing, payment reminders, collection, and cash application with little manual work. It replaces spreadsheets, paper invoices, and manual matching of payments. The result is faster payment, fewer errors, and less staff time spent chasing money.; Example: Instead of a clerk emailing 300 invoices each month, the system sends them automatically, follows up on late ones, and matches payments as they arrive.
Accounts receivable turnover: A ratio that shows how many times a business collects its average receivables during a period. It is calculated as net credit sales divided by average accounts receivable. A higher ratio means the business collects faster.; Example: A company with 1.2 million dollars in annual credit sales and 100,000 dollars in average receivables has an AR turnover of 12, or about once a month.
Accrual accounting: An accounting method that records revenue when it is earned and expenses when they are incurred, regardless of when cash changes hands. Most growing businesses use it because it shows true performance for a period. It is required under GAAP for most larger companies.; Example: A consultant who finishes work in December but is paid in January records the revenue in December under accrual accounting.
ACH (Automated Clearing House): The US electronic network that moves money directly between bank accounts. It is widely used for payroll, bill payments, and business-to-business invoices. ACH payments typically cost much less than card payments, which makes them attractive for larger or recurring amounts.; Example: A customer pays a 4,000 dollar invoice by ACH from their business checking account, and the funds arrive in the vendor's bank account a day or two later.
ACH credit: An ACH payment that the payer initiates to push money from their account to the payee. The payer controls the timing and amount. It is common for business-to-business payments made through online banking.; Example: A client logs into their bank's portal and sends an ACH credit to pay a vendor's invoice.
ACH debit: An ACH payment that the payee initiates to pull money from the payer's account, with the payer's authorization. It is the method behind most autopay and recurring billing. The payee must keep a record of the customer's authorization.; Example: A gym pulls a 50 dollar monthly membership fee from each member's checking account by ACH debit on the first of the month.
ACH return: An ACH payment that is sent back unpaid by the receiving bank. Each return carries a standard reason code, such as insufficient funds or a closed account. Returns can take a few days to arrive, so businesses need a process to reverse the payment and follow up.; Example: Three days after a customer's ACH payment posts, it comes back with a return code for insufficient funds, and the invoice reverts to unpaid.
Aging report: A report that groups unpaid invoices by how long they have been outstanding. Common buckets are current, 1 to 30 days past due, 31 to 60, 61 to 90, and over 90 days. It shows where collection efforts should focus first.; Example: The aging report shows 12,000 dollars over 90 days past due, so the collections team prioritizes those five accounts this week.
Authorization: Approval from the card issuer or bank that a payment can proceed and funds are available. Authorization happens in seconds when a card is used, before the money actually moves. An authorization alone does not complete the payment; settlement follows later.; Example: A customer enters their card to pay an invoice, the issuer authorizes the 300 dollar charge, and the funds settle to the business the next business day.
Autopay: A customer's permission to charge a saved payment method automatically each time a bill comes due. It reduces late payments and saves both sides time. Customers usually receive a notice before each charge.; Example: A tenant enrolls in autopay so their monthly rent is charged to their bank account on the due date without them having to log in.

B

Bad debt: Receivables that a business does not expect to collect. They are written off as an expense, either individually or through an estimated allowance. High bad debt is often a sign of loose credit terms or slow follow-up.; Example: After a client goes out of business owing 8,000 dollars, the company writes the balance off as bad debt.
Bank reconciliation: Comparing a business's cash records with its bank statement to confirm they match. Differences are explained and corrected, such as deposits in transit, fees, or errors. Regular reconciliation catches mistakes and fraud early.; Example: At month end, the bookkeeper finds that a 35 dollar bank fee was never recorded and adds it so the books match the bank statement.
Batch processing: Submitting many payments or invoices together as one group rather than one at a time. Batching saves time and can lower processing costs. Many ACH payments are sent and settled in batches.; Example: A property manager submits all 250 tenants' autopay charges in a single batch on the morning of the first.
Bill presentment: Delivering a bill to a customer so they can review it before paying. Electronic presentment usually means email delivery or an online portal instead of paper mail. Clear presentment, with the amount, due date, and pay option up front, speeds up payment.; Example: A customer receives an email showing the amount due, the due date, and a Pay Now button that opens the full invoice.
Billing cycle: The recurring period, such as monthly or annually, at the end of which a customer is invoiced. It defines which charges appear on each invoice. Consistent cycles make cash flow more predictable.; Example: A software company bills customers on a monthly billing cycle that runs from the first to the last day of each month.

C

Card-not-present (CNP) transaction: A card payment made without the physical card being presented, such as online, by phone, or by mail. CNP transactions carry higher fraud risk and usually higher fees than in-person payments. Tools such as address and security code checks help reduce fraud.; Example: A customer pays an invoice online by typing their card number into a payment page, which is processed as a card-not-present transaction.
Cash application: Matching incoming payments to the specific invoices they are meant to pay. It can be difficult when payments arrive without clear remittance information. Accurate cash application keeps customer balances and aging reports correct.; Example: A customer sends one 9,500 dollar payment covering three invoices, and cash application splits it across all three so each shows as paid.
Cash basis accounting: An accounting method that records revenue and expenses only when cash is actually received or paid. It is simple and common for very small businesses. It can misrepresent performance when billing and payment happen in different periods.; Example: A freelancer invoices in December but is paid in January, so under cash basis accounting the income is recorded in January.
Cash flow: The movement of money into and out of a business over a period. Positive cash flow means more money is coming in than going out. A profitable business can still struggle if customers pay slowly and cash flow runs short.; Example: A contractor's invoices are profitable, but because clients pay in 60 days, the business has to delay buying new equipment until cash flow catches up.
Chargeback: A card payment that is reversed by the cardholder's bank after the customer disputes it. The merchant loses the funds and usually pays a fee, but can respond with evidence. Too many chargebacks can put a merchant account at risk.; Example: A customer disputes a 400 dollar charge they do not recognize, the bank issues a chargeback, and the business submits the signed invoice as evidence.
Collection effectiveness index (CEI): A percentage that measures how much of the receivables available for collection in a period were actually collected. It compares what was collected against what could have been. A CEI close to 100 percent means collections are highly effective.; Example: A finance team calculates a CEI of 88 percent for the quarter, meaning it collected 88 percent of the receivables that were collectible.
Collections: The process of pursuing payment on overdue invoices. It usually escalates from friendly reminders to calls, account holds, and sometimes a collection agency. A clear, consistent collections process recovers more money while preserving customer relationships.; Example: An invoice 45 days past due moves from automated reminders to a personal call from the accounts receivable team.
Convenience fee: A fee charged for paying through an alternative channel, such as paying online by card instead of by check. Card network rules and some state laws limit when and how it can be charged. Businesses should confirm the rules that apply to them before adding one.; Example: A utility charges a flat 2.50 dollar convenience fee when customers choose to pay their bill by card online rather than by mail.
Credit limit: The maximum balance a business allows a customer to owe at one time. It controls credit risk and is usually based on the customer's payment history and financial strength. Orders that would exceed the limit may be held until a payment arrives.; Example: A distributor gives a new restaurant customer a 10,000 dollar credit limit and holds a new order that would raise the balance to 12,000 dollars.
Credit memo: A document that reduces the amount a customer owes. It is issued for returns, billing errors, discounts, or service credits. A credit memo can be applied to an open invoice or kept on the account for future use.; Example: A customer is overbilled by 150 dollars, so the business issues a credit memo that reduces the next invoice by that amount.
Customer portal: A secure website where customers can view invoices, download statements, update payment methods, and make payments. It gives customers self-service access at any time. Portals also reduce calls and emails to the billing team.; Example: A client logs into the customer portal, downloads last quarter's invoices for their accountant, and pays an open balance by ACH.
Customer statement: A summary of a customer's invoices, payments, credits, and balance over a period. Statements help customers reconcile their records and see what is still owed. They are often sent monthly to accounts with open balances.; Example: At the end of each month, every customer with an open balance receives a statement listing the invoices still outstanding and the total due.

D

Days sales outstanding (DSO): The average number of days it takes to collect payment after a sale. It is commonly calculated as accounts receivable divided by credit sales, multiplied by the number of days in the period. Lower DSO means cash comes in faster.; Example: A business with 100,000 dollars in receivables and 300,000 dollars in credit sales over 90 days has a DSO of 30 days.
Debit memo: A document that increases the amount a customer owes. It is issued for additional charges or to correct an under-billing. It works like a supplemental invoice tied to the original transaction.; Example: A shipment required an extra delivery fee that was left off the invoice, so the business sends a 75 dollar debit memo.
Deferred revenue: Payment received for goods or services that have not yet been delivered. It is recorded as a liability until the business earns it by delivering. It is common with annual prepaid subscriptions.; Example: A customer prepays 1,200 dollars for a one-year subscription, and the company recognizes 100 dollars of revenue each month as the service is provided.
Direct debit: A payment pulled directly from a customer's bank account under a standing authorization. In the US this is typically done through ACH debit. It suits regular bills such as subscriptions, rent, and utilities.; Example: A customer signs a direct debit authorization so their quarterly maintenance fee is drawn from their account automatically.
Dispute: A customer's formal challenge to a charge or invoice. Disputes can come directly to the business or through the customer's bank or card issuer. Clear invoices and records make disputes faster to resolve.; Example: A client disputes an invoice line for hours they believe were not worked, and the business resolves it by sharing the signed time log.
Due date: The date by which an invoice must be paid. It is usually set by the payment terms, such as 30 days after the invoice date. Displaying it clearly on every invoice and reminder reduces late payments.; Example: An invoice dated March 1 with net 30 terms has a due date of March 31.
Dunning: The structured sequence of reminders sent to customers about upcoming or overdue payments. Messages typically become firmer as an invoice ages. Automated dunning keeps follow-up consistent without staff effort.; Example: A dunning schedule sends a friendly reminder three days before the due date, a notice on the due date, and firmer messages at 7, 14, and 30 days late.

E

E-check: An electronic version of a paper check that moves funds directly from the payer's bank account. In the US, e-checks are usually processed over the ACH network. The payer provides their routing and account numbers instead of writing a physical check.; Example: A customer who used to mail checks now enters their bank details on the payment page and pays by e-check.
E-invoicing: Creating, sending, and receiving invoices in electronic form rather than on paper. Structured e-invoices can be read directly by accounting systems, reducing data entry. Some countries require specific e-invoicing formats for business transactions.; Example: A supplier sends invoices electronically, and the customer's accounting system imports them automatically without anyone retyping the details.
Early payment discount: A reduction offered to customers who pay before the due date. A common form is 2/10 net 30, meaning a 2 percent discount if paid within 10 days, otherwise full payment is due in 30 days. It trades a small discount for faster cash.; Example: A customer pays a 10,000 dollar invoice on day eight under 2/10 net 30 terms and takes a 200 dollar discount.
Electronic bill presentment and payment (EBPP): Delivering bills to customers electronically and letting them pay online. EBPP replaces paper invoices, mailed checks, and manual data entry. It shortens the time from billing to payment and gives both sides a clear record.; Example: Instead of mailing paper statements, a property manager uses EBPP to email each tenant a bill with a link to pay by ACH.
Electronic funds transfer (EFT): Any transfer of money from one account to another by electronic means. ACH payments, wire transfers, and card payments are all forms of EFT. The term is often used broadly to mean any non-paper payment.; Example: A vendor's invoice says payment by EFT is preferred, and the customer chooses to pay by ACH.
Encryption: Encoding data so that only authorized parties can read it. It protects payment information both while it travels over networks and while it is stored. Encryption is a core requirement for handling card and bank data securely.; Example: When a customer submits their bank details on the payment page, the data is encrypted before it leaves their browser.

F

Fraud screening: Automated checks that flag payments showing signs of fraud before they are approved. Screens may look at unusual amounts, mismatched details, or suspicious patterns. Flagged payments can be blocked or held for manual review.; Example: A first-time customer tries to pay five invoices with five different cards in ten minutes, and fraud screening holds the payments for review.
Funding time: How long it takes for money from a processed payment to reach the merchant's bank account. It depends on the payment method and the processor's settlement schedule. Knowing funding times helps businesses forecast cash.; Example: Card payments made by Monday afternoon are funded to the business's bank account on Tuesday, while standard ACH payments arrive in one to two business days.

G

General ledger (GL): The master record of a business's financial transactions, organized by account. Every invoice, payment, and adjustment ultimately posts to the general ledger. Financial statements are built from it.; Example: When a customer pays an invoice, the payment posts to the general ledger as an increase to cash and a decrease to accounts receivable.
Grace period: Extra time after the due date before late fees or other penalties apply. It gives customers some flexibility without encouraging habitual lateness. The length is usually stated in the payment terms.; Example: Rent is due on the first, but a five-day grace period means the late fee is applied only if payment has not arrived by the sixth.

I

Interchange fee: A fee paid on each card transaction to the bank that issued the customer's card. Card networks set interchange rates, which vary by card type and transaction type. Interchange is usually the largest part of what a merchant pays to accept cards.; Example: On a 1,000 dollar card payment, most of the processing cost the business pays is the interchange fee that goes to the customer's card-issuing bank.
Invoice: A document requesting payment from a customer. It lists what was provided, the amount due, the due date, and how to pay. A clear invoice is the starting point for getting paid on time.; Example: After finishing a website redesign, a designer sends an invoice for 3,500 dollars due in 15 days, with a link to pay online.
Invoice factoring: Selling unpaid invoices to a third party, called a factor, at a discount in exchange for immediate cash. The factor then collects payment from the customer. It speeds up cash flow but costs more than waiting to be paid.; Example: A trucking company sells 50,000 dollars of 60-day invoices to a factor and receives 47,500 dollars right away.
Invoice number: A unique identifier assigned to each invoice. It lets both the business and the customer reference the invoice in payments, disputes, and records. Invoice numbers are usually sequential.; Example: A customer writes invoice number 10452 in the memo of their payment so it can be applied to the right invoice.
Invoice status: Where an invoice stands in its life cycle. Common statuses include draft, sent, viewed, partially paid, paid, overdue, and void. Status tracking shows at a glance what needs follow-up.; Example: The billing dashboard shows an invoice moved from sent to viewed on Tuesday and to paid on Thursday.
Invoice template: A reusable layout and set of default content used to create invoices consistently. Templates include branding, payment terms, standard line items, and payment instructions. They save time and make every invoice look professional.; Example: A cleaning company uses one invoice template for all its commercial clients, so each invoice shows the same logo, terms, and pay link.

K

Know your customer (KYC): The process of verifying a customer's identity to prevent fraud and meet financial regulations. Payment providers perform KYC checks before letting a business accept or send payments. It typically involves confirming business details, owners, and bank accounts.; Example: Before a new business can accept ACH payments, the payment provider verifies its legal name, tax ID, and the identity of its owners.

L

Late fee: A charge added when a payment is not received by its due date or grace period. It compensates the business for the cost of late payment and encourages on-time payment. Late fees should be stated in the agreement and must follow any applicable laws.; Example: A tenant who pays rent on the tenth instead of the first is charged the 25 dollar late fee listed in the rental agreement.
Line item: A single entry on an invoice describing one product or service. Each line usually includes a description, quantity, unit price, and total. Detailed line items help customers understand and approve invoices faster.; Example: An invoice includes three line items: 10 hours of consulting, a software license, and a travel expense.
Lockbox: A bank service that receives a business's mailed customer payments at a dedicated address. The bank opens the mail, deposits the checks, and sends the business a record of each payment. It speeds up check processing and reduces internal handling.; Example: Customers mail checks to a lockbox address, and the business receives a daily file listing every deposit made that morning.

M

Merchant account: A type of bank account that allows a business to accept card payments. Card payments are deposited into the merchant account before moving to the business's regular account. Merchant accounts are usually set up through a payment processor.; Example: A business opens a merchant account through its payment processor so customers can pay invoices by credit card.
Merchant of record: The business legally responsible for a sale and named on the customer's card statement. It handles the payment, refunds, and chargebacks for that transaction. Platforms sometimes act as merchant of record on behalf of the businesses they serve.; Example: When a customer checks their card statement, they see the vendor's business name because the vendor is the merchant of record.
Micro-deposit verification: A method of confirming that a person or business owns a bank account. Two small deposits are sent to the account, and the account holder confirms the amounts. It reduces failed payments and fraud before ACH debits begin.; Example: A customer adds their bank account for autopay, receives deposits of 0.12 and 0.37 dollars, and enters those amounts to verify the account.

N

Nacha: The organization that governs the rules of the US ACH network. Nacha sets requirements for authorization, data security, returns, and timing that every ACH participant must follow. Businesses that initiate ACH payments must comply with these rules.; Example: Under Nacha rules, a business must keep each customer's authorization before debiting their bank account by ACH.
Net terms: Payment terms that set how many days a customer has to pay after the invoice date. Net 30, for example, means payment is due within 30 days. Shorter terms speed up cash flow, while longer terms can win larger customers.; Example: A wholesaler offers net 30 terms, so an invoice dated June 1 is due by July 1.
Nonsufficient funds (NSF): A situation in which a payment fails because the payer's account does not have enough money. NSF can apply to checks and ACH debits. The business usually reverses the payment, may charge a returned payment fee, and follows up with the customer.; Example: A customer's ACH payment is returned for nonsufficient funds, and the account is reopened with a returned payment fee added.

O

Open invoice: An invoice that has been sent but not yet paid in full. Open invoices make up a business's accounts receivable. They remain open until paid, credited, or written off.; Example: A customer has three open invoices totaling 7,200 dollars, one of which is past due.
Order-to-cash (O2C): The full business process from receiving a customer order to collecting payment and recording it. It covers order entry, fulfillment, invoicing, collections, and cash application. Improving any step shortens the time it takes to get paid.; Example: Reviewing its order-to-cash process, a company finds that invoices are sent five days after delivery and starts invoicing the same day.
Overdue invoice: An invoice that has passed its due date without full payment. Overdue invoices usually trigger reminders and may incur late fees. Tracking them closely keeps them from turning into bad debt.; Example: An invoice due on March 31 that remains unpaid on April 5 shows as five days overdue.

P

Partial payment: A payment for less than the full amount of an invoice. The remaining balance stays open until it is paid. Allowing partial payments can help customers who cannot pay all at once.; Example: A customer pays 2,000 dollars toward a 5,000 dollar invoice, leaving 3,000 dollars open on the account.
Payee: The person or business receiving a payment. On an invoice, the payee is the business that issued it. Payee details must be correct for payments to arrive in the right account.; Example: When paying an invoice by ACH, the customer confirms that the payee name matches the vendor's business name.
Payer: The person or business making a payment. On an invoice, the payer is the customer who owes the balance. Payers may choose among the payment methods the payee accepts.; Example: The payer chooses to pay by ACH instead of card to avoid a convenience fee.
Payment gateway: The technology that securely captures payment details online and passes them to the processor for authorization. It sits between the customer's checkout or payment page and the payment network. Gateways encrypt data to protect it in transit.; Example: When a customer clicks Pay on an invoice, the payment gateway securely sends their card details to be authorized.
Payment link: A URL that takes a customer directly to a page where they can pay a specific invoice or amount. Payment links can be sent by email, text, or chat. They remove friction because the customer does not need to log in or search for the invoice.; Example: A business texts a customer a payment link, and the customer pays the 180 dollar invoice from their phone in under a minute.
Payment method: The way a customer pays, such as ACH, credit card, debit card, check, or wire. Each method has different costs, speeds, and risks. Offering the right mix makes it easy for customers to pay.; Example: A business accepts ACH and card online, but encourages ACH for invoices over 1,000 dollars to reduce processing costs.
Payment plan: An agreement that lets a customer pay a balance in scheduled installments instead of all at once. Plans help customers through cash flow difficulties while keeping the account in good standing. Each installment can be collected automatically.; Example: A customer with a 3,000 dollar overdue balance agrees to a payment plan of 500 dollars a month for six months.
Payment processor: The company that moves a payment between the customer's bank or card network and the merchant's account. It handles authorization, settlement, and funding. Processors charge fees for each transaction or on a monthly basis.; Example: The payment processor authorizes a customer's card payment and deposits the funds into the business's account the next day.
Payment reminder: A message that tells a customer an invoice is coming due or is overdue. Reminders are usually sent by email or text and include a direct way to pay. Timely reminders are one of the most effective ways to reduce late payments.; Example: Three days before an invoice is due, the customer receives a reminder email with a one-click payment link.
PCI DSS: The Payment Card Industry Data Security Standard, a set of security requirements for any business that stores, processes, or transmits card data. It covers areas such as network security, encryption, and access control. Using compliant payment providers reduces how much of the standard a business must manage directly.; Example: A business avoids storing card numbers on its own servers by using a PCI DSS compliant payment provider that tokenizes card data.
Pending payment: A payment that has been initiated but has not yet settled. During this time, the funds may still be reversed or returned. Businesses usually wait for settlement before treating the money as final.; Example: A customer's ACH payment shows as pending on Monday and moves to completed on Wednesday once it settles.
Prepayment: Payment made before goods or services are delivered. It reduces risk for the seller and is common for new customers or custom work. Prepayments are recorded as deferred revenue until delivery.; Example: A furniture maker requires a 50 percent prepayment before starting a custom table.
Proration: Charging only for the portion of a billing period actually used. It applies when a service starts, ends, or changes partway through a cycle. Proration keeps billing fair for both sides.; Example: A customer upgrades their plan halfway through the month, so they are charged half of the price difference for the remaining days.
Purchase order (PO): A document a buyer issues to authorize a purchase, listing items, quantities, and agreed prices. Many businesses require the PO number to appear on the matching invoice. Invoices without it may be delayed in the customer's approval process.; Example: A hospital issues a purchase order for 200 cases of supplies, and the vendor includes the PO number on its invoice so it is approved quickly.

R

Receipt: A confirmation that a payment was received. It shows the amount, date, method, and what the payment was for. Customers use receipts for their records and expense reports.; Example: As soon as a customer pays online, they receive an emailed receipt showing the invoice number and amount paid.
Reconciliation: Matching payments received against open invoices and bank deposits to confirm that the books and the bank agree. It catches missing payments, duplicates, and errors. Automated reconciliation saves hours at month end.; Example: During reconciliation, the team finds that a 600 dollar deposit was applied to the wrong customer and corrects it.
Recurring billing: Automatically invoicing or charging customers on a regular schedule. It is used for subscriptions, memberships, rent, and service contracts. It reduces manual work and makes revenue more predictable.; Example: A landscaping company sets up recurring billing so each client is invoiced 400 dollars on the first of every month.
Refund: Returning money to a customer for a payment previously made. Refunds may be full or partial and are usually sent back to the original payment method. Clear refund policies reduce disputes and chargebacks.; Example: A customer cancels an event registration a month in advance, and the business issues a full refund to their card.
Remittance: A payment sent to a business, along with the information that identifies which invoices it covers. Clear remittance details make it much easier to apply the payment correctly. Missing remittance information is a common cause of unapplied cash.; Example: A customer's remittance includes a 7,000 dollar payment and a note listing the four invoices it covers.
Remittance advice: A document or message from the payer explaining what a payment covers. It usually lists invoice numbers, amounts, and any deductions. It is often sent by email alongside an ACH payment.; Example: A large customer emails a remittance advice showing that its 12,000 dollar ACH payment covers six invoices, minus a 200 dollar credit.
Revenue recognition: The accounting rules for when revenue is recorded. In the US, ASC 606 requires revenue to be recognized as the business fulfills its obligations to the customer. Revenue may be recognized at a different time than the invoice is sent or paid.; Example: A company invoices 12,000 dollars for an annual service up front but recognizes 1,000 dollars of revenue each month as the service is delivered.
Routing number: A nine-digit code that identifies a US bank or credit union. It is used together with an account number for ACH and wire payments. Entering the wrong routing number causes a payment to fail or be returned.; Example: To set up autopay, a customer enters their bank's routing number and their checking account number.

S

Same Day ACH: An ACH option that settles payments on the same business day they are submitted, if sent before the cutoff time. It costs a little more than standard ACH. It is useful when funds are needed quickly.; Example: A business pays a vendor by Same Day ACH in the morning so the vendor has the funds before the end of the day.
Settlement: The final transfer of funds from the payer's bank to the payee's bank, which completes a payment. Settlement happens after authorization, sometimes days later. Until settlement, a payment can still fail or be returned.; Example: A card payment authorized on Friday evening settles on Monday, when the funds are actually transferred.
Subscription billing: Charging customers a recurring fee for ongoing access to a product or service. It handles plan changes, upgrades, renewals, and cancellations. Subscription businesses track measures such as churn and monthly recurring revenue.; Example: A software company bills each customer 99 dollars per month through subscription billing, renewing automatically unless they cancel.
Surcharge: An extra fee added when a customer pays by credit card, to offset processing costs. Card network rules require advance notice and set limits, and some states restrict or ban surcharging. Debit card transactions generally cannot be surcharged.; Example: A business displays a notice that a 3 percent surcharge applies to credit card payments, while ACH payments have no surcharge.

T

Three-way match: An accounts payable control that compares the purchase order, the receiving record, and the invoice before a bill is paid. Payment is approved only when quantities and prices agree. It prevents paying for goods that were not ordered or received.; Example: An invoice for 100 chairs is held because the receiving record shows only 90 arrived, so the three-way match fails until the difference is resolved.
Tokenization: Replacing sensitive payment data with a random substitute called a token. The real card or account number is stored securely by the payment provider, not the business. Tokens let businesses charge returning customers without holding their actual details.; Example: A customer saves their card for future invoices, and the business stores only a token rather than the card number.
Transaction fee: A charge for processing a single payment. It can be a flat amount, a percentage, or both, depending on the payment method and provider. Comparing transaction fees across methods helps businesses manage payment costs.; Example: The business pays a small flat transaction fee on each ACH payment and a percentage-based fee on each card payment.
Two-factor authentication (2FA): A login method that requires a second proof of identity, such as a code sent to a phone, in addition to a password. It protects billing accounts even if a password is stolen. Many financial systems require it for administrators.; Example: When a finance manager logs in to approve payments, they enter their password and then a six-digit code from their authenticator app.

U

Unapplied cash: Payments received but not yet matched to a specific invoice. It often results from missing remittance details or payments that do not match any single invoice. Until it is applied, customer balances and aging reports are misleading.; Example: A 2,450 dollar payment arrives without an invoice number, so it sits as unapplied cash until the team contacts the customer.
Usage-based billing: Charging customers according to how much of a product or service they actually use. It is common for utilities, cloud services, and transaction-based software. Accurate usage data is essential for correct invoices.; Example: A messaging platform bills each customer 0.01 dollars per text message sent during the month.

V

Void: Cancelling a transaction or invoice before it is settled or paid. A voided item remains on record but no longer counts as owed or collected. Voiding is used to correct mistakes quickly.; Example: An invoice is sent to the wrong customer by mistake, so the business voids it and issues a new one to the correct customer.

W

Wire transfer: A direct, typically same-day transfer of funds between banks. Wires are fast and final, but usually cost more than ACH. They are often used for large or time-sensitive payments.; Example: A buyer sends a 250,000 dollar wire transfer to complete an equipment purchase the same day.
Write-off: Removing an uncollectible receivable from the books and recording it as a loss. Write-offs are made after collection efforts have failed. They keep accounts receivable reports accurate.; Example: After a year of unsuccessful collection attempts, a business writes off a 1,500 dollar balance from a closed client.