# Billings

## Quick Definition

The amount invoiced to customers in a period, representing cash that will be collected regardless of revenue recognition timing.

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## What is Billings?

Billings represent the total amount you invoice customers during a period. It's the cash you expect to collect, regardless of when you can recognize it as revenue under accounting rules.

Billings bridge the gap between bookings (signed contracts) and revenue (recognized income). A customer signs a deal (booking), you send an invoice (billing), and then you recognize revenue over the service period.

## Why Billings Matter

Billings are a proxy for cash flow. If billings exceed revenue, you're collecting cash faster than you're recognizing it, which usually means annual prepayments. This is healthy for cash position.

The billings-to-revenue ratio reveals payment terms. Enterprise companies with annual upfront payments often have billings 20-30% higher than revenue. This creates a cash cushion that funds growth.

## Calculated Billings

Since billings aren't always reported directly, analysts calculate them from financial statements using the formula: Revenue + Change in Deferred Revenue.

### Formula

Calculated Billings = Revenue + Change in Deferred Revenue

If Q1 Revenue = $1M and Deferred Revenue grew from $500K to $700K:

Billings = $1M + $200K = $1.2M

### Example

Your quarterly financials:

- Revenue recognized: $800,000
- Deferred revenue start: $400,000
- Deferred revenue end: $550,000

Billings = $800K + ($550K - $400K) = $950,000

You billed $950K but only recognized $800K. The $150K difference went to deferred revenue for future recognition.

## Related Terms

[**Bookings**  
The total value of new contracts signed in a period, representing committed future revenue regardless of when it will be recognized.  
Learn more](/content/terms/bookings/index.html)

[**ARR (Annual Recurring Revenue)**  
The total value of recurring revenue normalized to a one-year period, calculated by multiplying MRR by 12.  
Learn more](/content/terms/arr-annual-recurring-revenue/index.html)

[**Deferred Revenue**  
Money received from customers for services not yet delivered, recorded as a liability until the service is provided and revenue can be recognized.  
Learn more](/content/terms/deferred-revenue/index.html)

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