What is a billing system & how to set one up

As a small business owner, collecting money is a key part of your success. If you’re selling products or services but not getting payments on time, you may run into cash flow issues. A good billing system can automate back-office tasks, such as recurring payments, and reduce the number of late payments you get. 

In turn, you can prioritize business growth—instead of spending hours manually tracking down late invoices or entering information line by line. Let’s explore what billing systems are and what to focus on when comparing different solutions.

Types of billing systems

There are four key types of billing systems, which include invoicing for a flat rate, hourly, milestone, or recurring. Let’s take a closer look at each: 

• Flat rate billing for invoicing is for businesses that provide fixed-price services, such as website design or graphic design. With this approach, clients agree to a predetermined amount for a specific service, regardless of the actual time required to complete the project.
• Hourly rate billing allows invoicing for businesses that offer services with varying time requirements, such as consulting or legal work. In this case, clients are billed based on the actual hours expended by the service provider.
• Milestone-based billing is where payment is linked to the achievement of specific project milestones. This approach helps avoid surprises at the completion of extensive projects and encourages timely completion by both parties.
• Recurring billing, which automates payments for ongoing services like subscriptions. Recurring invoices can be generated and sent out weekly, monthly, or annually according to a prearranged schedule.

The selection of the most suitable invoice-based billing system depends largely on your industry and the nature of the products or services you offer to your customers. 

Billing systems are a key process for any business, large or small. A good billing system handles invoicing and payment processing. Let’s look at the features you’ll need. 

Must-consider billing system features

Billing software helps ensure that your customers have a streamlined way to pay for goods and services. A great billing system has three key features: 

Usability 

How easy your billing system is to use is a key factor. Can you learn how to use it quickly? Is it easy to teach other members how to use it? Part of the usability includes helping you maintain compliance with tax laws. You’ll want a billing system that can calculate and apply appropriate taxes automatically.

Billing systems that are easy to use will also include reporting and analytics capabilities to give you insights into sales and payment trends. 

Online payments 

Accepting online payments can be a quick and easy way to manage cash flow. It means you will typically be able to collect payments faster via your business bank account.1 Billing solutions, such as QuickBooks Payments, can allow you to accept various online payment methods, from credit cards to ACH bank transfers. 

Automated invoicing 

Sending out professional and timely invoices is the first step in a solid billing system. A good billing system will help you personalize professional invoices and stay on top of recurring invoices. In particular, automated invoicing means you don’t have to rely on manual billing processes. QuickBooks Online Advanced is one such tool that allows you to batch invoices—which can streamline the invoicing process.

How to set up a billing system in 5 steps 

Small business billing systems are relatively easy to set up. Here’s how the process works in five steps:

1. Enter data  

When you’re setting up your billing system, you’ll need to enter important details like customer or client names, billing addresses, and terms of payment. Besides customer info, you’ll also want to record and verify information about third-party payers like insurance companies. Smart accounting systems allow you to enter and verify this kind of information.

Other key data you’ll want to enter into your billing system is product and service information. Depending on your business, this might include prices, quantities, descriptions, and discounts. Usability should be a major feature to look for when you’re evaluating different billing solutions. You want a system that’s easy and intuitive to use. 

2. Create billing codes  

Next, you’ll want to create billing codes to track money and categorize the products or services you offer. Codes will help identify supplies, products, devices, services, or equipment. 

You can also leverage billing codes to assess how you spend your resources and time. Recognizing price patterns and resource usage can help when you grow larger. 

3. Integrate payment processor  

It’s a good idea to accept as many payment methods as possible—and a solid payment processor will do just that. Your customers might pay you in cash, by check, through an online payment system like PayPal or Stripe, or by credit or debit card, which then goes to your business checking account.²

It’s in your best interest to provide customers with flexibility in the payment methods you accept. A good payment process will help you manage and accept business-to-business (B2B) payments to streamline operations with your vendors and suppliers. 

4. Track payments  

Invoices³ can slip through the cracks—leaving you with late payments. Late payments can also happen because of inaccurate invoicing.

You can configure your billing system to track payments, limit delinquencies, and remind you of approaching due dates. This prompts staff to send payment reminders for customers with an impending due date.

Your billing system should also make it easy to find and follow up with customers with delinquent accounts and set payment terms. 

5. Manage security  

Billing and invoicing systems often need access to your financial and banking information—information you’ll want to keep safe. So, ensure you’re accessing your billing system on a secure network and only allowing access by authorized users. 

If you accept credit card payments, ensure that your billing platform meets payment card industry standards. 

How to pick a billing system 

When picking a billing system, there are several important features to look for. In particular, here are two key features: 

• Flexible: A good billing system should be flexible and adaptable to your specific business needs. It should support a variety of billing models, such as flat rate, hourly, milestone-based, and recurring billing. Additionally, it should be scalable to accommodate your business growth and handle increasing volumes of transactions.
• Customization: It's essential to have a billing system that allows you to customize the invoices with your branding elements, such as logos, color schemes, and personalized messages. This can help maintain a professional image and reinforce your brand identity to clients. Look for options to customize invoice templates and layouts to match your business's aesthetics.

Of course, there are other features you may need given your business requirements, such as reporting and analytics capabilities, or integration with other systems.

Choose the best payment setup for your business

Getting paid is vital to ensuring your business runs smoothly. Having a well-organized billing system is one of the best ways to send invoices and receive payments for products or services. 

Billing and invoicing software like QuickBooks can seamlessly integrate with your workflow and offer robust functionality. It also automates many manual aspects of the billing process—saving you time and resources.

QuickBooks Payments: QuickBooks Payments account subject to eligibility criteria, credit, and application approval. Subscription to QuickBooks Online required. Money movement services are provided by Intuit Payments Inc., licensed as a Money Transmitter by the New York State Department of Financial Services. For more information about Intuit Payments' money transmission licenses, please visit https://www.intuit.com/legal/licenses/payment-licenses/.

1 QuickBooks Money: QuickBooks Money is a standalone Intuit product that includes QuickBooks Payments, and currently does not connect with other QuickBooks products such as QuickBooks Online (and QuickBooks Checking), QuickBooks Self-Employed, or GoPayment. Intuit accounts are subject to eligibility criteria, credit, and application approval. Banking services provided by and QuickBooks Visa Debit Card are issued by Green Dot Bank, Member FDIC, pursuant to a license from Visa U.S.A. Inc. Visa is a registered trademark of Visa International Service Association. QuickBooks Money Deposit Account Agreement applies. Banking services and debit card opening are subject to identity verification and approval by Green Dot Bank. Money movement services, including Same Day Deposit, are provided by Intuit Payments Inc., licensed as a Money Transmitter by the New York State Department of Financial Services.

PayPal and Venmo: Not currently available on invoicing through QuickBooks Online Advanced subscription.