Billing Glossary
Subscriptions, invoicing, payments, and revenue-operations terminology
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ACH Payment
An ACH payment is a bank-to-bank electronic transfer routed through the U.S. Automated Clearing House network, used for invoices and recurring billing.
Account Statement
A summary document showing all billing activity—invoices, payments, credits, and balance—for a customer over a defined period.
Add-On
An add-on is an optional paid feature or service layered onto a base subscription to expand functionality, capacity, or seats without changing the core plan.
Annual Recurring Revenue
Annual Recurring Revenue (ARR) is the normalized yearly value of your active subscription contracts, excluding one-time fees.
Authorize and Capture
A two-step card payment flow where funds are first reserved (authorized) and later charged (captured), giving you control over when money actually moves.
Auto-Renewal
Auto-renewal is the billing mechanism that automatically charges customers and extends their subscription at the end of each term without manual intervention.
C
CAC Payback Period
The number of months it takes for gross profit from a new customer to repay the sales and marketing cost of acquiring them.
Chargeback
A chargeback is a forced payment reversal initiated by a cardholder's bank, pulling funds and fees out of your account to refund the customer.
Chargeback Dispute
A chargeback dispute is the formal process of contesting a customer's payment reversal by submitting evidence to the card network.
Credit Memo
A credit memo is a billing document that reduces what a customer owes, correcting overcharges, returns, or service credits against an existing invoice.
Customer Churn Rate
The percentage of customers who cancel their subscription or stop buying during a given period, signaling retention health.
Customer Vault
A customer vault is a PCI-compliant storage system that holds payment credentials so your team can charge cards without ever touching raw card data.
D
Decline Recovery
The process of recapturing revenue from failed card charges through retries, updated payment methods, and customer outreach.
Dunning
Dunning is the structured process of recovering failed or overdue payments through automated reminders, retries, and escalation steps.
Dunning Management
Dunning management is the structured process of recovering failed subscription payments through automated retries, customer outreach, and account status workflows.
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Grace Period
A grace period is the buffer window after a payment fails or a subscription expires where service continues before suspension or cancellation kicks in.
Gross Revenue Retention
The percentage of recurring revenue retained from existing customers in a period, excluding expansion — measures churn and downgrade only.
I
Invoice
An invoice is a billing document that itemizes what a customer owes, when payment is due, and how to pay it.
Invoice Adjustment
An invoice adjustment is a documented change to an issued invoice — credit, debit, or correction — that updates what a customer owes.
Invoice Due Date
The date by which a customer is contractually required to pay an invoice in full before it becomes overdue and triggers collections.
Invoice Line Item
A single row on an invoice representing one billable product, service, fee, or adjustment with its own quantity, rate, and total.
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M
Metered Billing
Metered billing charges customers based on actual usage of a product or service, tracked and invoiced after consumption rather than as a flat fee.
Monthly Recurring Revenue
Monthly Recurring Revenue (MRR) is the predictable subscription revenue your business collects every month from active customer contracts.
N
Net 30
Net 30 is a payment term giving the customer 30 calendar days from invoice date to pay the full balance with no discount applied.
Net Dollar Retention
Net Dollar Retention (NDR) measures how much recurring revenue you keep and grow from existing customers over a period, including expansions and churn.
Net Revenue Retention
Net Revenue Retention measures how much recurring revenue you keep and grow from existing customers over a period, after churn and downgrades.
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P
Past Due Reminder
A past due reminder is an automated notice sent to customers whose invoices have crossed the payment deadline without being paid.
Payment Authorization
Payment authorization is the issuer's approval to hold funds on a customer's card or account before the charge is actually captured and settled.
Payment Capture
Payment capture is the step where an authorized card charge is finalized and funds move from the customer's account into your merchant balance.
Payment Gateway
A payment gateway is the service that securely captures card or bank details at checkout and routes them to the processor for authorization.
Payment Link
A payment link is a shareable URL that lets customers pay an invoice or purchase a product without logging in or filling out a checkout form.
Payment Processor
A payment processor is the service that moves card and ACH transactions between your customer, their bank, and your merchant account.
Payment Terms
Payment terms are the contractual rules dictating when and how your customers must pay an invoice after goods or services are delivered.
Payment Token
A payment token is a randomized string that replaces sensitive card data so your systems can charge customers without storing the real PAN.
Payment Void
A payment void cancels an authorized but unsettled card transaction before it posts, removing the charge without triggering a refund.
Plan Downgrade
A plan downgrade is when a subscriber moves to a lower-priced tier with fewer features, seats, or usage limits than their current plan.
Plan Upgrade
A plan upgrade is when a subscriber moves to a higher-tier plan mid-cycle, triggering proration, new entitlements, and an adjusted invoice.
Proration
Proration is the math of charging or crediting a customer for only the portion of a billing period they actually used a plan or add-on.
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R
Reactivation
Reactivation is the process of restoring a canceled or lapsed subscription so the customer resumes billing and access without starting over.
Recurring Billing
Recurring billing is the automated, scheduled charging of customers on a fixed cadence for ongoing access to a product or service.
Recurring Invoice
A recurring invoice is a bill automatically generated and sent to a customer on a fixed schedule for an ongoing product or service.
Refund
A refund returns funds to a customer after a payment, reversing all or part of a previously captured transaction.
Revenue Churn
Revenue churn is the percentage of recurring revenue your business loses from existing customers over a given period through cancellations or downgrades.
Revenue Contraction
Revenue contraction is the reduction in recurring revenue from existing customers through downgrades, seat reductions, or partial cancellations.
Revenue Expansion
Revenue expansion is the additional recurring revenue you earn from existing customers through upgrades, cross-sells, add-ons, and usage growth.
Rule of 40
SaaS health metric where revenue growth rate + profit margin should equal or exceed 40% — a balanced trade-off between growth and profitability.
S
Sales Tax
A consumption tax collected from buyers at the point of sale and remitted to state, county, or local tax authorities by the seller.
Seat-Based Billing
Seat-based billing charges customers per user account, so revenue scales with how many people on their team need access to your product.
Smart Retry
Smart Retry is logic that re-attempts failed card charges at optimized times to recover revenue lost to soft declines and network errors.
Strong Customer Authentication
EU regulation (PSD2) requiring two-of-three authentication factors for most electronic payments, primarily enforced through 3D Secure 2.
Subscription Billing
Subscription billing is the automated process of charging customers on a recurring schedule for ongoing access to a product or service.
Subscription Cancellation
The process and policies that govern how a customer ends an active subscription, including timing, refunds, and data retention.
Subscription Pause
A temporary hold on an active subscription that stops billing and service delivery without canceling the customer's account.
Subscription Plan
A subscription plan defines the price, billing cadence, features, and limits a customer commits to when buying recurring access to your product.
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