What is a Billing Cycle? Definition and Meaning - Ikajo Glossary


Billing Cycle

The billing cycle is a certain period of time during which all settlement operations are carried out for a particular economic transaction. The settlement period can be interpreted differently in various industrial areas, but the main purpose of using it remains the same. It is important to pay off all passive debts within a limited timeframe in order to start over the work after the settlement period.

Proper use of the billing period is the key to successful management of the finances. That is a guarantee of financial well-being for people and banking confidence. In contrast, if you neglect these dates, it may cause delinquency, penalties and corrupt credit histories.

What are the most important targets of billing period?

  • The first and most important function of the billing period is the definition of a time frame for conducting financial transactions.
  • Secondly, the billing cycle allows financial statements to exist, because a balance sheet is a list of all the income and expenditures of an enterprise for specified time frames. Financial reporting allows analyzing the reliability and profitability of enterprises and also assess risks.
  • The third function is allowing people to track changes in their budget, manage their income and expenses.

In order to avoid all these problems, it is highly important to learn how to properly use the billing cycle and to follow several rules:

  • You should always carefully examine the conditions of the loan agreement, and specify all the necessary dates with a bank employee if some details are not clear for you;
  • In case, if you want to make a large purchase using a card, then it is better to make it at the beginning of the period. In such a manner, more time will pass before the first payment or full repayment of the loan, and you will have time to earn or collect the necessary amount.
  • In addition, you should also try to repay a loan with plenty of time to spare, in order to avoid situations with a “day to day” payment.
  • You should try to draw up all the cards at the same time. It is better to do this at the beginning of the month for maximally balancing the start and end periods of the billing cycle.
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