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.
Calculated Billings = Revenue + Change in Deferred Revenue
If Q1 Revenue = $1M and Deferred Revenue grew from $500K to $700K:
Billings = $1M + $200K = $1.2M
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.