Invoicing in arrears means billing for goods or services after they have been delivered. A business that provides a service through October sends the invoice on November 1, and on net 30 terms the customer pays by December 1. It is the opposite of billing in advance, where the customer pays before the period starts, as with most subscriptions. Billing in arrears suits work whose amount isn't known until it is done, such as hourly or usage-based services, but the seller carries the cost until paid.
What does "in arrears" mean?
"In arrears" means after the fact. Invoicing in arrears is billing at the end of a period for what was delivered during it. The word also has a second meaning, "behind on payments," as in "the account is in arrears." On an invoice, it nearly always means the first.
A worked example
A business provides a monthly service to a customer on net 30 terms.
| Step | Date |
|---|---|
| Service period | October 1 to October 31 |
| Invoice sent | November 1 |
| Payment due (net 30) | December 1 |
The business does the work in October and is paid around December 1. That is up to two months between starting the work and getting the money.
How is it different from billing in advance?
| Billed in arrears | Billed in advance | |
|---|---|---|
| When the invoice goes out | After the period | Before the period |
| Amount | Known exactly | Set in advance |
| Who carries the risk | The seller | The buyer |
| Common for | Hourly work, usage, utilities, payroll | Subscriptions, rent, memberships, tuition |
When a customer pays in advance, the seller hasn't earned the money yet. In accrual accounting it is recorded as deferred revenue until the service is delivered. Billing in arrears avoids that, since the work is done before the invoice. It sits in accounts receivable until paid instead.
When does billing in arrears make sense?
- The amount depends on the work. Hours, usage or materials aren't known until the period ends.
- The customer expects it. Many business buyers only pay for work they have received.
- The relationship is established. You know the customer pays.
What are the drawbacks?
- Cash comes later. You pay staff and suppliers before you are paid.
- More risk. If the customer doesn't pay, the work is already done.
- Bigger balances. Several months in arrears can build into a large unpaid amount before anyone notices.
How do you reduce the risk?
- Take a deposit before the work starts.
- Bill on a short cycle, such as every two weeks, so balances stay small.
- Use progress billing on long projects, so you bill as stages are finished.
- Print the due date on each invoice and send reminders before it.
Plain-language definition. The dates are a worked example, not a rule.
Every figure on this page was checked against these sources on Oct 6, 2026. General information, not legal or tax advice.