Recurring Billing Lifecycle Diagram

Written by

James Davis

Written by James Davis

Senior Technical Writer at United Thinkers

Author of the Paylosophy blog, a veteran writer, and a stock analyst with extensive knowledge and experience in the financial services industry that allows me to cover the latest payment industry news, developments, and insights. Read more

Reviewed by

Katherine Pensatori

Reviewed by Katherine Pensatori

Product Specialist at United Thinkers

Product specialist with more than 10 years of experience in the Payment Processing Industry. I help payment facilitators and PSPs solve their various payment processing issues. Read more

In essence, recurring billing is a cyclic process, involving several key stages. These include invoicing, balancing (outstanding debts are balanced against the invoices), billing itself, processing of the claims, handling of declined payments, and assessment of fees (such as late fees or decline fees).

Each stage has its own peculiarities, and, depending on a specific payment, the number of stages in the recurring billing lifecycle may vary (as declined payments have to be reprocessed).

 Detailed information on recurring billing is available for you at Paylosophy Blog.

Invoicing
The process of generation of invoices based on the payment plans that are due on the building date (e.g. today) as a result of the process. An invoice is generated for each payment plan that is due.

Balancing (1)
The process during which payments (such as prepayments or any positive balance on the account) are allocated against outstanding invoices. There are two balancing algorithms that are most commonly used:

• Oldest invoice first
  Any available payment will be allocated to the oldest outstanding invoice first. Then to the second oldest and so on. This algorithm is often used for collections or past-due payments.
• Newest invoice first
  Any available payment will be allocated to the most recently created invoice first. Then to the invoice created right before it and so on. This algorithm is often used for billing invoices as well as for prepayments and POS purchases.

Billing
The process during which all the invoices are collected and claims are generated and submitted to the processing engine to charge the respective accounts and collect payments. The billing remains open and the claims remain in pending status until the processing completes. Usually, depending on the decline recycling policy, the processing phase can take between 1 and 3 days.

Processing
The process during which respective submitted transactions are handled by the processing engine and associated accounts (bank accounts or payments cards) are charged with respective amounts.

Reprocessing
The process during which soft declines are reattempted based on predefined rules (around a number of attempts and their frequency). This process often involves the use of a credit card account updater.

Closeout
The process during which the result of processing is imported from the processing engine. Approvals and declines are posted to the respective customer accounts.

Balancing (2)
The process allocates newly posted payments against the invoices generated as part of the invoicing process.

Free assessment
The process during which all newly imported declines are analyzed and respective declines fees are assessed. During this process, late fees can also be assessed on accounts with an outstanding balance over a predefined time period.

Rebilling
Rebilling is essentially a billing process, which involves all of the phases explained above. However, it is generally done on the previously declined accounts.