GLOSSARY
A
Agentic Billing
Agentic billing is the set of billing mechanics that charge for work an autonomous AI agent performs rather than for a person's access: identifying the agent as a spender, authorizing spend before it acts, metering a multi-step run as one billable job, and settling calls the agent makes to other paid services.
AI Agent Pricing
AI agent pricing is the set of pricing structures used to charge for autonomous AI agents, where the billable unit is a run, a task, a resolved outcome, or consumed tokens rather than a user seat. Agent workloads make cost vary per request, so the unit choice decides gross margin.
AI Credits
AI credits are a vendor-defined billing unit deducted each time a customer runs an AI action, standing in for the token, compute, and per-call costs behind that action. Every product sets its own conversion rate, so one credit buys a different amount of work on each platform that issues them.
AI Monetization
AI monetization is the practice of converting AI capabilities into revenue, covering what a product charges for, what it gives away free, where it gates access, and whether the price per unit clears the cost of inference. Monetization decides revenue capture, and pricing models decide the structure.
AI Pricing Models
AI pricing models are the pricing structures AI products use to charge for output, including per-token, per-request, per-run, per-outcome, credit-based, tiered subscription, and hybrid combinations. The model sets which unit appears on the invoice and how closely revenue tracks the cost of serving each customer.
AI Token Pricing
AI token pricing is the per-unit rate model where a provider charges separately for input tokens and output tokens consumed by a language model, quoted per million tokens. Output rates run several times input rates, and cached input bills at a fraction of the base rate.
Anniversary Billing
Anniversary billing is a subscription arrangement where each customer's billing period starts on the day they signed up and renews on that same day at every interval. Every customer keeps a private renewal date, so invoice dates spread across the month according to when each subscription began.
Annual Contract Value
Annual contract value is the average yearly recurring revenue from a single customer contract, calculated by dividing the contract's recurring value by its length in years. ACV normalizes contracts of different durations so a three-year deal and a one-year deal compare on the same basis.
API metering
Tracking API calls as billable usage events so teams can price, rate, and invoice consumption accurately.
API Monetization
API monetization is the practice of generating revenue from an API by attaching a commercial model to it, using plans, keys, quotas, and metered charges. The model turns an API from an integration surface into a product with a price, an entitlement, and an invoice.
Auto-Renewal
Auto-renewal is a contract term that extends a subscription into a new billing period automatically, charging the customer again unless they cancel before a stated deadline. Consumer protection statutes in several jurisdictions treat auto-renewal as lawful only when the seller disclosed the renewal terms upfront, took express consent, and offers an easy way out.
B
Billing cycle
A billing cycle is the recurring period a subscription invoice covers, running from an anchor date to the day before the next anchor date. The cycle sets which charges land on which invoice and which period any proration, usage rollup, or plan change gets applied to.
Billing Engine
A billing engine is the component of a billing system that turns metered usage, contract terms, and pricing rules into invoice line items. The engine handles rating, proration, discounts, credits, and tax application, then hands a finalized invoice to a payment provider for collection.
Billing Frequency
Billing frequency is how often a customer receives an invoice, chosen from options like weekly, monthly, quarterly, or annual. The choice sets when cash arrives, how large each invoice is, and how often a customer faces a renewal decision, independent of how often usage gets measured.
Billing in Advance
Billing in advance means charging a customer at the start of the period the charge covers, before you deliver the service. Fixed fees and prepaid credits bill this way because you know their quantity up front, while metered usage can't, since the consumed amount doesn't exist yet.
Billing in Arrears
Billing in arrears is a billing model where a company invoices a customer after the service period ends, once the quantity consumed is known. Usage-based and metered products bill this way by necessity, because the amount owed doesn't exist until the period closes.
Billing Mediation
Billing mediation is the layer that sits between usage sources and billing, gathering records from systems that share no format, mapping them onto one schema, attaching the account and product context a charge depends on, then delivering a copy to every downstream consumer: the rating engine, analytics, and revenue share reporting.
Billing Period
A billing period is the span of time that a single invoice covers. It sets the boundaries for every charge on that invoice: which usage events count toward it, which subscription fees apply, and which date the billing system uses to close the books and generate the document.
Billing System Migration
Billing system migration is the process of moving live subscriptions, usage meters, pricing configuration, and invoice history from one billing system onto another without breaking what customers get charged. The work runs in stages: export, pricing-model mapping, a parallel run against the incumbent, reconciliation, then cutover.
Billing vs Invoicing
Billing vs invoicing describes the difference between calculating what a customer owes and issuing the document that demands payment. Billing is the whole process: metering, pricing, applying credits, and producing a total. Invoicing is one step inside it, the point where that total becomes a legal document.
Block Pricing
Block pricing is a usage-based rate structure that sells units in fixed-size blocks at a fixed price per block. Consumption gets divided by the block size and rounded up, so a customer who uses part of a block pays for the whole block. Unused capacity inside a block carries no refund.
Bookings vs Billings vs Revenue
Bookings vs billings vs revenue separates three measures of the same customer contract: bookings record the value committed at signature, billings record what a seller has invoiced, and revenue records what the seller has earned. Only revenue is defined by an accounting standard, and only revenue reaches the income statement.
Build vs Buy (Billing)
Build vs Buy (Billing) is the decision between developing a billing system in house and adopting a billing platform. The choice turns on engineering cost, pricing complexity, and how much control over data and roadmap the business needs, not on the license fee alone. Both options carry recurring cost, and only one of them arrives as an invoice.
C
Calendar Billing
Calendar billing is a period alignment scheme that anchors every subscription to the same fixed date, normally the 1st of the month. Every account shares one period start and end, a single billing run produces the whole invoice book, and the revenue those invoices carry falls inside one reporting month.
Churn Rate
Churn rate is the percentage of customers who cancel during a set period, found by dividing the accounts lost by the number of accounts at the start of that period. The metric counts account losses rather than lost revenue, which is why teams also call it logo churn or customer attrition rate.
Consolidated Invoicing
Consolidated invoicing is the practice of combining charges from multiple subscriptions or multiple related accounts onto a single invoice. Enterprise billing uses it to bill one parent entity for usage its subsidiaries or business units generated, while preserving the per-account breakdown on the document.
Consumption-Based Pricing
Consumption-based pricing is a pricing model where the amount a customer pays tracks how much of a product they actually use, measured by a billable unit such as API calls, tokens, or compute minutes. It's the same model most vendors call usage-based pricing.
Contracted ARR
Contracted ARR is the annualized recurring revenue of every signed contract a company holds, including contracts that haven't started yet. It measures committed revenue on paper rather than revenue currently being invoiced, which is why it runs ahead of reported ARR in a growing business.
Contraction MRR
Contraction MRR is the recurring revenue an existing customer stops paying while staying a customer: a downgrade, a seat reduction, a pause, a new discount, or lower metered consumption. Contraction MRR captures partial loss only. A customer who cancels every subscription counts as churn MRR instead.
Credit balance
A stored balance of prepaid credits or adjustments that can be applied against future invoices or usage.
Credit Burn-Down
Credit burn-down is the process of deducting a customer's prepaid credit balance as they consume a product, converting usage into credit deductions in real time. The deduction order and burn rate determine what a customer can still spend and what they forfeit at expiry.
Credit Memo
A credit memo is a document a seller issues to reduce the amount a customer owes on a previously issued invoice. It corrects overbilling, returns, or service credits without moving cash, and it leaves an audit trail that editing the original invoice would destroy.
Credit Rollover
Credit rollover is a policy that carries a customer's unused prepaid credits into the next billing period instead of expiring them. It decides how much of a granted balance survives period close, and every credit that carries forward stays an obligation on the balance sheet.
Credit-Based Pricing
Credit-based pricing is a pricing model where customers buy a balance of vendor-defined credits and spend them on product actions, each priced at a set number of credits. The credit sits between the price list and the underlying cost, so one balance covers actions that cost the vendor very different amounts.
D
Debit Memo
A debit memo is a document a seller issues to increase the amount a customer owes on an invoice that has already gone out. It covers undercharges, missed usage, and post-invoice fees, and it carries its own balance that a payment or a credit memo can settle.
Deferred Billing
Deferred billing is a billing arrangement that postpones the invoice for a product or service the customer already has access to. The delay runs from a defined trigger, such as a trial ending, a buyer accepting a milestone, or an agreed grace period, and it shifts the invoice date without changing what the customer owes.
Deferred Revenue Waterfall
A deferred revenue waterfall is a period-by-period schedule showing how a deferred revenue balance, the liability created when a customer pays before delivery, releases into recognized revenue over a contract term. Each row reports the opening balance, the amount recognized, and the closing balance for one period.
Draft Invoice
A draft invoice is an invoice that exists in the billing system but that nobody has finalized yet, so its line items and totals can still change. Usage-based billing keeps invoices in draft after the period closes, because late-arriving events keep moving the number.
Dunning
The automated follow-up process used to recover failed payments while keeping customer communication consistent.
Dunning Management
Dunning management is the coordinated sequence a billing system runs after a payment fails: retry attempts, escalating customer notices, and a final action on both the subscription and the unpaid invoice. Dunning policy decides how long a lapsed account keeps its access and at what point collection stops.
E
E-Invoicing Mandate
An e-invoicing mandate is a legal requirement to issue invoices as structured electronic data and transmit them through a channel the tax authority specifies. Some governments validate each invoice before it becomes legally valid. Others accept the invoice and inspect it later. A PDF sent by email satisfies neither.
Entitlement
A rule that defines what a customer can access based on their plan, subscription, contract, or usage limits.
Event Ingestion
Event ingestion is the write path that carries usage records from a product into a billing system's durable storage. It covers the transport, the authentication, the field-level validation each record has to pass, and the acknowledgement returned to the sender. Measurement, rating, and invoicing all run after ingestion finishes.
Expansion MRR
Expansion MRR is the recurring revenue existing customers add on top of what they already paid: a tier upgrade, extra seats, a cross-sell, a recurring add-on, higher metered consumption, or a price uplift. Expansion MRR counts increases only, and revenue from customers who had already cancelled belongs in reactivation.
F
Feature flag
A control that turns product capabilities on or off for specific plans, cohorts, or customers.
Feature Flag vs Entitlement
Feature flag vs entitlement is the distinction between two runtime checks that look identical in code. A feature flag decides whether a code path is safe to run at all, and engineering deletes it once the release lands. An entitlement decides whether a customer paid for that capability, and it lives as long as the plan does.
Feature Gating
Feature gating is the access-control layer that decides which product capabilities a customer can reach based on the plan they pay for. A gate resolves a yes or no answer at request time, using the customer's subscription, add-ons, and billing status, and it changes the moment their entitlements change.
G
Grace period
A short window after a billing issue or renewal date where access continues before enforcement begins.
Gross Revenue Retention
Gross revenue retention is a SaaS retention metric that measures the percentage of recurring revenue a company keeps from its existing customer base over a period, counting only losses from churned accounts and downgrades. Expansion revenue stays out of the calculation, so the result can never exceed 100%.
H
Hybrid pricing
A pricing model that combines recurring subscriptions with usage-based charges, credits, or add-ons.
Hybrid Pricing Model
A hybrid pricing model is a pricing structure that charges one customer through more than one mechanism in the same billing period, most often a recurring subscription fee combined with metered usage, prepaid credits, or per-seat charges. Each component is rated separately, then resolved in sequence onto a single invoice.
I
Idempotency Key
An idempotency key is a client-supplied identifier that a server records against the outcome of a write request. When the same key returns, the server skips the work and hands back the stored status code and body from the original attempt, so a retry after a timeout can't create a second charge.
Invoice adjustment
A correction, credit, discount, or charge applied to an invoice after rating or before collection.
Involuntary Churn
Involuntary churn is subscription loss caused by a payment failing rather than by a customer deciding to leave. The account lapses on an expired card, a bank decline, or stale billing details while the customer still wants the product, which is why retention teams keep it on a separate line from voluntary churn.
M
Merchant of Record
Merchant of record is the legal entity that sells a product to the end customer, appears on their card statement and receipt, and carries the resulting obligations: sales tax and VAT remittance, chargeback liability, refunds, and PCI compliance. The seller behind it receives a payout net of fees.
Metered billing
Metered billing is the billing operation that closes a cycle by reading an accumulated usage total, converting it into priced invoice lines, and issuing the invoice after consumption happens. It runs in arrears, applies contract terms such as minimums and commitments at the close, and produces the amount a customer actually owes.
MRR Movements
MRR movements are the categories that explain every change in monthly recurring revenue between two dates: new business, expansion, contraction, churn, and reactivation. Each movement records the net change in a subscription's MRR, and the five categories together reconcile opening MRR to closing MRR.
MRR vs ARR
MRR vs ARR is the distinction between monthly recurring revenue, the normalized subscription revenue a customer book produces in one month, and annual recurring revenue, the annualized value of the same recurring contracts. ARR restates MRR on a yearly basis, so the two describe one revenue base at two different resolutions.
O
Open Source Billing
Open source billing is billing software released under a public license that grants anyone the right to read the source, run it, modify it, and redistribute it. The license family, usually copyleft or permissive, and the vendor's open core policy together decide which capabilities actually ship in the public repository.
Overage
Additional usage beyond an included allowance that is charged separately or rated at a different price.
Overage Charges
Overage charges are the fees a billing system applies to usage that runs past an included allowance in a plan or contract. The billing system counts the excess units, multiplies them by a separate overage rate, and adds the result to the invoice as its own line.
P
Payment Reconciliation
Payment reconciliation is the finance process that matches money received against invoices issued, then explains every difference. The check ties each invoice to the payment captured against it and to the cash that actually landed in the bank, so processing fees, refunds, chargebacks, and batched payouts stop looking like missing revenue.
Payment Retry
Payment retry is the practice of reattempting a declined card charge on a scheduled cadence, using the issuer's decline code to decide whether another attempt can succeed. Card networks cap how many reattempts a merchant may make and charge fees past that limit, so the schedule matters as much as the attempt.
Per-Seat Pricing
Per-seat pricing is a subscription model where a vendor charges a fixed recurring fee for each user account on a customer's plan. Total cost equals the seat price multiplied by seat count, so revenue tracks headcount rather than product consumption. Contracts fix the seat price per plan tier and bill it monthly or annually.
Proration
A partial charge or credit calculated when a plan changes during a billing period.
R
Rating
The process of turning raw usage events into billable charges using pricing rules and customer context.
Revenue Churn
Revenue churn is the share of recurring revenue a company loses over a period through cancellations, non-renewals, and downgrades from its existing customer base. It weights every loss by its dollar value, so one large account leaving moves the number far more than several small ones.
Revenue Leakage
Revenue leakage is earned income a company never bills or never collects, lost through process failures rather than deliberate choices. Uncounted usage, mispriced contract terms, lapsed renewals, and misapplied discounts all cause it. Because nobody decides to give the money away, leakage rarely appears as a line item anywhere.
S
Sales Tax for SaaS
Sales tax for SaaS is the state and local tax a software vendor collects on subscription charges and remits to the taxing jurisdiction. In the United States, whether a subscription is taxable depends on how each state classifies remotely accessed software, and whether the vendor has to collect at all depends on economic nexus.
Self-Hosted Billing
Self-hosted billing is a deployment model where a company runs its billing software on infrastructure it controls, inside its own VPC, data centre, or private cloud, instead of consuming it as a vendor-hosted service. The buyer owns the servers, the database, the upgrades, and the uptime.
Subscription
A recurring commercial relationship that grants access to a product or plan over time.
Subscription Lifecycle
The subscription lifecycle is the state machine a subscription moves through between creation and termination. Each state decides two things at once: whether the customer keeps access, and whether the billing system generates an invoice this period. Payment outcomes drive most transitions.
Subscription Pricing Models
Subscription pricing models are the structures a vendor uses to charge for recurring access. Each one picks a billing unit and a rate: a flat plan fee, a per-user fee, a rate that changes with quantity, or a charge that tracks consumption. Most live products combine several.
T
Tax Engine
A tax engine is the software component that decides how much indirect tax applies to a transaction. It reads the seller's registrations, the buyer's location, and the product's tax category, then returns a rate and an amount for the invoice to carry.
Tiered pricing
A pricing structure where usage is charged across bands, often with different rates at each tier.
Tiered vs Volume Pricing
Tiered vs volume pricing is the choice between two ways of applying a rate table to one quantity. Graduated tiers price each band separately and add the parts. Volume prices the whole quantity at the rate of the band it reaches. Same table, two totals.
Token-Based Pricing
Token-based pricing charges for language model use by the token, the unit a model splits text into before processing it. The billable quantity is the token count of a request plus its response, and the rate depends on which category each token falls into rather than on the token itself.
U
Unbilled AR
Unbilled AR is the asset account that holds amounts a company has earned but not yet invoiced. It carries delivered work awaiting a bill, and an invoice moves the balance into accounts receivable without touching revenue. Under ASC 606 it presents as either a contract asset or a receivable.
Unbilled Revenue
Unbilled revenue is income a company has earned but not yet invoiced. The seller delivered the product or service, so accounting recognizes the income, while the customer has received no bill. Recognition and invoicing run on separate schedules, and the gap between them is what this balance measures.
Usage event
A recorded action or measurement that can be aggregated, rated, and used for billing or analytics.
Usage Metering
Usage metering is the system that captures and measures how much of a product each customer consumes before billing prices it. It ingests raw events, attributes each one to a customer and a meter, and holds the counts that later become invoice lines. Metering counts. Pricing decides what the count costs.
Usage-Based Revenue Recognition
Usage-based revenue recognition records revenue in the period a customer consumes a product, rather than when they're invoiced or when they pay. Under ASC 606 the consumption satisfies the performance obligation, so the recognized amount tracks metered quantity times the contracted rate.
