What is electronic billing? Here’s how e-billing works

Electronic billing—often referred to as e-billing—is a digital method of generating, delivering, and managing invoices. Instead of using traditional paper-based processes, e-billing relies on software and electronic systems to handle billing tasks.

For businesses, e-billing simplifies what used to be a tedious, error-prone method. Its automated process generates invoices, chases payments, and reconciles accounts. These capabilities can help expedite the payment cycle, reduce mistakes and disputes, and provide actionable insight to improve financial operations.

Below, we’ll explore further how electronic billing works.

What’s in this article?

• How does electronic billing work?
• How does Stripe support electronic billing?

How does electronic billing work?

Electronic billing is an automated process that integrates with a business’s existing systems to handle invoicing, payments, and recordkeeping. Here’s how each step of the process works.

Invoice generation

To create invoices, e-billing systems pull information from existing tools such as:

• Enterprise resource planning (ERP) software for accounting and inventory data

• Customer relationship management (CRM) systems for customer profiles and order details

• Point-of-sale (POS) systems for transaction records

Once the system collects the data, it creates the invoice in the requested format, depending on industry or customer requirements—for example, Electronic Data Interchange (EDI) standards for B2B transactions or machine-readable formats such as XML. Businesses can customize these invoices with branding; terms and conditions; and adjustments for currency or tax localization based on the customer’s region. The e-billing system calculates taxes, discounts, or surcharges to display the total amount.

The system double-checks the invoice’s details—from product descriptions to payment terms—for errors. It also ensures that all details comply with regional tax rules and invoicing laws, such as value-added tax (VAT) in Europe and goods and services tax (GST) in India.

Invoice delivery

Once the invoice is validated, the system sends it to the customer. A business can send the invoice as a PDF email attachment, to a customer portal where customers can view and download it, or directly to B2B clients’ accounts payable (AP) systems via EDI or other digital channels.

If invoices can integrate directly into the customer’s AP system, then that system can automatically match the invoice with purchase orders or goods received notes to verify the transaction. If there’s a mismatch (e.g., incorrect amounts, missing items), the system alerts the appropriate teams to review it.

Payment processing

Once the e-billing system delivers the invoice, it facilitates payment. It provides customers with payment options customized to their preferences, such as credit cards, bank transfers, and digital wallets. The system also calculates and applies any agreed-upon discounts for early payments. After it processes the payment, the system updates the invoice’s status and automatically sends a receipt to both the business and the customer.

Tracking and follow-up

After sending the invoice, businesses can monitor its progress through dashboards that show whether the invoice has been delivered, viewed, approved, or paid. If customers raise disputes, businesses can also track the resolution process within the e-billing platform. If payments become overdue, the e-billing system can send follow-up emails.

Once the invoice is paid, it’s stored securely for future use. Metadata tagging allows users to search for invoices easily by customer, date, or transaction ID. E-billing platforms also ensure documents are stored in alignment with regulations. Businesses can use these records to analyze patterns, such as average payment times and overdue rates, and improve cash flow management or refine payment terms.

How does Stripe support electronic billing?

Stripe uses powerful automation, flexible payment options, and global compliance features to support electronic billing. Stripe Billing is ideal for businesses that want a reliable, flexible, and customizable billing solution. For instance, many software-as-a-service (SaaS) companies use Stripe Billing for recurring billing and subscription management. Stripe can help manage billing for complex, multiparty marketplaces.

Here’s how it works.

Invoice creation

With Billing, you can design custom, branded invoices in multiple currencies. Stripe Billing works seamlessly with Stripe Tax to automatically calculate taxes based on the customer’s location.

Invoice delivery

Stripe ensures that invoices are sent promptly and securely via email, the customer portal, or application programming interface (API) integration with B2B clients’ systems.

Payment options

Stripe supports a wide variety of payment methods, including:

• Credit and debit cards: These payments can be processed through card networks.

• Bank transfers: Stripe supports Automated Clearing House (ACH), Single Euro Payments Area (SEPA) Direct Debit, and other regional bank transfer options.

• Digital wallets: Customers can pay using Apple Pay, Google Pay, or other various wallets.

• Buy now, pay later (BNPL): For eligible businesses, Stripe offers installment payment options such as Affirm and Afterpay.

Recurring billing and subscriptions

Stripe Billing can automatically charge customers on a recurring basis according to subscription plans or usage. It supports tiered pricing, flat rates, usage-based models, or a combination of these. If a payment fails (e.g., if there are insufficient funds), Stripe’s Smart Retries tool can reattempt payment based on best practices. Stripe’s recovery tools helped users recover about $3.4 billion in revenue in 2023.

Automation and workflows

With Billing, you can generate and send invoices automatically based on a recurring schedule. Stripe can also send automatic reminders and follow-ups to customers for overdue invoices to help reduce churn. It automatically matches payments to invoices to reduce the time spent manually reconciling accounts.

Tracking and reporting

Stripe provides tools to monitor billing activity and financial performance, such as:

• Invoice status updates: You can track whether an invoice has been delivered or paid.

• Analytics and reporting: The Stripe Dashboard provides insight into revenue, payment trends, and churn rates.

• Data exports: Businesses can export invoice and payment data to accounting tools, or they can use Stripe’s integrations with platforms such as QuickBooks and Xero.

Security and compliance

Stripe employs security measures that are PCI compliant. Features such as Stripe Tax and multiregional support help businesses comply with global tax regulations. Customers and businesses can also enable two-factor authentication for another layer of security when they access billing portals.

Integration and customization

Businesses can use Stripe’s API to fully integrate e-billing into their own platforms or workflows. Stripe provides detailed documentation and software development kits (SDKs) for various programming languages that make it easier to build custom billing systems. Stripe can also work with Salesforce, Shopify, and other SaaS platforms for better functionality.

Scalability

Stripe is ideal for international businesses. It supports over 135 currencies and localizes invoices for different regions by language, currency, and tax settings. Stripe can also work with businesses of all sizes, whether they’re startups or large enterprises.