Think about the last time you ordered food online. You might have paid in advance through your card, but you received a $20 refund because your order got delayed or cancelled. In most apps, refunds don't go into the bank account directly; instead, they're stored as a credit in your food delivery account, ready for your next order.

They are more than just promises, more than trust. They are credits.

The most common form of credit is sales credit. You deliver the product or service and give the customer a set number of days to pay, say, Net 15 or Net 30.

For services that run month after month, invoices are generated periodically, and the payment cycle follows agreed-upon terms. It may be either the start or the end of the month.

Large or ongoing projects may be billed in parts; each payment represents a credit instalment.

When payments extend beyond the due date, those invoices become overdue and need close follow-up.

Credit Notes:

This is issued when you need to reverse or adjust part of a billing amount, such as when a customer returns goods or a post-sale discount occurs.

When a customer pays more than what's due, the excess is treated as a credit balance for future invoices.

When a customer prepays, the amount remains a credit until applied against an upcoming service or product delivery.

1. 
   If the "credit owed to you" side grows too much, your cash flow is weakening.
2. 
   If the "credit you owe" side isn't correctly managed, you risk misreporting revenue or confusing customers.

• Payment terms are clearly defined.

• Overdue invoices are tracked and followed up on.

• Credits and refunds are issued promptly.

• Use automation to handle reminders, adjustments and reporting.

 When these pieces are in sync, your business operates with confidence, as every transaction is accounted for and every balance is clear.

With Zoho Billing, businesses can:

• Define flexible payment terms at the customer level or invoice level.

• Track receivables in real time with clear visibility into what's due, overdue or funds collected.

• Issue credit notes instantly for returns, discounts or adjustments.

• Apply customer credits automatically against future invoices or renewals.

• Automate reminders and the dunning process to keep cash flow consistent.

• Clear reports on what's paid and unpaid, how long a customer takes to pay, and how often it fails.
  

In this series, we will examine each of these functionalities deeply and explain how they offer visibility and clarity, letting your team focus on growth rather than following up on credits.

Up Next: Setting the Right Payment Terms