Self-Billing
An arrangement where the buyer creates invoices on behalf of the supplier.
Definition
Self-billing is an invoicing arrangement where the customer (buyer) generates the invoice for goods or services received, rather than the supplier issuing it. The buyer calculates the amount owed based on agreed terms and sends the self-bill to the supplier, who accepts it as their invoice.
This practice is common in industries with frequent, high-volume transactions where the buyer has better visibility into what was received—such as manufacturing supply chains, commission-based sales, and consignment arrangements.
Why It Matters
Self-billing simplifies invoicing in complex supply relationships. When buyers create invoices based on actual deliveries received, there are fewer invoice disputes because the buyer has already verified what they're paying for.
However, self-billing requires strong trust between parties and clear contractual terms. Suppliers must carefully review self-bills to ensure accuracy, as they're relying on the buyer's records rather than their own.
Examples
- 1
An auto manufacturer uses self-billing with parts suppliers, generating invoices based on parts received at the assembly line, verified by scan data.
- 2
A retailer self-bills consignment vendors based on actual sales, paying suppliers only for goods that sold.
- 3
A company self-bills its sales representatives for commissions, calculating amounts due based on verified sales data.
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