What Is Central Billing? Overview, Benefit, 7 Facts

In business, you must have multiple sources of income. You can’t make money if you’re not making sales. But how do you make sales? By having all of your leads and customers on the same system. That’s called central billing.

What Is Central Billing?

Central billing is a way to buy things where different companies buy inventory from a wholesaler instead of from each supplier individually. This is a common way for companies to do business. It lets them use their buying power as a group to get discounts on bulk pricing.

What Is Central Billing?

Centralized billing not only makes it easier for retailers and their suppliers to keep prices low and make a lot of money, but it also makes the whole billing and administrative process more efficient.

Understanding More About Central Billing

Each store or business finds it much easier to do their monthly accounting when billing is done centrally. The store writes one check to the wholesaler instead of writing checks to each supplier.

With centralized billing, payments from retailers are put together into a single monthly check for manufacturers. Before, manufacturers had to go to each location to collect and handle payments. When a supplier works with a wholesaler, they save both time and money and have less chance of not getting paid.

From the supplier’s point of view, the wholesaler buys a lot more goods than the small amounts that each store buys.

So, in order to keep the wholesaler’s business, suppliers have a reason to offer bulk discounts on these kinds of sales. Because of the discounts they get, stores can still make money and pay the wholesaler for their work.

What Is Central Billing?

The Traditional Billing Vs The Central Billing

In the traditional way of billing, stores get their stock from different suppliers. A convenience store, for instance, gets drinks, food, candy, milk, and other things delivered. Since this store probably only buys a small amount of each of these things, its suppliers probably don’t give it many discounts.

The store owner has to keep track of a lot of different accounts and pay dozens or even hundreds of vendors every month. The supplier also has to work with a lot of other businesses, and each one needs to be billed and paid.

Businesses can buy and sell goods much more easily when billing is done in one place. Under central billing, a wholesaler acts as a middleman between suppliers and retailers.

Every store that works with this wholesaler has its own account, which can be charged with all of the inventory for the month.

At the end of the month, each supplier sends each wholesaler a single invoice for all shipments made to retailers that wholesaler serves. Then, at the end of the month, the wholesaler puts all of a store’s monthly purchases on one bill and sends it to the store.

How Does A Central Billing Works

A middleman (wholesaler) runs the process and takes some risks so he or she can make money from it.

What Is Central Billing?

In many central billing systems, the wholesaler acts as a middleman between the seller and the buyer.

But in some situations, this wholesaler may also choose to act as a storage facility. A wholesaler makes more money by buying things in bulk and selling them to retailers than by just billing people.

Typical Example Of Central Billing

Bread, milk, and other things that go bad quickly are brought to a convenience store every day. Instead of paying cash, they put them on a central billing account they have with their wholesaler.

Their wholesaler sends them a bill at the end of the month for everything they bought that month. In turn, each supplier gets paid by the wholesaler.

Benefits Of Central Billing

Benefits To Supplier

Even though the supplier still has to make several deliveries, it only has to worry about getting paid from one wholesaler instead of from many retail locations.

What Is Central Billing?

This makes the distributor pay for giving credit instead of the manufacturer. In exchange for these perks, the supplier gives the wholesaler a rebate or Long Term Agreement payment.

Benefit To Retailer

The store owner benefits because it’s easier for them to do their paperwork. Instead of having to keep track of many payments every day, they only have to write one check a month that can cover thousands of transactions.

They give money to the wholesaler, who gives money to the suppliers. They also get a rebate (LTA) on most of the things they buy.

Benefit To Wholesaler

For the wholesaler, there are several benefits. First of all, they are not required to transfer all LTA funds. Second, they do a very important job for retailers, to whom they also sell other goods through traditional wholesale channels. But they are taking the risk that the store won’t pay.

Centralised istribution

Central billing has often been replaced by central distribution. Under the centralised distribution model, a wholesaler will have their own supply chain that will let them give their customers everything they need.

What Is Central Billing?

This eliminates the need for suppliers to deliver goods and for a central billing system.

Conclusion

Central billing is a process where all your bills are sent to one location and then distributed to various vendors and/or employees of your business.

Central billing will save you money and it will make your life easier because you can always look at one statement.

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Pat Moriarty
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