A billing cycle is just the regular stretch of time when a customer pays for using a software or SaaS product. In other words, it’s how often you get charged and how the company keeps track of your subscription. Most SaaS companies stick to cycles like monthly, quarterly, annually, or sometimes something custom, all depending on how they set up their pricing.
If you want the short version, a billing cycle basically answers: “How often do I have to pay for this thing?”
Billing cycles matter—a lot. They shape SaaS pricing, help companies predict revenue, and affect how customers feel about using the product. For the business, picking the right cycle changes everything from cash flow to how many users stick around. Take annual billing as an example: it usually comes with a discount and brings in more money upfront. Monthly billing, on the other hand, makes it easier for new customers to try things out without a big commitment.
From the customer’s side, billing cycles affect how you plan your budget and how locked in you feel. When businesses shop around for SaaS tools on review sites, they pay close attention to billing cycles—how often they’ll get billed, how renewals work, and whether it’s a pain to cancel or switch. If a company explains its billing cycle clearly, that goes a long way in building trust.
Billing cycles also tie directly into important SaaS metrics like Monthly Recurring Revenue (MRR), Annual Recurring Revenue (ARR), and Average Revenue Per User (ARPU). The timing of each charge decides how the company tracks and reports its revenue.
Some SaaS products don’t just charge by the calendar—they go by how much you actually use. That’s usage-based or hybrid billing. You see this a lot in cloud services or API-based products, where you get billed at the end of each period based on what you used.
Here’s a quick example:
Imagine a SaaS accounting tool that charges $30 per user every month. If you sign up on March 1, you pay $30 right then, and then another $30 on April 1, starting the new cycle each month. Simple as that.