A monthly in arrears invoice is sent to a client that is behind 30 days on their payment for a product, service, rent, or any other expense or bill.
In Arrears Meaning
To be “in arrears” means to owe a debt. Owing money in arrears is not a bad thing. There are transactions where a person is paid upfront (in the beginning) and others where a person is paid after having received a service or product (in arrears). A person in arrears is fine as long as they pay the debt on the due date. If a person were to be 1 month in arrears – it would implicate that they are 30 days behind on payment. Those who fall behind on rent are the most culpable when in comes to being monthly in arrears. Rent is always due at the end of the month (after 30 days), so when a tenant fails to pay 1 months rent, they will find themselves in a situation known as monthly in arrears the following month. If a tenant keeps falling behind in arrears, they will be at risk of an eviction.
Paid/Billed In Arrears
Almost everyone that is on salary or paid by the hour is paid in arrears. Typically after a week of working for a business, the employer will pay the employee at the end of the week for the total amount. Because the employee is due money for past work, the employer in this situation is known to be paying in arrears.
Anytime an invoice is sent requesting payment, it’s known as billing in arrears. The nature of a transaction where a customer receives a product or service before paying for it is in arrears. For example, a power company servicing electricity to a home must first provide service to the home and measure the amount of electricity used until the billing cycle ends. The power company will then calculate the electricity used and bill an invoice to the homeowner, making this a billing in arrears arrangement.