A billing policy for credit customers

Firms frequently bill customers on a fixed-period basis (such as once a month), or on a fixed-amount basis (whenever the outstanding credit balance reaches a particular amount). We examine here a more flexible procedure, the bill-or-carry policy, which uses a simple decision rule and results in lower costs than either the fixed-period or fixed-amount procedures. The logic and properties of the bill-or-carry policy are compared with those of the fixed-period and fixed-amount procedures.