Also known as an equal payment plan or EPP, budget billing is a type of billing method that allows customers to pay a fixed monthly amount for goods or services rendered. This particular billing option is often provided by utility companies, but can also be utilized in other settings. The idea behind budget billing is to allow customers to plan on tendering that fixed amount each month, a measure that eliminates the chances for a particularly large bill during any given month to place excessive stress on the monthly budget.
Setting up a budget billing plan normally calls for assessing the amount of usage or business volume incurred over the previous annual period. One basic approach is to identify the total annual amount and divide that amount by twelve, arriving at the average use per month over the course of the year. The vendor or provider may also allow for factors like applicable taxes or other costs in determining the fixed amount that is extended to the customer. At the end of the first full year of the agreement, the provider evaluates the actual usage, assesses an additional charge if the customer utilized services that were not adequately covered by the budget billing, and then recalculates for the fixed monthly amount that will apply for the upcoming year.
One of the main benefits of budget billing is that customers do not have to make allowances for seasonal shifts in cost throughout the year. For example, if the local electric company provides budget billing options, the customer will pay the same amount every month, even though his or her usage will increase significantly during months when air conditioning or heating is needed to keep the home comfortable. In theory, the lower usage incurred during months when less heating or cooling is required balances out those months of peak usage, allowing the budget billing to adequately cover all or most of the actual usage over the course of the year. In the interim, the consumer gets to deal with a fixed rate for electrical services, rather than having to project how much money to set aside for the power bill each month.
While some providers offer budget billing at no charge, others will assess a small fee that is applied to the monthly bill. Even with the additional charge, this approach may be a good strategy for many consumers, especially those who must work with limited monthly incomes and find it more difficult to cover larger utility costs during peak months of usage. Other consumers may choose this option out of convenience, since it helps to make staying within the home budget easier. At other times, some consumers may find that the approach provides little to no benefit in their situations, and prefer to tender payments based on actual usage instead of averaging costs out over the year.