The accounts receivable process covers how a business issues invoices, tracks balances, collects customer payments and reconciles open receivables. Its purpose is to turn approved sales into correctly recorded and collected cash.
What are the main steps?
The process usually includes customer and credit setup, order or service confirmation, invoice creation, delivery, payment tracking, collections, cash application, dispute resolution and ledger reconciliation.
What information should stay connected?
Link the customer, contract or order, delivery evidence, invoice, credit note, due date, currency, payment reference and remaining balance. Stable identifiers reduce unapplied cash and duplicate collection activity.
How are late payments handled?
Collections should follow documented stages based on days overdue, value, dispute status and customer risk. A disputed invoice needs an owner and resolution date; it should not simply remain in an aging bucket.
Which measures show performance?
Useful measures include days sales outstanding, overdue percentage, collection effectiveness, dispute rate, unapplied cash and write-offs. Review the measures together because faster collection achieved through excessive credit notes can hide poor billing quality.
What controls are important?
Separate invoice changes, credit-note approval, receipt handling and write-offs where practical. Reconcile the receivables subledger to the general ledger and investigate old credits, unidentified receipts and manual adjustments.
