Accounts receivable is the money customers owe you for work done or goods delivered. Every invoice that sits unpaid is cash the business has earned but cannot use. A simple, consistent routine keeps receivables under control.

Start with clear invoices

  • State the payment terms on every invoice, such as the due date and accepted payment methods
  • Include a purchase order or reference number if the customer uses them
  • Send invoices promptly when work is delivered, not at the end of the month
  • Make paying easy, with links or bank details on the invoice

Use an ageing report

An accounts receivable ageing report groups unpaid invoices by how overdue they are, for example current, 1 to 30 days, 31 to 60 days and over 60 days. Review it every week or two. The older an invoice gets, the harder it is to collect.

A follow-up routine

  1. A friendly reminder shortly before the due date
  2. A reminder on or just after the due date
  3. A phone call or personal email when an invoice is a few weeks overdue
  4. A conversation about a payment plan, or pausing further work, for invoices well overdue

Write the routine down so it happens consistently, and note every contact against the customer record.

Record payments correctly

Apply each customer payment to the invoice it pays, rather than recording it as a new sale. If payments come through a processor, record the gross payment and the fee separately. Our guide to monthly bank reconciliation explains how deposits are matched. Payments recorded as new income instead of being applied to invoices are a common cause of overstated revenue and receivables that never go away.

Deposits and retainers

Money received before work is done is not yet income for accrual reporting; it is a liability until earned. The IRS explains how the cash and accrual methods treat timing in Publication 538.

When an invoice will not be paid

Sometimes a debt becomes uncollectable. Record it consistently, keep the evidence of collection attempts, and discuss the tax treatment with your preparer, because it depends on your accounting method and circumstances. The IRS recordkeeping guidance explains why supporting records matter.

Measures worth tracking

  • Total receivables compared with monthly sales
  • The share of receivables more than 30 and 60 days overdue
  • Customers who regularly pay late

Key terms

  • Accounts receivable: amounts customers owe the business for goods or services already delivered.
  • Ageing report: a list of unpaid invoices grouped by how long they have been outstanding.
  • Payment terms: the agreed time a customer has to pay, stated on the invoice.
  • Credit memo: a document that reduces what a customer owes, for example after a return or a pricing correction.
  • Unapplied payment: a customer payment recorded but not matched to an invoice. It makes the customer look as if they still owe money.
  • Bad debt: an amount that will not be collected.

Clear terms, prompt invoicing and a written follow-up routine do most of the work. The ageing report shows whether they are working.

How we help

Receivables review is part of our monthly bookkeeping services, and our accounting services include cash forecasts that use your actual collection patterns.