The accounts receivable process makes sure your company collects payment for the goods or services it provides

An effective process for managing your receivables is the cornerstone of maintaining a healthy cash flow in a busy business environment. 

This checklist will help you check your client is able to pay, informs them of the necessary steps for payment, and covers best practices for accounting for the incoming payments.

For a video overview of an accounts receivable process, check out the link below.

The buyer:

Record buyer details

If your proposal comes in a structured format, you can use DocParser or Zapier parser to automatically pass that data into the form fields below.

Establish your credit practices:

Send the buyer a credit application

Send the buyer a credit application for them to fill out. 

The application should contain the following fields:

  • 1
    Business name
  • 2
    Their accounts department contact details
  • 3
    The names of the directors of the business
  • 4
    References from past suppliers they have ordered from

If the company purchasing from you is going to be ordering large quantities of your product, it is important to check they will be able to continue to pay for their orders

Run a credit check on the purchasing company

Run a credit check on the ordering company to see their credit record.

Contact your credit reporting bureau and request a business credit check. 

The credit score will be a number between 1 - 100. A score of 70 or more demonstrates a company with a healthy credit record. A score of below 30 should be avoided as it is a sign that they are near bankruptcy.

Use the form fields below to record necessary notes.

The information you put in the form fields below will be seen by your organization's financial manager in the next task (which is an approval task). Based on the other company's credit score, the financial manager will give approval or rejection.

Your organization's financial manager has been assigned to the approval task via role assignments, as long as you've added their email to the "The email of your organization's financial manager" form field in task #3.

Check they have a good credit score as part of your accounts receivable process

Approval: Post-credit check review

Will be submitted for approval:
  • Run a credit check on the purchasing company
    Will be submitted

Send the buyer your terms of sale

Your terms of sale document will explain when you want the payment to be sent. Many companies will give a thirty-day window for sales. 

Your terms document will also cover the late payment fees and any potential interest you will charge for late payments. This incentivizes the buyer to pay on time and covers any costs incurred to you for late payments. 

You may also consider providing a discount to early or immediate payments to further incentivize companies to pay as soon as possible. Continual late payments across a number of companies can create a cash flow problem in future. 

If you are a US-based company, refer to the FTC to check your terms adhere to the necessary legal documents.


Check customer payment terms

The invoice is the document you send to customers who will be paying at a future date. It is not a sales receipt, which is the document a customer receives if they pay on purchase.

The invoice you send should be sent at the time of the sale documenting all deliverables and prices in advance. This document should also detail the date of payment and the means of payment. The word "invoice" should be clearly stated on the document along with its identifying number, and all names and addresses of all parties should be included.

Send the customer an email asking when in the month they prefer to make payments. Then upload the prepared invoice below.

You can use our Creating an Invoice checklist to help build your invoice.

Generate and send invoice in your accounting software

Dennis V Niven recommends sending the invoice digitally in order to reduce the barriers surrounding the payment. This way the buyer receives the document instantly and you are able to follow up with the buyer if necessary.

It is also recommended to phone the responsible person within the accounts payable division of the buyer company before and after issuing the invoice. This encourages buyers to pay on time, improving your cash flow. 

You can use an accounting software platform like QuickbooksFreshbooks or Mint to automatically email the invoice document to the customer. 

Check out this article for a detailed analysis of the best accounting software. 


Record your activity digitally

Using either Excel or previously mentioned online software like Quickbooks, you can easily track your accounts receivable.

Record all activity into your accounting system. Use the subchecklist below to record which columns you are using to track activity:

  • 1
    Date the invoice was sent
  • 2
    Customer name
  • 3
    Customer contact information
  • 4
    Invoice number
  • 5
    Link to digital invoice
  • 6
  • 7
    Paid or not paid
  • 8
    Date paid

Make a second physical copy

If possible, keep a second printed copy of your important materials. These printed materials can be used for securing against technical failures. They can also serve as security checks to ensure data has not been retroactively tampered with. 

Print invoices and monthly overviews of activity. Keep these materials clearly filed.

Establish monthly contact with your client

Send your clients a monthly statement outlining what they still owe. This document should also show payments received. The client will then clearly know the unpaid balance they have remaining with your company. 

This process allows you to send reminders to clients, encouraging prompt payments.

Reach out to the accounts payable officer at the buyer company to check they have received their monthly statement. 

You can use the email widget below to email the buyer and inform them they will be receiving monthly updates from now on.

Accounting for accounts receivable:

Record for sales on credit of services

For services, you bill the client for the value of the services you provided. There are no purchase costs to be concerned with.

For example, if you send an invoice to a client for $20,000 you need to record it twice in your journal. 

You record one debit for $20,000 to accounts receivable and one credit of $20,000 to sales. Two journal entries of equal amounts. 

Record for sales on credit of goods

For the sales of goods, you need to consider purchase or manufacturing costs. 

You record the sale the same as in task 14 by entering a credit to sales and a debit to accounts receivable.

However, there is an added step. For example, if you sold $20,000 worth of goods which only cost you $10,000 to purchase you need to record a journal entry of a debit of $10,000 to costs of goods sold, and a credit of $10,000 to the inventory account

These techniques bolster the value of the accounts receivable and sales accounts while writing the cost of goods as an expense, and reducing the asset value of the inventory account.


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