What is the Most Common Accounts Receivable Task?

What is the Most Common Accounts Receivable Task? | Accounting Smarts
Charles Hall

Last updated by

Charles Hall


June 10, 2022

The invoicing process is the most common and the core task in the accounts receivable process. Without invoicing, cash flow suffers.

The primary objective of the accounts receivable job is ensuring that the business gets paid on time.  With that said, the invoicing process is the most common and the core task in the accounts receivable process.  Without invoicing, cash flow suffers.  The invoice details the transaction and commits the buyer to payment, without it the customer is lost.

The person in charge must ensure that all transactions are invoiced, recorded and discrepancies resolved. They must also ensure inbound cash receipts to the business after shipping and delivering goods or services are received timely and recorded accurately.

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Table of contents

Why is sending an invoice important?

Sending timely and well-organized invoices is fundamental for success in the accounts receivable process. It greatly improves the likelihood of being paid on time and maintaining a positive cash flow for the business.

Even for businesses without a fully developed accounts receivable cycle, invoicing is critical because:

  • It is a professional way to communicate transactions with your customers
  • It documents sales and balances owed by customers
  • It is the foundational step in creating and supporting financial records
  • It documents each sales transaction in one document including:  contact information, payment terms and transaction details
  • It provides a legal claim for payment

When should an invoice be sent?

Commonly, invoices are sent upon the shipment of goods or completion of a service. By the time you send an invoice, you must have successfully fulfilled all your contractual obligations or delivered all items requested.

The invoice should show total items, hours billed, and total amount minus any prepayment or deposit previously paid by the customer.  Invoice amounts should agree with the original quote.

Send it immediately to avoid confusion for you or your customer, and to avoid delayed payments.

What is the best way to send an invoice?

There are 3 ways you can send an invoice.

  1. Deliver the invoice in person
  2. Email the invoice
  3. Mail the invoice

In our paperless society, emailing the invoice has become the standard form of delivery for most invoices.  We concur with the email route as most customers are comfortable with email and it saves time, money and speeds up the process.  However, some industries may have reasons for continuing to use the mail or in person delivery.

Even the most basic online accounting systems offer electronic invoicing that helps you create, send, and track invoices all in one place.  Overall, this leads to a more efficient organization.

If you lack an accounting system you might also consider an app for invoicing purposes.  There are many to choose from and the mobility allows you to invoice on the go.  Here are a few to consider:

  • QuickBooks Online
  • PayPal
  • Invoice2go
  • Bill.com

Keep a copy of all invoices sent, whether electronic or hardcopy. Even after getting paid, the best practice in bookkeeping is to keep all records for at least six years-it helps in audits and the fulfillment of tax obligations.

What should be included on an invoice?

An invoice should communicate all the details of a sales transaction, including:

  • Your company name and contact information
  • Customer “Bill To” address
  • Custom “Ship To” address
  • Invoice number
  • Invoice date
  • Ship date
  • Ship method
  • Tracking number (if available)
  • Detailed line items of what was delivered (qty, rate, amount)
  • Subtotal
  • Sales Tax
  • Shipping charges
  • Any deposits already received
  • Total Due
  • Payment terms
  • Any other important notes about the order
  • Invoice

All of these details are important to you and the customer to ensure there is no confusion about what was ordered, when payment is due, and where the product was sent.

Creating a visually esthetic invoice will dramatically improve the communication and expectations with the customer.

Invoices send a message about the professionalism and quality of your company.  Using company colors to brand and even promote your company for future sales is a benefit you can leverage with an effective invoice.

See sample invoice below – click to download FREE template


7 Ideas for better invoicing in a small business

1. Create a billing schedule

Small businesses may not have a dedicated accounts receivable person. This often makes invoicing less of a priority when there is so much work to be done. But without invoicing, there is no getting paid so don’t fall into this trap. Choose a particular day of the week for creating and sending invoices. Set a reminder to do it – BE CONSISTENT.

2. Do it promptly

Your business cash flow is critical to the success of the operation.  The earlier you send an invoice, the faster you get paid. Preferably, send invoices immediately upon delivering or performing the service, but no less than once per week.

3. Sync quotes and invoices

Good accounting requires consistency between quotes and invoices. If possible, get your quotes signed before delivering goods or services then use the same terms and descriptions in your invoices to build trust from your clients and simplify the invoicing process.

4. Save time with invoice templates

If you use apps or computer applications to create and send invoices, leverage the use of templates. Save templates with the right design, including your company logo, terms of payment, and contact information. Every time you wish to send a new invoice, all you'll have to do is edit the date, item lists, and total charges.

5. Maintain accuracy

It is easy to lose money when you send an invoice that doesn't accurately account for the extra time you spent on a job or the additional materials you acquired to complete it. Keep accurate track of time, materials, and cost of goods-double-check emails, timesheets, and receipts before sending the invoice. If you fail to bill for something the first time, it will be hard to justify a second invoice.

6. Accept online payments

You will get paid much faster on platforms like PayPal or online bank transfer. These payment methods can help speed things up, especially if your clients are slow on payment. When accounting for online payments, remember to treat the transaction fee as an expense.

7. Follow up

Your invoice is your money; follow-up is critical. Regardless of how professional the customers are, invoices rarely get paid on time. Remind your customers of the expected date of payment early on. Remind them about the discounts or penalties for early or late payment.

Without the invoicing process you have little chance of collecting payments so make it a priority.

Beyond asking for money, the invoicing process can be looked at as a way to build and nurture relationships with customers. Seamless, professional, and transparent invoicing and follow up can create loyal customers and increase chances for future business.