The accounts receivable process: 6 steps from invoice to cash

Accounts receivable (AR) is the money customers owe you for goods or services already delivered. The AR process is how that money moves from a sale to your bank account.

1. Set credit terms

Decide who gets credit, how much and on what terms, such as net 30. Record the terms in the contract before work begins.

2. Issue accurate invoices

Send the invoice promptly with the correct legal entity, PO number, amount, due date and payment methods. Most payment delays start with an invoice that cannot be approved.

3. Track outstanding balances

Monitor open invoices by customer and by age. An aged receivables report is the core tool.

4. Collect

Send reminders before and after the due date, call accounts payable, and escalate overdue balances in visible steps.

5. Apply cash

Match incoming payments to the right invoices. Unapplied cash makes customers look overdue when they are not, which leads to embarrassing chasers.

6. Report and improve

Watch days sales outstanding (DSO), the aged balance and the amount collected per period. Use them to adjust terms, customer credit limits and follow-up timing.

Where automation helps

Importing data, calculating ageing, prioritising balances and drafting outreach are repetitive and safe to automate. Sending messages and approving write-offs should stay with a person. That is how AI Money Recovery is designed.

Frequently asked questions

What are the steps in the accounts receivable process?

Setting credit terms, invoicing, tracking outstanding balances, collecting, applying cash and reporting.

What is AR in accounting?

Accounts receivable: money owed to a business by customers for goods or services already delivered. It is recorded as a current asset.

Who handles accounts receivable?

In small businesses, often the owner or bookkeeper; in larger ones, an AR or credit control team within finance.