Are Your Customers Paying Late? 5 Steps to Improve Your Invoicing and Collections Process

Do you invoice your customers?  Are some of them taking too long to pay—or not paying at all?

If so, you're not alone.  Many businesses face this challenge, but the good news is that you can take steps to improve your process.  Here are five practical steps to help you manage accounts receivable more effectively and increase your chances of getting paid on time.

Understanding Invoicing and Collections

Before we dive into the strategies, let’s take a quick look at how invoicing (accounts receivable) and collections work.

In accounting, invoicing customers is also known as managing your accounts receivable.  This means you’re issuing documents—usually labeled “invoices”—that inform customers of what they owe for the goods or services you provided.  A typical invoice includes:

• Customer information (name, address, etc.)

• Invoice date and due date

• Description of products or services

• Line-item amounts and total due

• Optional fields like PO numbers, service dates, memos, or customer IDs (depending on your industry)

Once the invoice is sent, the next phase is collections.  Contrary to popular belief, collections don't mean showing up at a customer’s door demanding payment.  In the accounting world, collections refers to the structured process of reviewing, monitoring, and following up on unpaid invoices.  The process will depend on the industry and your business preferences, as dealing with money and with your customers can sometimes be sensitive and sometimes feel like it's personal.  Now that we’ve covered the basics, let’s explore five steps you can take to improve your collection process.

5 Steps to Strengthen Your Collections Process

1. Prepare an Accounts Receivable Aging Report

This report shows outstanding unpaid invoices sorted by how long they’ve been overdue (e.g., 30, 60, 90+ days).  It’s the foundation for identifying payment issues.

2. Review Customers with Overdue Balances

Examine which customers have unpaid invoices and how overdue they are.  This allows you to prioritize who needs immediate follow-up.

3. Monitor the Report Frequently

Make this part of your regular routine—ideally with your accounting team.  Review the report at least once per month to stay on top of issues early.

4. Follow Up with Customers

Reach out to customers who are past due by a certain number of days (e.g., 15 or 30 days).  Use polite, professional reminders via email or phone to keep communication open.  Document any issues the clients are experiencing.  If the customers are struggling to pay, work with your customers to see what options are available.

5. For Customers Who Refuse to Pay

For those who continue to delay or ignore payments, consider carefully (usually as a last resort):

• Writing off the balance as bad debt (if it’s uncollectible and immaterial)

• Sending the customer balance to a collections agency

• Pursuing legal action, if the benefits exceed the cost

Make It a Recurring Process, Not a One-Off

Steps 1 through 4 should be part of a recurring process, not just something you do when cash gets tight.  By establishing a regular routine and reviewing results with your team, you’ll improve cash flow, strengthen customer accountability, and reduce the risk of bad debt over time.

Final Thoughts

A well-managed invoicing and collections process isn’t just good accounting—it’s smart business.  Whether you're a business owner or part of an accounting team, by putting a consistent invoicing and collections process in place, you’ll give your business the best chance of maintaining healthy cash flow and strong customer relationships.  If you're unsure where to start, consider partnering with a financial expert to set up or refine your system.