The accounts receivable invoice flow is the entire process that begins when a company issues an invoice to a client and ends when payment is received and the transaction is properly recorded. It includes, among other things: issuing the document, sending it, contacting the recipient, monitoring payments, reminders, and escalation in case of delays.
For the company, this means that every stage—from sending the invoice to receiving the funds—must be managed efficiently. A poorly designed process can lead to payment delays, disrupted liquidity, increased costs (e.g., monitoring, interest, collection costs) and lower efficiency of the finance team.
For SMB and Mid-Market firms—where resources may be limited and risk higher than in large corporations—effective management of the invoice flow can be a competitive advantage: it helps convert invoices to cash faster, improves the predictability of cash flows, and optimizes finance operations.
Why is controlling the accounts receivable process crucial for companies?
In mid-market companies and larger SMBs, a specific challenge appears: on the one hand, the organizational structure is not as extensive as in corporations; on the other hand, the scale of operations grows, generating more invoices, clients, and contracts. Here are several reasons why process control is especially important for this segment:
- Financial liquidity – delays in customer payments can significantly affect the company’s ability to pay its own obligations on time, invest, or grow.
- Operating costs – if invoices are handled manually, each additional client or rise in document volume increases workload, which can lead to errors and higher costs.
- Risk of errors and abuse – a larger invoice volume increases the probability of mistakes in data, dispatch, or recording, which can result in disputes with clients, complaints, or accounting issues.
- Company image and client relationships – an efficient invoicing and reminder process signals professionalism in the finance department, which builds client trust.
- Process scalability – as the company grows, processes that were sufficient at a smaller scale can become bottlenecks. That’s why it’s worth establishing easily scalable processes already at the mid-sized stage.
Mapping the stages of the process – from issuing the invoice to payment
To effectively manage the accounts receivable invoice flow, you need to outline each stage and assign responsibilities. Below are the most common steps:
- Invoice generation – issuing the document in line with the contract, sales terms, and client requirements.
- Sending the invoice to the client – via email, B2B platform, client portal, or system integration.
- Receipt confirmation and payment term – ensuring the client received the invoice and knows the due date.
- Monitoring the due date – after issuing, the finance team tracks whether the client meets the payment terms.
- Payment reminder – if payment is not made on time, finance sends a reminder (phone/email).
- Escalation in case of delays – if the client still doesn’t pay, trigger escalation or collections procedures.
- Receiving payment and posting – once funds are received, the invoice is closed in the accounting/finance system.
- Delay analysis and reporting – at period-end, analyze indicators (e.g., average payment time, number of delays).
Each of these steps should have clearly defined ownership (who reacts quickly), tools (how documents are sent, what reminders are used), and metrics (how we measure time to payment, % of overdue invoices).
What are the most common challenges in the accounts receivable flow?
In practice, companies encounter a range of difficulties—here are the most frequent:
- Manual processes and human error – manual issuing/sending and manual payment monitoring cause delays and mistakes.
- Lack of a consistent payment policy – unclear terms and absence of standard conditions result in longer wait times for payment.
- Poor communication with the client – the client may not receive the invoice or may have doubts about the document or terms.
- No monitoring or escalation – often there’s no reminder or escalation system for overdue payments.
- Lack of system integration – invoices may be issued in one system and posted in another, making control and reporting difficult.
- Rising invoice volumes without added resources – as the company grows, invoice count rises while the finance team stays the same, leading to overload.
- Weak KPIs and lack of analysis – if key indicators (e.g., DSO – Days Sales Outstanding) aren’t measured, you can’t see where the problems are.
At Incro, we understand how critical this process is for liquidity. We’ll help you implement best practices and tools that eliminate many of the issues above. Book a free consultation.
The role of the finance function and key tasks
It’s important that the finance function focuses not only on “operational handling,” but also on proactive strategy. How will we help? We’ll tailor the right strategy to your company so results are visible immediately. In the accounts receivable invoice flow, this means:
- Setting invoice handling standards – policy, terms, responsibilities.
- Designing the end-to-end process – with defined workflow, roles, and tools.
- Implementing supporting technologies (e.g., automation, integrations).
- Monitoring and reporting key KPIs (e.g., DSO, % overdue invoices, cost to process an invoice).
- Identifying problems and blockers (e.g., delinquent clients, invoice errors, lack of integration).
- Strategic advisory – how improving invoicing can impact liquidity and company growth.
How to build an effective invoice workflow? Principles and best practices
To keep the accounts receivable process efficient, apply the following rules and best practices:
- Standardize invoicing – use one invoice format, define a standard due date, assign product/service codes, set terms.
- Automatic document sending – invoice dispatched automatically upon issuance, ideally with receipt confirmation.
- Set reminders – e.g., 3 days before due date, on due date, and after due date.
- Assign responsibility – one person monitors delinquencies, another handles escalation.
- Monthly reporting and review – e.g., “how many invoices were overdue,” “what was the average payment time.”
- Escalate at a defined moment – if an invoice is 7 days overdue, trigger more intensive communication.
- Integrate with finance/accounting systems – so invoices are posted quickly and correctly.
- Continuous improvement – analyze data and improve the workflow where bottlenecks occur.
With this approach, the finance team can significantly improve process efficiency and reduce operating costs.
Choosing tools that support the accounts receivable flow
As a company grows—or as invoice volumes rise in the SMB/Mid-Market segment—tooling becomes essential. When selecting a solution, consider:
- Invoicing and dispatch functionality – ability to generate and automatically send invoices.
- Automated reminders and notifications – email, SMS, phone, integrations.
- Dashboard for payments and delinquencies – to see the status of “open” invoices.
- Integration with ERP/accounting – so data flows automatically.
- Scalability and flexibility – the solution must handle a growing invoice volume.
- Security and compliance – client data protection, compliance (e.g., VAT, GDPR).
- Escalation and collections handling – either built-in or integrable with external modules.
Such tools move the process from manual, time-consuming work to an operational, near-automatic management system.
Automating the invoice flow – benefits and things to consider
Automating the accounts receivable process can greatly increase efficiency. Here are the main benefits and aspects to consider:
Benefits:
- Shorter time from invoice issuance to payment.
- Lower risk of human error (e.g., incorrect data entry, missed dispatch).
- Better monitoring and visibility – dashboards showing overdue invoices and liquidity.
- Lower operating costs – less manual work, less paper, fewer calls.
- Faster scalability – the process handles more invoices with the same headcount.
Considerations:
- Implementation and configuration cost – can the tool be adapted to your company’s specifics?
- Procedural change and team training – automation requires a new way of working.
- Integration with existing systems – ERP, CRM, accounting.
- Data security and legal compliance – especially for automated notifications.
- Tool maintenance – updates, monitoring, technical support.
Process diagnostics before automation is crucial – analyze the current workflow, identify bottlenecks, and decide what to automate.
What might automation look like? – Sunbay tool example
Automating the accounts receivable flow doesn’t have to be complex or expensive—especially with solutions like the Sunbay receivables management platform. It’s used by SMB and Mid-Market companies that want to shorten payment times, reduce delinquencies, and lighten the finance team’s workload.
Sunbay is an example of a system that supports modern, efficient automation of the AR invoice flow.
- Quick analysis and preparation (1–2 hours)
Identify the current state: how many invoices you send, payment terms, number of delinquencies, and your finance team’s capacity. In this step you define the scope of automation—e.g., reminders, escalation, KPIs. - Integration with the accounting system
The sunbay.io platform is connected to the accounting system (e.g., Infakt, Fakturownia, or Subiekt). - Configuring the accounts receivable workflow
Rules are set: when the first reminder goes out (e.g., 3 days before due date), the next ones (e.g., 2 days after), and escalation (e.g., after 7 days). The tool supports email/SMS templates and personalization (client name, amount, due date). - Automatic dispatches and monitoring
Once an invoice is issued in the ERP, the information flows to Sunbay → the invoice is sent automatically to the client → reminders go via email/SMS per rules → if there’s no payment, escalation or a phone call follows (which can be handled by an AI agent). - Real-time dashboard and reporting
The finance team has access to a panel showing, among other things, which invoices are overdue and which clients often delay payments. - Continuous improvement and escalation
Based on dashboard data, the company can adjust rules—for clients who habitually pay late, apply shorter reminder cycles or change terms to earlier payment. You learn and refine the process continuously. 🙂
What results do case studies show?
- Shorter payment times: if there was no collection process at all, the average payment time can drop by nearly 30 days – Marketing agency example.
- Time savings: one company’s finance team saved the equivalent of one FTE instead of manually tracking 200+ overdue invoices – Startup example.
- Organized data.
Why does this matter for SMB/Mid-Market companies?
- Smaller finance teams no longer need to stretch themselves to track delinquencies.
- With shorter time to payment—less liquidity stress, better ability to invest or pay your own obligations.
- Ability to scale the process without a proportional increase in headcount.
- Better visibility and control—translating into lower risk from poorly paying clients.
- Nobody enjoys chasing unpaid invoices. 🙂
Integration with ERP, CRM, and finance/accounting systems
A key aspect of managing the accounts receivable flow is ensuring the process is consistent and integrated with the company’s existing IT systems. Focus on:
- Automatic data transfer – invoice data (amounts, client, due date) should flow smoothly from ERP to the invoice/AR tool and then to accounting.
- Client data consistency – client information (e.g., payment terms, contact details) must be aligned across systems to avoid errors.
- Accounting alignment – issued, sent, and posted invoices should be visible in accounting, and any payment delays reflected in analysis.
- System communication – CRM informs finance about the contract and payment terms; ERP generates the invoice; the invoicing/automation system handles dispatch; the tool monitors payments.
- Consistent reporting and analytics – all data should feed a central dashboard or BI to enable reporting, analysis, and decision-making.
This integration prevents situations where an invoice is issued but no one knows it was sent, or where payment is received but not correctly posted—hindering liquidity management and masking risk.
Monitoring, reporting, and process KPIs
Every process must be measured to stay effective. For the AR invoice flow, key KPIs include:
- DSO (Days Sales Outstanding) – average number of days from invoice issuance to payment received.
- % of overdue invoices – share of invoices paid after the due date.
- % value of overdue invoices – value of overdue invoices relative to total invoice value.
- Cost to process an invoice – the cost of issuing, sending, and monitoring one invoice (labour, tools).
- Time to react to delays – time from due date to triggering a reminder or escalation.
- Liquidity metrics – not strictly invoicing KPIs, but related to the process’s impact on cash flows.
Reporting these indicators gives finance and management a realistic view of operations—where the bottlenecks are and where fixes are needed.
Risk management and compliance in the AR process
The accounts receivable invoice flow also involves control, legal, and risk issues:
- Tax compliance – invoices must meet formal requirements (e.g., VAT, client data), and handling must comply with regulations.
- Client data security – if invoicing or reminders are automated, protect data in line with GDPR.
- Managing delays and collections – payment delays are client credit risk; monitor clients—their payments and financial condition.
- Access control – only authorized personnel should access invoices, client data, and reminders.
- Audit and documentation – the process should be documented and auditable—useful for regulators, auditors, or during M&A.
For mid-sized companies, this means the AR process cannot be “ad hoc”—it must be defined, controlled, and compliant.
Scaling the process as the company grows
As an SMB/Mid-Market company grows, the number of invoices, clients, and contracts can increase significantly. To keep the process efficient, you need to scale it:
- Automation – the more invoices you have, the more manual processes become bottlenecks.
- Flexible tools – choose systems that can handle higher volumes of invoices and clients.
- Modular workflow – design the process so you can add steps, reminders, and escalations as volumes rise.
- Training and culture change – the finance team must be ready to handle higher volumes and faster cycles.
- Real-time data analysis – in larger companies you need to react faster—real-time dashboards matter more than monthly reports.
A well-designed process from the outset helps avoid chaos and overload when growth accelerates.
The role of culture and employee education in an effective process
A process is not only systems and tools—it’s also people and organizational culture. For the AR flow, important aspects include:
- Team awareness – finance and sales must understand why the process matters (impact on liquidity and growth).
- Cross-functional collaboration – sales, finance, and accounting need a shared understanding of payment terms, invoicing, and monitoring.
- Tool education – if new automation tools are used, the team must be trained to use them effectively.
- Culture of timeliness – promote and reward on-time client payments; react quickly to delays.
- Continuous improvement – the team should regularly analyze the process, propose improvements, and help implement changes.
Without the right culture, even the best systems may not deliver the expected results.
Why use Incro’s services
What you gain:
- Strategy instead of “just accounting” – at Incro we design the end-to-end AR workflow (from issuance to collection), aligning process, people, and technology to shorten DSO and improve cash flow.
- Experienced CFO-on-demand team – access to CFO, controller, and analyst expertise without full-time cost; real support in credit policy, client segmentation, and escalation rules.
- Technology tailored to you – tool-agnostic approach: we recommend and implement solutions (e.g., automated reminders, ERP/CRM integrations, Sunbay for payment monitoring) with an emphasis on fast time-to-value.
- Enforceable KPIs – clear dashboards (DSO, % overdue, time to react, recovery), regular management reviews, and monthly/quarterly improvement plans.
- Compliance and control – GDPR standards, audit trails, permission matrices; processes aligned with company finance and tax policy.
- Change that “sticks” – team training, collections playbooks, client communication templates, and escalation procedures so results don’t “evaporate” after go-live.
Typical outcomes of working with Incro:
- shorter cash conversion cycle (CCC) and reduced DSO;
- less manual work in AR thanks to automation and better segmentation;
- greater predictability of inflows and better investment/purchasing decisions;
- a scalable process ready for higher invoice volumes without proportional headcount growth.
When does it make the most sense?
When the number of clients and invoices is rising, past-due items appear, and the finance team—busy firefighting—has no time to analyze root causes. That’s when Incro’s CFO as a Service puts rules in order, implements automation, and delivers measurable results—quickly and without excessive operational burden on your side. If this resonates, book a free consultation.
Summary – key guidelines for companies
Managing the accounts receivable invoice flow is a strategic process that can impact financial liquidity, operational efficiency, and competitive advantage. For SMB/Mid-Market firms, focus on:
- Process standardization and clear accountability.
- Implementing supporting tools—and considering automation (e.g., with Sunbay).
- Integrating processes with ERP/accounting systems and monitoring KPIs (like DSO, % overdue).
- Ensuring regulatory compliance and risk control.
- Scaling the process as the company grows and building a culture that supports on-time payments.
If you’d like help—at Incro we know not only how to “handle” invoices, but how to turn them into a strategic element of financial management. Contact us here.
FAQ – Frequently Asked Questions
Q1: How can we briefly define “accounts receivable invoice flow”?
A: It’s the process—from issuing an invoice to the client, through dispatch and payment monitoring, to receiving the funds and posting the transaction.
Q2: Why measure DSO (Days Sales Outstanding)?
A: DSO shows how many days on average a company waits for invoice payment. The shorter the DSO, the faster sales convert to cash—which improves liquidity.
Q3: Should every SMB automate the invoice flow?
A: Not every company—but consider automation when invoice volumes grow, the process becomes time-consuming, or there are many delays. Automation provides scalability and efficiency.
Q4: What are the most important elements when choosing an invoicing tool?
A: Key factors: issuing and dispatch functionality, automated reminders, a payments-monitoring dashboard, ERP/accounting integration, data security, and scalability.
Q5: What benefits can automation bring to this process?
A: Tools (e.g., Sunbay) enable automated invoice and reminder sending, real-time payment monitoring, integration with the client’s existing system, and handling more invoices with less manual effort.
Q6: What if a client consistently pays late—how does that affect the invoice flow?
A: Introduce an escalation procedure—e.g., automated reminders, phone calls, prepayment for subsequent invoices. Finance should monitor clients, classify them by risk, and act proactively.
