Accounts Receivable SOP Template
A step-by-step standard operating procedure for small teams. Covers invoice creation through payment collection or write-off — so nothing falls through the cracks.
01Purpose & Scope
- Purpose
- Standardize the accounts receivable process to ensure consistent, timely invoice collection across the organization.
- Scope
- Covers the full AR lifecycle from invoice creation through payment collection or write-off.
- Applies to
- All team members involved in billing, invoicing, and collections.
02Roles & Responsibilities
Invoice Creator
Prepares and sends invoices. Typically the project manager or business owner.
AR Manager
Monitors outstanding invoices, sends payment reminders, and handles escalations. May be the same person as the Invoice Creator on small teams.
Decision Maker
Approves write-offs, payment plans, and account terminations. Usually the business owner.
03Invoice Creation Standards
Every invoice must include:
- Sequential invoice number
- Invoice date
- Due date
- Line item descriptions with amounts
- Payment terms
- Payment instructions (bank details / payment link)
- Late fee policy reference
Invoice Numbering Format
[PREFIX]-[YEAR]-[SEQUENTIAL]
Example: PH-2026-001
- Invoices must be reviewed for accuracy before sending.
- All invoices must be stored in your invoicing software or shared drive.
04Sending Process
- Send invoices within 1 business day of the project milestone or month-end.
- Send via email as a PDF attachment.
- Email the designated AP contact (not a general inbox).
- CC the project contact if they are different from the AP contact.
- Subject line format:
Invoice [#] from [Business Name] — Due [Date] - Request a read / delivery receipt when possible.
05Payment Reminder Schedule
| Timing | Action | Tone | Detail |
|---|---|---|---|
| Day -3 | Pre-due reminder | Friendly | Your invoice is due in 3 days |
| Day 0 | Due date reminder | Neutral | Payment is due today |
| Day +7 | First overdue reminder | Friendly | Gentle follow-up on overdue balance |
| Day +14 | Second overdue reminder | Firm | Mention late fees per your policy |
| Day +21 | Phone call to client | Direct | Personal call to accounts payable contact |
| Day +30 | Final notice | Formal | Written notice outlining next steps |
| Day +45 | Escalation | Legal | Escalate to collections or legal counsel |
06Escalation Triggers
Define when to escalate beyond the standard reminder schedule:
| Trigger | Action |
|---|---|
| Client is unresponsive after 2+ contact attempts | Phone call to client |
| Invoice 30+ days overdue | Pause current work for that client |
| Invoice 45+ days overdue | Send formal demand letter |
| Invoice 60+ days overdue | Engage collections agency or file small claims |
| Client disputes invoice | Immediate investigation; hold reminders until resolved |
| Pattern of late payment (3+ late invoices) | Require deposits on all future work |
07Write-Off Criteria
When to stop chasing an invoice:
- Invoice is 90+ days overdue AND all collection efforts exhausted
- Cost of further collection exceeds the invoice amount
- Client is confirmed insolvent or bankrupt
- Write-off must be approved by the Decision Maker
- Reason for write-off must be documented in writing
Write-Off Threshold
Invoices under $100 may be written off at the AR Manager's discretion. Amounts above this threshold require Decision Maker approval.
08Monthly AR Review Process
Schedule
First Monday of each month.
Agenda
- Review aging report (all outstanding invoices by 0-30, 31-60, 61-90, 90+ day buckets)
- Identify at-risk accounts (trending toward late)
- Update client payment scorecards
- Review collection rate for the previous month
- Decide on escalations or write-offs
- Update payment terms for problematic clients
- Document action items with owners and deadlines
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