Accounts payable and receivable

A bill goes through three stages: it's recorded, it's paid, and the payment is matched to it. We do the recording and the matching. The paying, and the decision to pay, stay with you.

When a bill comes in, we enter it against the supplier with its date, amount, description and due date as the bill shows them. Before entering it, we check it isn't already in your books, because the same bill can arrive twice: once by email and again on paper, or as a reminder. If something about a bill looks unusual, such as a supplier that hasn't appeared in your books before, we ask you about it before it goes on the list.

The list of bills coming due shows each supplier, the amount and the due date, with the earliest first. You decide what to pay and when. You might pay a bill early, hold one back while you query it with the supplier, or pay part now and the rest later. Those choices are yours, made in your own internet banking, and so are any terms you negotiate with a supplier.

Once a payment shows in your bank feed, we match it to the bill it settles. A part payment leaves the rest of that bill open. A credit note from a supplier is recorded against the bill it relates to, so the list shows what you still owe each supplier.

From the moment an invoice is raised to the day it's paid, it sits in accounts receivable in your software. Whether we raise your invoices or you do, the tracking that follows is the same. Each invoice needs the right customer, a due date that matches the terms you agreed with them, and a number the payment can be traced back to.

Most of the work after that is matching. When money lands in your account, we find the invoice or invoices it pays. That's simple when a customer pays one invoice in full and quotes its number. It takes more care when they don't:

• One payment covers several invoices. It's split across them, using the customer's remittance advice where they send one.
• A payment is less than the invoice. The amount received is recorded, and the rest stays open until you tell us what happened, such as a line the customer disputes.
• A payment arrives with no reference, or from a name that isn't the customer's. We ask you who it's from before matching it.
• A customer pays the same invoice twice. The extra shows as a credit on their account, for you to decide whether to refund it or put it towards their next invoice.

Some differences won't be collected, such as a small amount a customer won't pay or a fee taken out on the way. How those are recorded depends on your business, so that's a question for your accountant. Until you've decided, the open amount stays visible on the customer's account rather than disappearing.

Four kinds of document travel alongside bills and invoices. Each one tells us something a bank feed can't.

Payment terms do the most work. business.gov.au describes them as the rules your business sets for how and when customers pay, and suggests putting them on invoices and contracts: the payment methods you accept, when you expect payment, whether you offer credit and on what conditions, and how you collect overdue amounts. When we raise invoices for you, each due date comes from the terms you've given us for that customer.

Statements and credit notes for your customers go out from you, because they're contact with your customers about money. Our part is keeping the balances behind them right, so what a customer sees matches your books.

The aged list groups each customer's unpaid invoices by how far past their due date they are. Amounts not yet due sit in the first column, then each band of overdue days runs to the right, so the money that has waited longest is easy to find.

Read it from the right. Customer C's whole balance is more than 30 days overdue, and part of it is more than 60, so that's where a follow-up would start. Customer D owes a small amount, up to 30 days overdue, which may be an oversight. Customer B has an amount not yet due and an invoice that has slipped past its due date. Customer A owes the most, but none of it is due yet.

Two things can make the list look worse than it is: a payment that has arrived but hasn't been matched, and a credit note that hasn't been recorded. That's why the month's matching is finished before you get the list. Our guide on how to read an aged receivables report goes further into the patterns to look for.

Contact with customers about what they owe comes from you. What you get from us is the overdue list, kept current in your own software: each late invoice with its number, date, amount, due date and anything already paid against it. That's the record a reminder, or anything firmer, relies on.

business.gov.au sets out the usual order for recovering an unpaid amount: check what your contract or terms say about payment, then send a friendly reminder, because a missed payment can simply be an oversight. If there's no response, a letter of demand comes next, and after that you might seek help with dispute resolution, use a debt collection agency or take legal action. Each of those steps is yours to take, with legal help where you need it.

What comes back to us is the outcome, so the books keep up with it:

• A customer agrees to pay in parts: tell us, and each part is matched to the right invoice as it arrives.
• A customer disputes a line: tell us, so the amount isn't read as an ordinary late payment on the next list.
• You decide to stop chasing: business.gov.au notes that chasing takes time and money, and that stopping is sometimes the right call. How that amount is then recorded is for your accountant to say.

Our guide on how to chase unpaid invoices covers the reminders themselves, if you'd like a starting point for the wording.