Module 2: Invoicing and A/R

Where we are in the workflow: Invoice it → Track it → Collect it → Categorize it → Reconcile it → Report it. In this module you own the first three steps.

Module goal: You will be able to create and send professional invoices, record and apply customer payments correctly, handle partial payments, credits, and refunds, and use the A/R Aging report to run a collections routine that gets your client paid.

Running case continues: Bright Path Cleaning Co. is now set up (Module 1). Dana Reyes is ready to start invoicing properly, and she has a few unpaid customers she is nervous about chasing.

Key Terms for This Module

• Accounts Receivable (A/R): money customers owe the business for work already delivered.
• Invoice: a request for payment for goods or services delivered, with a due date.
• Sales Receipt: a record of a sale that was paid at the time of the sale, with no A/R involved.
• Estimate / Quote: a non-posting document that can be converted into an invoice. It does not affect the books.
• Undeposited Funds: a temporary holding account for payments received but not yet deposited in the bank.
• Credit Memo: a document that reduces what a customer owes.
• Aging: how long invoices have been unpaid, grouped into time buckets.

Lesson 2.1: Creating Invoices

Learning Objectives

• Explain what happens in the books when an invoice is created.
• Choose between an invoice, a sales receipt, and an estimate.
• Set up sales settings and invoice styling before the first invoice.
• Create a complete, accurate invoice and a recurring invoice.

Content and Theory

An invoice does two things at once. For the customer, it is a payment request. For the books, it records that income has been earned and that the customer owes money.

What QBO records behind the scenes for a $1,400 invoice:

• Debit Accounts Receivable $1,400 (the customer owes you)
• Credit Commercial Cleaning Income $1,400 (you earned it, mapped through the product or service item from Lesson 1.3)

Notice that no cash moved. Money only hits the bank when the payment is recorded and deposited. This is why an invoice does not change the bank balance.

Which document should you use?

• Invoice: the customer will pay later (Net 15, Net 30, and so on).
• Sales Receipt: the customer pays at the moment of sale (for example, a cash or card sale on the spot).
• Estimate: you are quoting a price. Nothing is owed yet, and it does not touch the books until converted into an invoice.

Anatomy of a good invoice:

• Customer and billing email
• Invoice date: this controls which period the income lands in on the P&L. Use the date the work was performed or billed, and not "whenever I got around to it."
• Terms and due date: the due date drives the A/R Aging report.
• Invoice number: must be unique and sequential.
• Line items: product or service, description, quantity, rate, and amount.
• Message to customer: payment instructions and a thank-you.

Step-by-Step Walkthrough

A. One-time setup before the first invoice

1. Go to the gear icon, then Account and settings, then Sales.
2. Set the default payment terms (for example, Net 15).
3. Set a default message on invoices with payment instructions.
4. Review the invoice numbering so it starts where the client's old numbering ended, with no gaps or repeats.
5. Go to the gear icon, then Custom form styles, and add the client's logo, colors, and any footer text. Keep it clean and simple.

B. Create an invoice

1. Click + New, then Invoice.
2. Select the customer. Terms and email should fill in automatically from the customer record.
3. Confirm the invoice date and due date.
4. Add line items by choosing the Product or service. The description and rate fill in, and you can adjust them.
5. Enter the quantity. Check that the total matches what the client agreed.
6. Add a message or notes if needed.
7. Choose Save and send (Lesson 2.2) or Save and close to hold it for review.

C. Set up a recurring invoice (ideal for weekly or monthly clients)

1. Build the invoice as usual, then choose Make recurring.
2. Give the template a name and choose a type: Scheduled (creates and can send automatically), Reminder (prompts you to create it), or Unscheduled (saved for manual use).
3. Set the interval (for example, monthly on the 1st).
4. For new setups, start with Reminder until you trust the amounts.

Real-World Example

Harper Office Park gets four weekly office cleanings at $350 each in September. Dana wants to bill them on September 1 on Net 15 terms.

Solution breakdown:

• Customer: Harper Office Park
• Invoice date: September 1, Terms: Net 15, so the due date is September 16.
• Line item: Office Cleaning, quantity 4, rate $350, amount $1,400.
• Result in the books: A/R goes up by $1,400 and Commercial Cleaning Income goes up by $1,400. The bank balance does not change.
• Because this is a repeating service, save it as a recurring template set to "Reminder."

Best Practices and Common Pitfalls

• ✅ Always review the preview before sending. Once the customer has it, corrections look unprofessional.
• ✅ Use consistent, plain-language descriptions ("Office cleaning, 4 weekly visits, Sept 2026").
• ✅ Keep invoice numbers sequential. Gaps raise questions and duplicates cause confusion.
• ⚠️ Don't record a paid-on-the-spot sale as an invoice. Use a Sales Receipt so it isn't sitting in A/R.
• ⚠️ Don't use a wrong or "convenient" invoice date. It moves income into the wrong month.
• ⚠️ Avoid creating new customers or items from inside the invoice screen. This is how duplicates return.
• ⚠️ Never edit a sent invoice's amounts casually. Voiding or issuing a credit memo may be cleaner, depending on the situation. Ask the client or follow their policy.

Tool Translation: In Xero, go to Business, then Invoices, then New invoice. Xero has "repeating invoices" and shows a similar due-date logic.

Sheets companion: An Invoice Log with columns for invoice number, customer, invoice date, due date, amount, and status, useful as a cross-check on the books.

Lesson 2.2: Sending Invoices

Learning Objectives

• Send invoices through QBO and confirm delivery.
• Write a clear invoice email.
• Use batch actions and understand delivery settings and invoice statuses.

Content and Theory

An invoice that is created but never delivered will not get paid. Sending is part of the job, and it is where a VA adds real value by making sure billing goes out on time and consistently.

Delivery options:

• Email from QBO: the most common. The invoice arrives as a link or PDF, and if the client uses QuickBooks Payments, it may include a "Pay now" option (availability depends on the client's setup and country).
• Print or download PDF: for mailing or attaching to your own email.
• Send later or scheduled: useful for recurring invoices.

Invoice status labels you will see: Due in X days, Overdue X days, Partially paid, and Paid. Many versions also show whether the customer viewed the invoice, which is a helpful signal in collections.

A good invoice email is short and specific: who it is from, what it is for, the amount, the due date, and how to pay.

Step-by-Step Walkthrough

1. From the invoice screen, click Save and send (or Review and send).
2. Check the To address. This is the top cause of undelivered invoices.
3. Add a CC to the client owner if they want visibility.
4. Edit the subject and message using the template below.
5. Confirm the attachment or link preview looks right, then click Send.
6. Return to Sales, then Invoices and confirm the status changed to "Sent" or "Due in X days."
7. For several invoices at once, select them in the Invoices list and use Batch actions to send.

Email template:

Subject: Invoice 1001 from Bright Path Cleaning Co. – due September 16

Hi [First name], thank you for choosing Bright Path Cleaning Co. Attached is invoice 1001 for $1,400.00 covering four weekly office cleanings in September. Payment is due September 16. You can pay by [method]. If you have any questions, just reply to this email. Thank you!

Real-World Example

Dana asks you to send eight invoices on Friday. Two customers say they never received theirs.

Solution breakdown: First check the email address on each of the two customer records for typos. Look at whether the invoice shows as sent or viewed. Ask the customer to check spam. Resend to the corrected address and update the customer record so future invoices go to the right place. Add a note in your Invoice Log so the fix is documented.

Best Practices and Common Pitfalls

• ✅ Send invoices promptly. Every extra day before sending is usually a day later payment arrives.
• ✅ Send a test to yourself the first time you use a new template or style.
• ✅ Set a fixed billing rhythm with the client (for example, invoices go out every Monday) and keep to it.
• ⚠️ Don't assume "saved" means "sent." Check the status.
• ⚠️ Watch for customers with multiple contacts. Make sure accounts payable receives it, not only the person who hired the service.
• ⚠️ Confirm the client's preferences on automatic reminders before turning them on, since their availability depends on the plan and setup.

Tool Translation: Xero sends from the invoice screen too, and shows whether an invoice has been viewed.

Sheets companion: Add "Date sent" and "Sent to" columns to your Invoice Log.

Lesson 2.3: Recording Payments

Learning Objectives

• Record a customer payment against an invoice.
• Explain Undeposited Funds and when to use it.
• Group payments into a bank deposit that matches the bank feed.
• Avoid the most common double-counting error in bookkeeping.

Content and Theory

Recording a payment tells the books that the customer has paid what they owe. In accounting terms, A/R goes down and cash goes up:

• Debit Bank (or Undeposited Funds)
• Credit Accounts Receivable

Notice that income is not touched here. Income was recorded when the invoice was created. This is the single most important idea in the module.

What is Undeposited Funds? It is a temporary holding account (an asset) that holds payments you have received but not yet deposited. Think of it as the "cash drawer" or the envelope of checks waiting to go to the bank.

Why use it? Because bank deposits often bundle several payments together. If a customer pays $1,350 and another pays $100, the bank statement shows one deposit of $1,450. Undeposited Funds lets you record each payment separately, then group them into one bank deposit that matches the statement exactly.

Two ways to record a payment:

• Deposit to Undeposited Funds, then make a Bank Deposit later. This is best when payments are bundled, or for checks, cash, and processor payouts.
• Deposit directly to the bank account. This is fine for a single payment that arrives on its own (for example, a direct bank transfer). Just be consistent, and make sure each payment is matched in the bank feed.

The classic double-counting error: The invoice is marked paid and the same bank feed deposit is categorized as "Income" instead of matched. Now the income appears twice: once from the invoice, and again from the categorized deposit. The fix is to match the feed deposit to the recorded payment or bank deposit, never categorize it as new income.

Step-by-Step Walkthrough

A. Record a payment

1. Click + New, then Receive payment.
2. Select the customer. Their open invoices appear below.
3. Enter the payment date (the date the customer paid, not today's date).
4. Choose the payment method and enter the reference number (for example, the check number).
5. Set Deposit to: Undeposited Funds or the bank account.
6. Enter the amount received and tick the invoice(s) it applies to.
7. Save.

B. Group payments into a bank deposit

1. Click + New, then Bank deposit.
2. Select the account the deposit went into.
3. Tick the payments from Undeposited Funds that were part of that one bank deposit.
4. Check that the total equals the amount on the bank statement or feed.
5. Save, then go to Banking and Match the feed line to this deposit.

Real-World Example

On September 23, Dana deposits two checks at the bank: Harper Office Park for $1,350 and Ramon Lopez for $100. The bank feed shows one line: Deposit $1,450.

Solution breakdown:

1. Record each check with Receive payment, deposited to Undeposited Funds.
2. Create one Bank deposit selecting both payments. The total is $1,450.
3. In Banking, Match the $1,450 feed line to that deposit.
4. Undeposited Funds returns to zero for these items. Income was not touched, which is correct.

Best Practices and Common Pitfalls

• ✅ Use the actual payment date. It affects the aging report and reconciliation.
• ✅ Record reference numbers (check numbers, transaction IDs) so payments can be traced.
• ✅ Undeposited Funds should be near zero at month-end. A growing balance means payments were recorded but never grouped into deposits.
• ⚠️ Never categorize a customer payment as income in the bank feed if an invoice exists. Match it.
• ⚠️ Don't record a payment without an invoice attached unless you know why. It leaves an unapplied payment (Lesson 2.4).
• ⚠️ Payment processors (Stripe, PayPal, Square) usually deposit the amount after fees. See the fee tip in Lesson 2.5.

Tool Translation: In Xero, you receive payment against an invoice by choosing the bank account it landed in, and reconcile the bank line to that payment. Xero has no Undeposited Funds by default. Batch deposits use a "batch payment" approach.

Sheets companion: A Deposit Tracker listing each payment, the bank deposit date, and the total, so you can tie it to the statement.

Lesson 2.4: Applying Payments

Learning Objectives

• Apply one payment across one or more invoices.
• Handle payments that arrive without instructions.
• Recognize and resolve unapplied payments and overpayments.

Content and Theory

Applying a payment means linking it to the specific invoice(s) it pays, so each invoice shows the right balance. A payment that isn't linked to an invoice is an unapplied payment. It sits in A/R as a credit, and the invoice it should have paid still looks unpaid. That causes wrong aging reports, wrong collections emails, and embarrassing calls to customers who already paid.

Common situations:

• One payment, one invoice: the simple case.
• One payment, several invoices: the customer pays multiple invoices in one transfer.
• Payment with no remittance details: you don't know what it is for.
• Overpayment: the customer pays more than they owe.

Rule when instructions are missing: Ask for the remittance details first. If the client or customer can't say, apply to the oldest invoice first, document the decision in the payment memo, and tell the client.

Overpayments: In the Receive Payment screen, any amount received above what you apply becomes a credit on the customer's account. You then have three choices, and the client decides: apply it to the next invoice, refund it, or leave it as a documented prepayment.

Step-by-Step Walkthrough

1. Open + New, then Receive payment and choose the customer.
2. Enter the total amount received.
3. In the outstanding transactions list, tick the invoices being paid and edit the amount applied to each if needed.
4. Check the summary at the bottom: Amount to apply versus Amount to credit. If "Amount to credit" is more than zero, you have created an unapplied credit. Decide whether that is intentional.
5. Add a memo describing how you applied it and why.
6. Save, and open the customer's page to confirm each invoice shows the correct status.

Real-World Example

A customer, Northside Dental, mails a $2,000 check with no remittance slip. Their open invoices are $750 (oldest), $650, and $800, totaling $2,200.

Solution breakdown:

1. Ask the customer or Dana whether the payment was meant for specific invoices.
2. If there is no answer by your processing deadline, apply oldest-first: $750 to the oldest, $650 to the next, and $600 to the third, leaving $200 open on that last invoice.
3. Write in the memo: "Applied oldest-first, no remittance provided."
4. Tell Dana what you did so she can confirm with the customer.

Related mini-case: If a customer with a $4,800 invoice sends $5,000, apply $4,800 to the invoice and let the extra $200 remain as a credit. Then ask the client how to handle it: apply it to the next invoice, or refund it (see Lesson 2.6). Module 7 revisits this as a full client scenario.

Best Practices and Common Pitfalls

• ✅ Always finish by checking the invoice status on the customer's page.
• ✅ Document any assumption in the memo field.
• ✅ Review the customer list for unapplied payments and credits at least monthly.
• ⚠️ Never leave a payment unapplied "for now." It distorts A/R.
• ⚠️ Don't apply a payment to the wrong customer's invoice to "make the numbers work."
• ⚠️ Don't decide alone what to do with an overpayment. Refunding or holding a customer's money is the client's decision.

Tool Translation: In Xero, an unallocated payment shows as a prepayment or overpayment that you allocate later.

Sheets companion: An "Unapplied Items" tab in your Collections Tracker with customer, amount, date, reason, and resolution.

Lesson 2.5: Partial Payments

Learning Objectives

• Record a partial payment and read the remaining balance.
• Identify why a customer might short-pay.
• Record fees that reduce a deposit.

Content and Theory

A partial payment pays part of an invoice. In QBO, the invoice stays open with a Partially paid status and a smaller balance due. The payment reduces A/R by the amount received only.

Why do customers short-pay?

• They are paying in installments (agreed in advance).
• They are disputing part of the invoice.
• They subtracted a bank or wire fee, or a discount they think they earned.
• They simply made a mistake.

Your job is to record what actually arrived, then investigate the difference. Never adjust the invoice to make it look paid.

Fees that reduce a deposit: When a payment processor or bank takes a fee out of a payment, the deposit is smaller than the invoice, but the customer did pay in full. Record the full payment against the invoice. Then, when you build the Bank Deposit, add an extra line for the fee (as a negative amount to a Bank fees or Merchant fees expense account) so the net deposit matches the bank exactly.

Step-by-Step Walkthrough

Genuine partial payment

1. Use Receive payment and enter only the amount actually received.
2. Apply it to the invoice. The invoice remains open for the balance.
3. Add a memo ("Partial payment, balance due [date]").
4. Note it in your Collections Tracker so it is followed up.

Payment reduced by a fee

1. Record the full invoice amount as received, deposited to Undeposited Funds.
2. Create a Bank deposit and select the payment.
3. Add a new line: the fee account, with the fee as a negative amount.
4. Confirm the deposit total now equals the actual bank deposit, then match it in the feed.

Real-World Example

Ramon Lopez was invoiced $220 for a Deep Cleaning, due September 20. On September 22 he mails a $100 check with a note: "Will pay the rest soon."

Solution breakdown:

1. Record a $100 payment against the invoice. The balance shows $120 and the status becomes Partially paid.
2. The remaining $120 now appears on the A/R Aging in the 1 to 30 days past due bucket (September 20 due date).
3. Add him to the Collections Tracker with a note about his promise and a follow-up date.

Fee mini-case: A customer pays a $600 invoice by card, and the processor deposits $588.30 after fees. Record $600 against the invoice, then in the bank deposit add a line of negative $11.70 to Merchant Fees. The deposit now equals $588.30 and the invoice shows fully paid.

Best Practices and Common Pitfalls

• ✅ Record exactly what arrived, on the date it arrived.
• ✅ Get installment agreements in writing and log the due dates.
• ⚠️ Don't "write down" an invoice just because the customer short-paid. That is a decision for the client.
• ⚠️ Don't record a net processor payout as the full payment. The fees vanish from the P&L and the invoice stays open.
• ⚠️ Tiny leftover balances (a few cents or a few dollars) still show on aging. Ask the client how they want them handled.

Tool Translation: In Xero, you can allow a partial payment on an invoice and the balance remains due. Fees are typically added as a separate line when reconciling.

Sheets companion: A "Payment Plans" tab with promised dates and amounts, checked at each session.

Lesson 2.6: Credits and Refunds

Learning Objectives

• Distinguish a credit memo from a refund receipt.
• Create and apply a credit memo.
• Record a refund of money already paid.
• Understand how write-offs work and why they need client approval.

Content and Theory

Sometimes a customer should owe less than what was invoiced, or should get money back. QBO uses two different tools for two different situations:

• Credit memo: reduces what the customer owes. No cash moves. It debits income (or a returns or discount account) and credits A/R.
• Refund receipt: money goes back out to a customer for something they already paid. It debits income and credits the bank.

Choosing the right one:

• Customer has not paid yet and you are reducing the bill: credit memo, applied to the invoice.
• Customer already paid and is getting money back: refund receipt.
• Customer has an unapplied credit and wants cash: the credit is settled by paying it out. The accounting result is a debit to A/R and a credit to the bank. Follow the refund option your version of QBO provides.

Write-offs (bad debt): When an invoice will never be collected, the client may choose to write it off. This is done with a credit memo to a Bad debt expense account. Because the treatment differs between cash-basis and accrual-basis clients, always confirm with the client and their tax preparer before writing anything off, and never do it just to "clean up" aging.

Step-by-Step Walkthrough

Create and apply a credit memo

1. Click + New, then Credit memo.
2. Select the customer and the date.
3. Add the item being credited (or a "Discount" or "Returns" item mapped to the right account) and the amount.
4. Add a message explaining the reason. Save.
5. To use it, open Receive payment for that customer. The credit appears in the list, so tick the credit and the invoice to apply it against.

Record a refund

1. Click + New, then Refund receipt.
2. Select the customer and the item being refunded.
3. Choose the Refund from account (the bank or the account the refund was paid from).
4. Enter the amount and payment method (for example, check number), then save.
5. Match the outgoing transaction in the bank feed to this refund receipt.

Real-World Example

Scenario 1: Harper Office Park's invoice was $1,400, but one weekly visit was missed. Dana agrees to a $50 credit. Harper hasn't paid yet.

Solution breakdown: Create a $50 credit memo for Harper. On the next Receive payment screen, apply the credit against the invoice. Harper now owes $1,350, and when the check for $1,350 arrives, it pays the invoice in full.

Scenario 2: Nisha Patel paid $120 by check in advance and the invoice shows paid. She cancels the service, and Dana refunds her by check.

Solution breakdown: Create a refund receipt for $120 with the Standard Home Cleaning item and paid from the business checking account, referencing the check number. The income is reversed, the bank goes down, and the original invoice stays paid.

Best Practices and Common Pitfalls

• ✅ Get client approval before issuing any credit, refund, or write-off, and keep the approval in writing.
• ✅ Always add a clear reason in the memo.
• ✅ Review open credits on the customer list monthly. Forgotten credits reduce A/R and hide what customers really owe.
• ⚠️ Don't delete an invoice to "fix" a billing mistake. A credit memo or a void leaves a proper trail.
• ⚠️ Don't use a refund receipt for an unpaid invoice. It creates a payment that never happened.
• ⚠️ Don't write off bad debt without checking the accounting method and getting approval.

Tool Translation: Xero uses credit notes, which can be allocated to invoices or refunded.

Sheets companion: A "Credits and Refunds Log" recording date, customer, amount, reason, and who approved it.

Lesson 2.7: A/R Aging

Learning Objectives

• Run the A/R Aging Summary and Detail reports.
• Interpret the aging buckets.
• Verify that A/R Aging agrees with the Balance Sheet.
• Spot red flags that signal bookkeeping errors, not customer problems.

Content and Theory

The A/R Aging report lists what each customer owes and how overdue it is. It is the most important report for the "Collect it" step, and it is the direct answer to "Who still owes me money?"

The buckets (by default, based on the due date):

• Current: not yet due.
• 1 to 30 days past due
• 31 to 60 days past due
• 61 to 90 days past due
• 91 or more days past due

Two versions:

• A/R Aging Summary: one line per customer. Best for a quick overview and for the client.
• A/R Aging Detail: one line per invoice with dates, terms, and days past due. Best for collections work and investigations.

How to read it:

• Look at the oldest buckets first. The older an invoice is, the less likely it will be paid.
• Look for concentration: is one customer most of the total?
• Look for negative amounts. These are unapplied payments or credits, which usually mean a bookkeeping task was left unfinished.

The integrity check: The A/R Aging Summary total, run for a specific date, should equal the Accounts Receivable balance on the Balance Sheet for the same date and the same accounting basis. If they differ, something has been posted to A/R outside a normal invoice or payment (for example, a journal entry), or the reports were run on different dates or bases.

Step-by-Step Walkthrough

1. Go to Reports and search for Accounts receivable aging summary.
2. Set the report date (for example, the last day of the month).
3. Review the buckets and the total. Note the top three overdue customers.
4. Open the Aging Detail version and click into any invoice that looks wrong.
5. Scan for negative amounts and investigate each one.
6. Run the Balance Sheet for the same date and compare the A/R line to the aging total.
7. Record results in your Collections Tracker, and use the Customize button to save the report for reuse.

Real-World Example

As of September 30, Bright Path's A/R Aging Summary shows:

• Northside Dental: $900 (Current, due October 8)
• Ramon Lopez: $120 (1 to 30 days past due, due September 20, partially paid)
• Alicia Chen: $340 (31 to 60 days past due, due August 25)
• Bayview Cafe: $525 (61 to 90 days past due, due July 30)
• Total: $1,885

Solution breakdown:

• The Balance Sheet A/R on September 30 should also read $1,885. If it doesn't, investigate before sending anything to the client.
• Priority for collections: Bayview Cafe (oldest, $525), then Alicia Chen ($340), then a friendly reminder to Ramon Lopez for his remaining $120.
• Northside Dental isn't due yet, so no action is needed except perhaps a courtesy reminder before October 8.
• Your summary to Dana: "$1,885 outstanding, of which $865 is more than 30 days late."

Best Practices and Common Pitfalls

• ✅ Run aging at least weekly for active-billing clients, and always at month-end.
• ✅ Fix bookkeeping issues (unapplied payments, wrong dates) before you chase customers.
• ✅ Always compare aging to the Balance Sheet.
• ⚠️ Check whether the report is aging by due date or invoice date. The buckets change.
• ⚠️ A customer who says they paid may be right. Check for an unapplied payment or a deposit categorized as income before you send a reminder.
• ⚠️ Don't send aging reports to clients with obvious errors still in them.

Tool Translation: Xero has an Aged Receivables report with similar buckets.

Sheets companion: Paste the aging detail into a Collections Tracker so you can add contact dates and notes beside each invoice.

Lesson 2.8: Collections

Learning Objectives

• Build a simple, repeatable collections routine.
• Write polite, effective reminder messages at each stage.
• Know the limits of a VA's role in collections.
• Track follow-ups so nothing falls through the cracks.

Content and Theory

Collecting is not about being aggressive. It is about being consistent, polite, and persistent. Most late payments come from forgetfulness or process delays, not refusal. A routine, followed every week, gets most invoices paid without conflict.

A simple collections schedule (adjust with each client):

• Before due (3 to 5 days): friendly courtesy reminder (optional).
• Due date or 1 to 3 days after: polite reminder with the invoice attached.
• 7 to 14 days past due: second reminder, asking for a payment date.
• 30 days past due: firmer notice, ideally a phone call by the client, and a customer statement.
• 60 or more days past due: the client decides on next steps (payment plan, pause of services, external collection, or write-off).

Your role and its limits:

• You prepare and send reminders on the client's behalf, with their approval of the wording and schedule.
• You track responses and payment promises and report back.
• You do not threaten, negotiate settlements, write off balances, or start legal action without explicit client instruction.
• Debt collection rules vary by location, and clients may need proper advice for serious cases. This course is not legal advice.

Customer statements (available under + New, then Statement) summarize all open invoices for a customer in one document, which is helpful when a customer has several overdue items.

Step-by-Step Walkthrough: The Weekly Collections Routine

1. Fix the books first: apply unapplied payments and match deposits (Lessons 2.3 and 2.4).
2. Run the A/R Aging Detail and paste it into your Collections Tracker.
3. For each overdue invoice, check the tracker for the last contact and decide the next stage.
4. Send the appropriate reminder from QBO (so the invoice link is attached), and log the date and outcome.
5. Record any promise-to-pay dates and set a follow-up.
6. Send Dana a short weekly summary: total outstanding, what was sent, what came in, and what needs her decision.

Message templates (edit for the client's tone):

Stage 1: friendly reminder
Hi [Name], a quick reminder that invoice [#] for $[amount] was due on [date]. I've attached a copy for convenience. If it's already on its way, thank you! Let us know if you have any questions.

Stage 2: second reminder
Hi [Name], following up on invoice [#] for $[amount], now [X] days past due. Could you let us know when we can expect payment? If there's an issue with the invoice, please tell us so we can help resolve it.

Stage 3: firm notice
Hi [Name], invoice [#] for $[amount] is now [X] days past due. Please arrange payment by [date], or contact us to discuss a payment plan. A statement of your account is attached.

Real-World Example

Dana asks: "Can you chase Bayview Cafe? They're two months late and I don't want to ruin the relationship."

Solution breakdown:

1. Confirm in QBO that the $525 invoice is truly unpaid (no unapplied payment, no deposit sitting in the bank feed).
2. Ask Dana to approve the message and tone. She wants to keep the relationship, so use a warm Stage 2 message that asks for a payment date.
3. Send it through QBO with the invoice attached, and log it in the tracker with a follow-up date one week later.
4. If there is no response, escalate to Dana for a personal call. Present the options: payment plan, pause services, or write-off (with the accounting-method caution from Lesson 2.6).

Best Practices and Common Pitfalls

• ✅ Be consistent. A weekly routine beats an occasional panic.
• ✅ Keep every message factual, polite, and specific: invoice number, amount, and date.
• ✅ Get the client's written approval of the schedule and templates once, then follow it.
• ✅ Log every contact.
• ⚠️ Never chase an invoice you haven't verified as unpaid in the books.
• ⚠️ Don't contact a customer's personal channels (personal phone, social media) unless the client says that's the normal way of working with them.
• ⚠️ Don't promise discounts or extensions on the client's behalf.

Tool Translation: Xero supports invoice reminders and customer statements, and its aged receivables report helps prioritize.

Sheets companion: The Collections Tracker template: invoice number, customer, amount due, days past due, last contact, method, response, promised date, and next action.

Module 2 Knowledge Check

Answer each question. Your answers are checked only when you click Check answers — nothing is revealed until then.

Module 2 Practical Exercise: Run Bright Path's September Billing and A/R

Scenario: It is September 30. Dana has sent you her September billing details and asks: "Please enter everything, tell me who still owes me money, and help me follow up. I'm nervous about the late ones." Work in the same practice file you set up in Module 1.

Transactions to Enter

1. Invoice 1001, Harper Office Park: Office Cleaning, 4 visits at $350 = $1,400. Dated Sept 1, Net 15.
2. Invoice 1002, Santos, Maria: Standard Home Cleaning, $120. Dated Sept 3, Due on receipt. She paid $120 in cash on Sept 5.
3. Invoice 1003, Lopez, Ramon: Deep Cleaning, $220. Dated Sept 5, Net 15. He mailed a $100 check on Sept 22 (partial payment).
4. Invoice 1004, Northside Dental: Office Cleaning, $900. Dated Sept 8, Net 30. Unpaid.
5. Invoice 1005, Chen, Alicia: Move-Out Cleaning, $340. Dated Aug 10, Net 15. Unpaid.
6. Invoice 1006, Patel, Nisha: Standard Home Cleaning, $120. Dated Sept 10, Due on receipt. She paid $120 by check on Sept 10. The service was cancelled, and Dana refunded her $120 by check on Sept 14.
7. Invoice 1007, Bayview Cafe: Office Cleaning, $525. Dated July 15, Net 15. Unpaid.
8. Credit memo: $50 credit to Harper Office Park dated Sept 18 for a missed visit. Harper paid $1,350 by check on Sept 20, applying the credit.

Bank Deposits (as they appear on the bank statement)

• Sept 12: one deposit of $240 (Santos cash $120 and Patel check $120)
• Sept 14: check paid out for $120 (Patel refund)
• Sept 23: one deposit of $1,450 (Harper check $1,350 and Lopez check $100)

Tasks

1. Create and send invoices: Enter invoices 1001 to 1007. For the invoices marked unpaid, use the correct dates so they age properly. (You do not need to send real emails. Send one to yourself to confirm the template looks right.)
2. Record payments: Use Receive Payment for each payment, deposited to Undeposited Funds.
3. Create the credit memo for Harper and apply it when recording Harper's payment.
4. Create the bank deposits so they match the two bank deposit amounts above. Confirm Undeposited Funds ends at $0.
5. Record the refund for Nisha Patel with a Refund Receipt paid from checking.
6. Run the A/R Aging Summary as of September 30 and confirm it matches the Balance Sheet A/R.
7. Build a Collections Tracker for the overdue items with a planned next step and follow-up date for each.
8. Write one collections email to Bayview Cafe using the correct stage template.
9. Write a short summary to Dana (5 to 8 sentences): total A/R, what is overdue, what you recommend, and any decisions you need from her.

Deliverables

Screenshots of the invoice list, A/R Aging Summary, and Balance Sheet A/R line; your Collections Tracker; the Bayview email; and the summary to Dana.

Self-Assessment Rubric

• Invoices: Excellent means correct dates, terms, items, and amounts on all seven. Needs work means wrong dates or missing terms.
• Payments and deposits: Excellent means each payment recorded once, deposits match the bank exactly, and Undeposited Funds ends at $0. Needs work means payments categorized as income or deposits that don't tie out.
• Credits and refunds: Excellent means the credit memo is applied and the refund is a refund receipt. Needs work means the wrong document type was used.
• A/R Aging: Excellent means the totals agree with the Balance Sheet and the buckets are correct. Needs work means no cross-check was done.
• Collections and communication: Excellent means a polite, specific, correctly staged message and a clear, action-oriented summary to Dana. Needs work means vague, aggressive, or missing next steps.

Stretch Challenge

Ramon Lopez calls and says he will pay the remaining $120 on October 10. Update your tracker, decide whether any change is needed in QBO, and draft a two-sentence confirmation email that records his promise.

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Check Your Work

Finished the exercise? Compare your work against the answers below.