Automating Accounts Receivable: From Invoice to Collection

Payment Automation

Automating Accounts Receivable: From Invoice to Collection

Ask an accounts receivable team where the week goes, and the answer is rarely "sending invoices." It goes to what happens after: following up on invoices that are past due, taking a payment by phone or by cheque, typing a payment into the accounting system, and working out which invoice, or which invoices, a single payment was meant for. Each task is small, but together they add up.

This guide follows one invoice from billing to the moment the customer's account is updated and reconciled, the path some teams call invoice to cash. It covers taking the payment once the customer has been asked to pay, not the follow-up on late invoices. It is written for finance and AR managers, controllers, and business owners, and for the software teams who build these steps into their products.

The Accounts Receivable Cycle in Six Steps, and Where Manual Work Hides

The cycle is the same whatever software you use. What differs is how many of its steps depend on a person to move things along. Here are the six steps and where manual work tends to collect.

1. The invoice is created. This happens in your accounting or ERP system, which stays the record of what is owed. Manual work hides in the delivery: an invoice sent as a PDF with no way to pay it leaves the customer to call, look up bank details, or mail a cheque.
2. The amount becomes due. The payment terms run out and the invoice becomes past due. Manual work builds up in the follow-up: who is past due and who has already been contacted.
3. The payment is collected. The customer pays by bank payment, Interac e-Transfer, or card, or you collect under an authorization the customer gave earlier. Manual work hides in payments taken by phone or cheque and in keying in account details.
4. The transaction status is received. A payment is pending, paid, failed, or returned. Manual work hides in waiting for a bank statement to see which of these it was.
5. The customer's account is updated. The payment is recorded and the invoice is closed. Manual work hides in typing the payment in and deciding which invoice or invoices it covers, especially when one payment covers several.
6. Reconciliation is completed. What the bank shows is agreed with what the books show. Manual work sits in matching deposits to invoices, usually in a spreadsheet and often at month end.

Automation does not remove these steps. It changes who moves a payment from one step to the next. The aim is for steps three to six to follow from the payment itself, with the invoice it was meant for already identified. Our guide to automating the full payment cycle covers the same idea across collections and payouts, and what payment automation changes for finance teams looks at it from the accounting side.

Two Ways to Ask for Payment: An Invoice Payment Link or an Account Statement

Collection starts with how the request for payment reaches the customer. It can start in two ways, and they can run side by side.

A payment link tied to one invoice

When an invoice is created in your accounting system, a payment link can be generated already tied to that invoice. TIB Finance can email the link to the customer, or return it to your software so that you can include it with the invoice. The customer opens the link and pays online, and the payment is tied to that invoice from the start. A payment made through the link can be matched to the invoice automatically, without anyone working out what the money was for. This suits project bills, one-off sales, and customers who pay each invoice as it arrives.

An account statement the customer can pay from

Some customers do not have just one open invoice. They may have four, and two of them may be past due. For these customers, you can send an account statement instead. With TIB Finance, a statement can list a customer's open invoices, the customer chooses which ones to pay, and a single payment can be tied to several of them, so it can be matched to those invoices automatically.

A statement helps because the customer sees everything that is open in one place and decides what to settle, instead of sending an amount that leaves you guessing. Because the payment is tied to the selected invoices, matching it does not have to depend on a remittance note.

Statements are where your own systems matter most. What is sent, who sends it, how the customer selects invoices, and how the payment is posted back in your accounting system all depend on the systems involved, so this flow is set up with each client through an integration with TIB Finance's API and webhooks. Direct integrations with specific platforms are also possible.

How the Customer Pays: Matching the Method to the Customer

The request is half the job. The other half is offering a method that suits the customer. Our guide to choosing the right payment methods for B2B transactions goes through the options in detail, including the Canadian ones. Here is how they apply to receivables:

• Recurring customers: pre-authorized debit (PAD) suits customers billed on a schedule. The customer authorizes once, in a written or electronically accepted agreement, and later collections run on the EFT (electronic funds transfer) rail without a new request each time. A valid authorization must stay on file; see our pre-authorized debit guide and the rules for recurring payments in Canada.
• One-off and occasional payments: through a payment link, the customer can pay online by bank account or card. Interac e-Transfer is a separate option: the customer receives a request for the amount and approves it in their own online banking, so the payment stays pending until they act on it. Our guides to Interac e-Transfer for business and to ACH versus Interac compare the two options.
• Customers who prefer a card: they can pay by card through a payment link.

Bank-based payments need one more piece of planning. A bank payment can be returned days after it was submitted, for example for insufficient funds or a closed account. Treat a bank payment as pending until its status says otherwise, not as final the moment it is submitted.

Getting the Payment Status Back to Your System

A request for payment is only useful if your system finds out what happened to it. Each payment has a status, such as pending, paid, failed, or returned, which TIB Finance passes on through its API and by webhook when the bank reports it. That is not the same moment as the customer pressing pay. A card is approved or declined when it is submitted, while a bank payment can stay pending and a return can be reported several days later. An Interac e-Transfer request stays pending until the customer acts on it.

This is why the status matters more than the submission. Your accounting system should keep the invoice open until the payment is confirmed as paid. Our guide to webhook events explains how those notifications are delivered.

What happens when a payment fails or is returned

When a payment fails or is returned, the status says so and the invoice stays open. What happens next is up to your team: contact the customer, send a new payment link, or collect by another method. TIB Finance does not automatically retry failed payments, so a new attempt is a decision someone makes.

Matching Payments and Reconciling Accounts Receivable

Once a payment is confirmed as paid, two things remain: recording it against the right invoice or invoices, and agreeing it with the bank.

Matching the payment to the invoices

A payment made through a link tied to an invoice, or through a statement where the customer selected the invoices to pay, is tied to those invoices. That is what allows it to be matched to them automatically. A payment for three selected invoices can be matched to those three invoices, rather than to whichever invoices happen to add up to the amount. Payments that arrive outside this path, such as a cheque or a transfer with no reference, are not matched this way and go through your usual process.

Closing the invoices and updating the balance

When the payment is posted in the accounting system, the invoices it covers are closed, and the customer's balance and aging update the way they do for any payment.

With TIB Finance, a system connected through its API and webhooks can receive each payment's status and record the payment against the invoices it was created for. How that posting is set up depends on your accounting system and your process: whether a person reviews each payment before it is posted, or matched payments are posted automatically, is decided on your side, in how the integration is built. Without a connection, transactions and their statuses are available in reports, and someone enters them.

Reconciling what is left

Reports list transactions and their statuses, so your team can reconcile against the books and work through what remains, such as returned payments and invoices that are still open. Reconciliation can become more of a review of exceptions than a matching exercise. Our article on integrating payment processing into an ERP shows how payments are reconciled back to the system of record.

Fitting Automation Around the Accounting System You Already Use

Nothing here replaces your accounting system. QuickBooks, Sage, SAP Business One, Microsoft Dynamics 365, and NetSuite are the systems of record: they create invoices, hold balances and aging, and close invoices when payments are posted. TIB Finance does not issue invoices or keep your books. It carries out the collection and reports what happened, so the system you already use stays in charge of the numbers.

TIB Finance can connect to accounting and ERP systems through its API and webhooks. The general pattern is that the system creates the invoice, a payment link or a statement is sent to the customer, and statuses come back to the system, with the details set up around each client's systems and process. For why the system that manages the transaction is not the one that moves the money, see why your business software needs a payment layer. Developers can start with the payment API integration guide.

Before you start, decide which invoice reference travels with each payment, who, if anyone, reviews payments before they are posted, and who handles returned payments.

How TIB Finance Fits into the Accounts Receivable Cycle

TIB Finance, a Canadian payment automation platform, runs collections and payouts through one platform and API. For receivables, collections can run through EFT, PAD, Interac e-Transfer, and cards, with each payment's status reported by API and webhook and reports your team can reconcile against.

If your team still spends its week sending payment requests and matching payments by hand, contact our team to see how TIB Finance fits the way you invoice and collect today.

Common Questions

What is accounts receivable automation?

Accounts receivable automation connects the steps between billing a customer and recording the payment: sending the request for payment, collecting the payment, receiving its status, updating the customer's account, and reconciling, the path some teams call invoice to cash. Your accounting system stays the system of record, and automation reduces the manual work around it.

How do you automate invoice collection?

Send each invoice with a way to pay it, such as a payment link tied to the invoice, and send an account statement to customers with several open invoices. Collect by the method that suits each customer, receive the payment status through the API or webhooks, and record the payment against its invoice in your accounting system.

Can I send a payment link with an invoice?

Yes. With TIB Finance, a payment link can be generated already tied to an invoice. TIB Finance can email the link to the customer, or return it so your own software can include it with the invoice. A payment made through the link can be matched to that invoice automatically.

Can customers pay several invoices at once from an account statement?

Yes. With TIB Finance, an account statement can list a customer's open invoices, the customer chooses which ones to pay, and a single payment can be tied to several of them, so it can be matched to those invoices automatically. Like any flow that connects to your accounting system, it is set up around your systems and your process, through an integration with TIB Finance's API and webhooks.

What is the difference between a payment link and an account statement?

A payment link is tied to one invoice and suits a customer who pays each invoice as it arrives. With TIB Finance, an account statement can list a customer's open invoices, so the customer chooses which to pay and a single payment can be tied to several of them. Either way, the payment is tied to the invoice or invoices it was for, and both connect to your systems through TIB Finance's API and webhooks.

How are payments matched to invoices?

With TIB Finance, a payment made through a link tied to an invoice, or through a statement where the customer selected the invoices, is tied to those invoices, so it can be matched to them automatically. Payments made outside that path, such as a cheque, are not matched this way and are handled through your usual process. Posting a matched payment in your accounting system is part of the integration set up around your systems.

How does my accounting system know a payment was made?

TIB Finance reports the status of each payment, such as pending, paid, failed, or returned, through its API and by webhook when the bank reports it. A connected accounting system can use those statuses to record the payment against the invoices it was created for. Without a connection, transactions and their statuses are available in reports.

What happens when a customer's bank payment is returned?

If a bank payment cannot be completed, for example because of insufficient funds or a closed account, the bank returns it, and that can take several days. TIB Finance passes on the status when the bank reports it, and the invoice stays open. Failed payments are not retried automatically, so what happens next is up to your team.

Does accounts receivable automation replace QuickBooks, Sage, or SAP?

No. QuickBooks, Sage, SAP Business One, Dynamics 365, and NetSuite stay your systems of record for invoices, balances, and aging. TIB Finance carries out the collection and reports the result, and it can connect to accounting and ERP systems through its API and webhooks.

Which payment methods can customers use to pay an invoice?

Collections with TIB Finance can run through EFT, PAD, Interac e-Transfer, and cards. Recurring customers can pay by pre-authorized debit, and a payment link lets a customer pay online by bank account or card. A customer can also receive an Interac e-Transfer request, which stays pending until they act on it in their online banking.