What is the invoicing process? Steps and best practices

Published Monday 30 March 2026

Table of contents

• What is the invoicing process?
• Why an efficient invoicing process matters
• Track time and materials better
• Connect quotes and invoices
• Use invoice templates to their fullest potential
• Choose the right invoicing software
• Set a billing schedule
• Invoice more often, get paid more often
• Accept online payments
• Train your customers to pay on time
• Follow up on outstanding invoices
• Streamline your invoicing process with Xero
• FAQs on the invoicing process

Key takeaways

• Implement a consistent billing schedule by blocking dedicated time each week for invoicing and treating it as essential billable work, as businesses that invoice promptly get paid up to 30% sooner.
• Connect your quotes directly to invoices by using the same descriptions and line items, referencing quote numbers, and clearly noting any approved changes to reduce disputes and speed up payment.
• Follow up on unpaid invoices systematically by sending reminders on the due date, following up within a week, and calling after two reminders, as companies that follow up on 90% or more of their invoices are most likely to get paid within a week of the due date.
• Centralise time and expense tracking in one place using apps that sync with your invoicing software to eliminate manual data entry and create accurate invoices in minutes instead of hours.

What is the invoicing process?

The invoicing process covers every step from creating an invoice to receiving payment. It includes tracking billable work, generating accurate invoices, sending them to customers, and following up until you get paid.

A streamlined invoicing process helps you:

• get paid faster: Clear, accurate invoices reduce delays and disputes
• save time: Consistent workflows cut down on repetitive admin work
• improve cash flow: Regular invoicing keeps money flowing into your business
• reduce errors: Standardised processes mean fewer mistakes and corrections

For small businesses, the invoicing process typically involves these stages:

• preparation: Track time, materials, and costs for each job
• creation: Generate invoices using templates or software
• delivery: Send invoices promptly via email or online portal
• collection: Follow up on outstanding payments and process receipts

Why an efficient invoicing process matters

An efficient invoicing process directly impacts your cash flow and how much time you spend on admin. When invoicing is slow or inconsistent, payments get delayed and you spend more time chasing money than running your business.

An efficient process delivers:

• faster payments: Businesses that invoice promptly get paid up to 30% sooner
• less admin time: Streamlined workflows free you to focus on billable work
• fewer disputes: Clear, accurate invoices reduce back-and-forth with customers
• better visibility: You always know what's been paid and what's outstanding
• scalability: A solid process grows with your business without adding complexity

Timely, accurate invoices protect more than just your revenue. According to research, 89% of business leaders believe late payments are hindering their business growth, straining customer relationships, creating cash flow gaps, and adding stress to your workday.

Track time and materials better

Accurate time and expense tracking is the foundation of accurate invoicing. A single source of truth for billable hours and costs saves you time by keeping all information in one place instead of scattered across diaries, emails, and receipts.

Centralising your tracking makes invoicing faster and more accurate. You can:

• use time-keeping apps: Clock in and out of jobs from your phone to capture billable hours automatically
• use expense apps: Photograph receipts and attach them to specific jobs so costs are ready when you invoice
• link tracking to invoicing: Choose tools that sync with your invoicing software to eliminate manual data entry

When all your job data lives in one place, creating invoices takes minutes instead of hours.

Connect quotes and invoices

Connecting quotes to invoices reduces disputes and speeds up payment. When customers see invoice descriptions that match their approved quote, they can verify they're getting what they paid for.

To make this connection work:

• get quotes signed off: Always secure written approval before starting work
• mirror quote language: Use the same descriptions and line items in your invoice
• reference the quote: Include the quote number or date on the invoice for easy customer reference
• highlight any changes: If scope changed during the project, note approved variations clearly

This approach removes ambiguity and gives customers confidence to pay promptly.

Use invoice templates to their fullest potential

Invoice templates save time by pre-filling common information and automating calculations. Whether you use spreadsheet software or dedicated invoicing tools, templates reduce manual entry and ensure consistency.

Get the most from your templates by:

• saving customer-specific versions: Pre-fill customer details, payment terms, and standard services
• building in formulae: Automate totals, tax calculations, and discounts to eliminate manual maths
• including essential fields: Add your business details, payment instructions, and due dates to every template
• standardising descriptions: Use consistent language for services so customers recognise line items

As your business grows, you may outgrow spreadsheet templates. A dedicated invoice maker offers more automation and integrates with your accounting software.

Check out our invoice template to get started.

Choose the right invoicing software

Invoicing software automates repetitive billing tasks and gives you real-time visibility into what's been paid. The right tool saves hours each week and helps you get paid faster. In fact, businesses using accounts receivable software are three times more likely to receive payment before the due date than those that don't.

Look for software that offers:

• product and service pricing: Stores your rates so you can build invoices in clicks
• automatic tax calculations: Handles GST, VAT, or sales tax and prepares filing paperwork
• bank reconciliation: Matches payments to invoices daily so you always know what's outstanding
• mobile access: Lets you create and send invoices from your phone, anywhere
• integration with accounting: Syncs with your bookkeeping so you don't double-enter data

When evaluating options, consider your invoice volume, the features you need now, and what you'll need as you grow.

Learn more in our guide on invoicing software for small businesses.

Set a billing schedule

A billing schedule ensures invoices go out consistently, not just when you remember. A set routine keeps invoicing on track alongside paid work, so payments arrive on time.

To build a schedule that sticks:

• block dedicated time: Pick a specific day and time each week for invoicing and protect it
• treat it as billable: No work gets paid without an invoice, so invoicing is essential work
• batch similar tasks: Process all invoices in one session rather than throughout the week
• get help if needed: If you're consistently too busy, a bookkeeper can handle invoicing for you

Consistency matters more than the specific day you choose. The key is making invoicing a non-negotiable part of your routine.

Invoice more often, get paid more often

Invoicing more frequently gets you paid faster. When you invoice monthly, the payment clock starts later than it could. Add typical payment terms and you could wait 60 days or more for your money.

More frequent invoicing improves cash flow. Consider these approaches:

• invoice weekly: Set a regular day to process all completed work from the past week
• invoice on completion: For one-off jobs, send the invoice as soon as the work is done
• invoice at milestones: For longer projects, bill at agreed stages rather than waiting until the end

Frequent invoicing prevents backlogs from forming and keeps money flowing consistently into your business. It also makes each invoice smaller and easier for customers to pay promptly.

Accept online payments

Online payment options can get you paid up to 30% faster by removing friction from the payment process. When customers can pay with a click, they're more likely to pay promptly, especially since research shows that nine in ten consumers have made a digital payment in the last year.

Common online payment methods include:

• credit and debit cards: Convenient for customers, processed quickly
• bank transfers: Direct deposits with lower fees than card payments
• payment services: Platforms like PayPal offer familiar checkout experiences
• pay now buttons: Embedded links in invoices let customers pay instantly

Most payment providers charge a transaction fee, but the faster payment often outweighs the cost. If your customers already pay on time, you may not need to change anything. If you want faster payments, adding convenient options could help.

Train your customers to pay on time

Training customers to pay on time starts with your first invoice. Early interactions set expectations for the entire relationship, so use them to establish that you take payment seriously.

To set the right tone from the start:

• call after the first invoice: Check that the invoice has everything they need and confirm receipt
• follow up immediately on missed due dates: Call the next day to ask if there's a problem
• stay professional, not aggressive: You're checking in, not demanding payment
• be consistent: Keep this approach for the first few invoices to establish your expectations

Once customers know you follow up promptly, they're more likely to prioritise your invoices. This upfront effort saves time chasing payments later.

Follow up on outstanding invoices

Following up on unpaid invoices is the most important part of the invoicing process. Even accurate, professional invoices often don't get paid on time without a reminder. Research shows that companies following up on 90% or more of their invoices are the most likely to get paid within a week of the due date.

Build follow-up into your routine:

• send a reminder on the due date: A simple email noting the payment is now due
• follow up within a week: If unpaid, send a second reminder with the invoice attached
• pick up the phone: After two reminders, call to check if there's an issue
• escalate if needed: For persistent non-payment, consider formal collection steps

Following up takes effort, but it's essential. Most late payments happen by accident. Customers get busy, invoices slip down the priority list, and a reminder is often all it takes.

Learn more about how to handle unpaid invoices.

Streamline your invoicing process with Xero

A streamlined invoicing process gets bills out faster and money in sooner. By tracking time accurately, using templates, invoicing frequently, and following up consistently, you can reduce admin time and improve cash flow.

Review your invoicing process regularly using these steps:

• prepare accurately: Track time and expenses in one place
• create efficiently: Use templates and software to speed up invoice creation
• send promptly: Stick to a billing schedule and invoice more frequently
• collect consistently: Offer convenient payment options and follow up on outstanding invoices

Ready to simplify your invoicing? Xero's invoicing software automates repetitive tasks, sends payment reminders, and shows you what's been paid at a glance. Try Xero free for 30 days and see how much time you can save.

Learn more in our guide to invoicing.

FAQs on the invoicing process

Here are answers to common questions about setting up and managing your invoicing process.

What is the invoicing and billing process?

The invoicing and billing process is the complete cycle of requesting and collecting payment for goods or services. It includes tracking what's owed, creating invoices, sending them to customers, processing payments, and reconciling your accounts.

How often should I send invoices?

Send invoices as frequently as practical for your business. Weekly invoicing works well for ongoing work, while one-off jobs should be invoiced on completion. More frequent invoicing improves cash flow and prevents backlogs.

What information must be included on an invoice?

Every invoice should include your business name and contact details, the customer's name and address, a unique invoice number, the invoice date and due date, a clear description of goods or services, the amount due, and payment instructions.

How do I handle disputed or unpaid invoices?

For disputed invoices:

1. Contact the customer promptly to understand the issue and resolve it.

For unpaid invoices:

1. Send reminders at the due date and one week later.
2. Follow up by phone.
3. If payment remains outstanding, consider formal collection steps or seek professional advice.

What's the difference between creating invoices and processing invoices?

Creating invoices (invoicing) is the seller's process of generating and sending bills to customers. Processing invoices (invoice processing) is the buyer's process of receiving, verifying, and paying bills from suppliers. This article focuses on creating and collecting invoices as a seller.