How To Set Up a System To Manage Customer Payments

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There is nothing more important to the success of your business than your system for managing accounts receivable billing and the collection of payments from your customers and clients. Sometimes this system is called payment management or a collection system. Here's how to set it up.

Key Takeaways

  • A system to manage payments owed to you from customers or clients is really important for the health of your business.
  • To establish one, consider all the ways you take in money from customers and then establish rules and regulations for them.
  • Depending on your business, you may need to have accounts receivable and run an aging report to account for customers and clients who still owe you money for your products or services.

Establish Customer Payment Methods

How people pay you will depend primarily on the type of business you have and whether your customers are individuals or companies or both. Also, if your company is an online-only store, you will receive payment differently than a corner, brick-and-mortar storefront will. The more different types of payment methods you accept, the more helpful it will be for customers.

There are some established ways to take in money from customers:

  • Cash payments—primarily from individuals in a retail business
  • Checks—from individuals and business customers
  • Credit and debit card payments—from individuals and businesses
  • Online payment methods such as PayPal—from individuals and companies


You will have to pay a premium for handling some types of payments, such as credit and debit cards.

Additionally, you could choose to offer a credit or payment plan, for both individuals and business customers. An example of such a plan for a retail store would be layaway, where the customer pays a portion each month until they pay off the balance of the purchase. Alternatively, you could allow the customer to receive the goods and they would pay you after receipt on a scheduled payment plan.

You may even wish to accept payment from a third-party or other external sources such as an insurance company. Car repair shops may use this type of system as well as firms that sell to large construction firms.

Rules of Thumb for Setting Up Payment Processing

After you have determined what types of payments to take, you will need to set up some rules for your employees regarding the acceptance and handling of these payment types.

For example, you should have rules for accepting checks. Determine if you will allow only business checks or if you will take personal checks. Also, set the information you require to process the payment such as a driver's license number.

Some forms of payment like revolving credit may require you to check the credit history of the client. You may set limits that a customer cannot exceed. In some cases, you may charge a service fee for the paperwork and accounting involved in keeping these types of accounts.


It's a good idea to create itemized invoices for accounts that pay with credit so you to keep track of their purchases and make for easier returns.

Send Out Bills and Run Accounts Receivable Aging Reports

Send out bills to customers who owe you money. Send a billing at least once a month, or more often if you are serious about collecting money. You will want to account for how long it takes customers to pay and show any past due balance on the next billing.

Depending on your type of business, you may have customers who do not pay when purchasing, or who are paying over a timeframe. Running accounts receivable aging reports will show you when to send out bills and when to initiate stronger collection methods.

Initiate Collections Proceedings for Those That Don't Pay

For customers who do not pay within a reasonable amount of time (as determined by your "rules of thumb,") initiate collections proceedings. You may want to send an account to a collections agency or to a small claims court. Decide which is best for each type of account.

Setting up and working on a collections management system can help you collect the money that you are due and keep cash flow moving through your company.

Frequently Asked Questions (FAQs)

How should you keep track of customer payments?

Consider standardizing the way your customers pay you so it's easier to keep track of them. Then, decide where you want to keep track of this money coming into your business—Excel, an online program like QuickBooks or FreshBooks, or another system that you prefer and trust. Just make sure you can easily see where the money is coming from and how much so you can balance your books.

What are the methods of customer payments?

Customers can often pay in cash, with a credit card, with a check, on a mobile app, and sometimes with bank wire transfers. You'll need to decide which methods of payments you accept at your small business. Some may come with fees, while others may be more difficult to collect and deposit.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Visa. "The Visa System: Rates, Fees and Rules."

  2. Federal Trade Commission. "Offering Layaways."

  3. Sage Business Cloud, Sage Accounting. "Create the Accounts Receivable Aging Report."

  4. FreshBooks. "How To Keep Track of Invoices and Payments. A How-To Guide."

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