How to track invoices and payments efficiently

PayPal Editorial Staff

PayPal Editorial Staff

January 15, 2023

Man holding pen and looking at a calculator and paper

One of the best parts of running your own business is getting paid. But creating an invoice, sending it to your client, and keeping track of it throughout the process can become complicated, especially when working with multiple customers on different billing cadences. From chasing down a late payment to realizing you invoiced the wrong client, you may feel like you can’t catch a break.

But here’s the thing: You don’t have to be an accounting expert to develop a convenient, headache-free invoice tracking system. Whether you choose to rely on a simple Microsoft Excel spreadsheet or prefer the advantages of automated accounting software with invoice tracking capabilities, there’s a digital solution for nearly every type of business.

How to keep track of invoices

The best way to keep track of payments comes down to the type of business you run. For instance, the way freelance writers invoice their clients (after the submission of an article) can be quite different from how interior designers bill theirs (such as 50% upfront with the remaining balance due 30 days after completion).

No matter how you choose to keep track of accounts payable, it boils down to creating a uniform, reliable process that works best for your business. And if you choose the right accounting software and integration, you can send and track e-invoices and payments with ease. Compared to an Excel sheet, accounting software takes the manual process out of invoice tracking. Check out the accounting software PayPal integrates with.

How to keep track of accounts receivable

In the accounting world, money owed to your business from customers is known as accounts receivable. Here are tips for keeping track of outstanding invoices:

  • Use the same invoice template. Choose an invoice template and stick with it. That way, your invoices will not only look the same but will also follow similar payment terms and conditions. (This is helpful when dealing with late or missed payments.)
  • Consider the benefits of electronic invoices. Compared to paper invoices, which can easily get misplaced or lost, electronic invoicing can be a faster and simpler way of billing clients and tracking invoices.
  • Develop uniform payment terms and conditions. Make sure clients follow the same payment terms to avoid a situation like the following: Client A’s invoice is marked late on day 31 whereas client B’s invoice is labeled late on day 61. This can result in unnecessary confusion when tracking.
  • Create a process for payment follow-ups. It’s important to create a process for invoice follow-ups once payment is considered late or expired. That way, you lower your chances of losing track of unpaid invoices.
  • Track all payments received. Keep meticulous records of every payment received by your business, either in your accounting software or via an Excel spreadsheet.
  • Automate your invoicing process. With accounting software, you can automate the entire invoicing journey, from sending invoices to receiving payments.

How to keep track of accounts payable

On the other hand, the money you owe to vendors and expenses is called accounts payable. Similar to tracking outstanding invoices, it’s just as critical to keep tabs on how much you owe.

  • Categorize payments by type. Break down who you owe by payment types, such as vendors, credit cards, and more.
  • Use an outgoing invoice tracker. This can help keep track of who hasn’t been paid yet. You can create one with Excel or accounting software.

How to create and use an Excel invoice tracker

An easy way to create your own invoicing tracking template is by using an Excel spreadsheet. With an Excel spreadsheet, you can organize your billing in multiple ways. While a ledger is usually kept chronologically according to date, an online tracker can filter your invoices based on name, receivable, date, receipt number, and more. When creating your invoice tracking template, it’s a good idea to start by including the following:

  1. Invoice number

    There are a variety of ways to assign invoice numbers, so choose the one that works best for your business. No matter how the number is formatted on the actual bill, consider using a standard number of digits. So, instead of entering numbers ‘99’ or ‘100,’ use ‘00099’ and ‘00100.’

  2. Customer

    If you organize your customers by name, enter that information here. Some vendors assign repeat clients a unique number. If this is true for your business, make sure you include that number with the client’s name.

  3. Invoice date

    While your bills may include dates for services, you generally won’t use a service date on your tracker template. For your Invoice Date, use the date that you issued the invoice.

  4. Due date

    This is the date the total amount is due.

    Pro tip: In order to avoid confusion and potential late payments, it’s a good idea to list your payment terms directly on the invoice.

  5. Amount

    The amount is the grand total due, including any taxes or fees for things like delivery.

  6. Amount paid

    Even if your business doesn’t accept partial payments, it’s a good idea to keep track of the amount your client paid. You’ll be able to easily see when the transaction is complete and if you do end up processing a partial payment, you won’t need to make any changes to your template.

  7. Outstanding amount

    This number may be different from the total, particularly if you accept partial payments or if your business collects late fees.

  8. Status

    This column is particularly helpful when you want to see a list of outstanding accounts. Typically, the status of a bill will either be Current or Past Due.

Pro tip: If you want to automate your invoice tracker, PayPal Invoicing does the heavy lifting for you. The PayPal invoice tracker updates automatically to include each new bill and track its payment status. You’ll see the status of each invoice and have the ability to record payments, send reminders, and more, using a convenient drop-down menu.

Customizing your invoice tracker

Once you’ve got the basics covered, you can think about customizing your invoice tracker to meet your specific needs. Does it make sense for your billing to include additional information about the customer? Do you have employees who made the sale or provided the service? When tailoring your tracker template, you may consider including the following details:

  1. Customer contact information

    You probably won’t use this for tracking purposes, but having the customer’s phone number or email address on hand will save you the hassle of digging up their information if you need to follow up or send a reminder.

  2. Point of contact

    If your business deals with companies rather than individuals, you’ll likely have a point of contact within that company and may want to add that person’s name to your template.

  3. Employee

    For businesses that pay employees a commission, this column is probably a must-have. Even if your employees don’t earn a commission, it could be helpful to have an employee’s name attached to a sale, should you need any additional information.

  4. Reminder

    On the rare occasion that you do need to send a reminder, this column is where you would record the date that you sent the reminder.

  5. Late fees

    Depending on the payment terms for your business, late payments may incur an additional fee. Track those fees in this column.

  6. Past due age

    No matter what your payment terms are, it’s a good idea to track how late an overdue payment is. If you work with a collection agency, this column is an absolute must-have, but even if you don’t, it’s an easy way to identify clients who are habitually late payers. If a client is consistently behind, it might be time to consider breaking ties.

How to use PayPal’s invoice tracker

With PayPal Invoicing, you'll have a dashboard where you can view the complete history of an invoice, accept payments from 200+ markets around the globe and more. Even better, PayPal Invoicing can help you get paid fast by giving your customers an easy way to pay – even if they don’t have an account with PayPal. For example, in a recent study, 79% of PayPal invoices are paid within one day of sending the invoice.1

No matter what kind of invoice tracker you use, organization is key. You’d hate to leave money on the table because of a messy ledger. PayPal Invoicing can help you stay organized, save time, and get paid.

Here’s a quick guide on how to use PayPal for Invoicing:

  1. Sign up for a PayPal account, or log in if you already have one.
  2. Create and send an invoice from the PayPal website or mobile app.
  3. PayPal shares a link to the invoice with your client via email, or you can share a link on your own.
  4. Customers can make a payment. We’ll notify you when the money lands in your PayPal account.

Ready to get started with PayPal Invoicing? Learn more here.

Was this content helpful?

Sign Up for the PayPal Bootcamp

In partnership with three expert business owners, the PayPal Bootcamp includes practical checklists and a short video loaded with tips to help take your business to the next level.

Loading...

We’ll use cookies to improve and customize your experience if you continue to browse. Is it OK if we also use cookies to show you personalized ads? Learn more and manage your cookies