Jul 25, 2025
If you want to ensure your business continues to have a steady revenue stream as well as a healthy cash flow then it is essential you master the art of accounts receivable management.
Having an effective process can help ensure payments are made on time, and that you build good relationships with your customers while maintaining a good level of liquidity. Alternatively if you ignore AR management you could end up wasting resources, losing revenue, finding errors in your accounting which in turn can put unnecessary pressure on your cash flow. In this blog post we are going to look at what accounts receivable management is and provide you with some tips on how you can improve yours.
Accounts receivable is the term used to describe the money owed to your business by customers. Accounts receivable management is the systems or processes you have implemented to keep track of that money which includes things like:
Typically, accounts receivable staff work closely with sales and finance teams to collect revenue, record transactions, confirm payments, and resolve discrepancies on accounts.
The objective of efficient accounts receivable management is to streamline your invoicing, payment collection, and follow-up procedures to reduce payment delays and lower the chances of uncollected debts.
Receivables Management involves establishing and adhering to consistent policies and procedures that help ensure all interactions with your clients run smoothly. This will help ensure payments are made promptly, reducing the chances of overdue accounts.
If you find it difficult collecting payments on time here are a few tips that will help you improve your AR management.
Now we have determined exactly what accounts receivable management is. Here are 8 tips that will provide you with better receivables management which in turn will make collecting payments not only more efficient but much easier.
Wave goodbye to paper invoices, traditional mail, and physical checks, they're easy to mislay and usually take too much time to manage. Instead, our advice would be to implement a digital invoicing system that allows clients to pay quickly and conveniently online.
By combining your billing and payment processes into one seamless system and automating your record keeping you can reduce the need for manual tracking and keep the possibility of human error to a minimum.
By choosing an invoicing software that has built in payment processing customers will be able to pay directly from their invoice with just the click of a mouse. The system can also automatically apply payments simplifying your cash application process.
You will also have the option of setting up personalised automated reminders that help you keep on top of collections. It also means clients receive communications that are specifically for them which helps foster customer relations and improves efficiency.
To ensure your accounts receivable operations are running effectively, monitor the following key performance indicators:
Days Sales Outstanding (DSO): This is the primary metric you should focus on reducing. DSO represents the average number of days it takes to receive payment after a sale. Ideally, aim to keep your DSO under 30 days.
Average Days Delinquent (ADD): This reflects the average number of days payments are past due. The lower this number, the better. If it starts to increase, evaluate your billing workflow and confirm your AR team has the capacity to manage collections efficiently.
Accounts Receivable Turnover Ratio: This is the number that shows you how quickly revenue is collected from customers i.e converting receivables into cash within a given period. It is important to keep this number low, because if the ratio is high, it may signal a large amount of outstanding invoices, meaning it is time to review your invoicing and collection efforts.
Collection Effectiveness Index (CEI): CEI shows the percentage of receivables successfully collected. Strive for a CEI near 100%, which means you’re collecting from nearly all your clients and minimising unpaid invoices.
Invoice Revisions: Ideally, customer invoices should be accurate the first time. An increase in revised invoices often means that your process is not working efficiently or that you may need to reassess your staffing requirements. Frequent changes are likely to delay payments, so it’s worth reviewing your billing procedures and staffing to maintain accuracy and speed.
Be clear and consistent when it comes to your billing process. This process should be documented so that this procedure is followed by everybody in the business. An effective billing process should always consist of the following:
All billing periods and invoicing dates
The information required on every invoice, this usually includes things like, customer name, address, purchase order numbers etc.
The procedure for keeping records
Regular AR process assessment and how it is followed up.
The procedure for collecting any overdue payments
As well as the steps you must take to ensure clients are invoiced correctly on a daily, weekly, monthly basis you should include in your documentation.
Billing contact information for all clients.
If necessary any specific billing details or steps for particular clients
Notes and Payment details for all clients.
Offering credit to certain customers could be something you are interested in. If so, it is imperative that you set out your policies early to ensure some clients are not given too much credit. You need to ensure that everybody in your organisation can easily determine whether or not a customer can be granted credit when they ask for it.
Likewise, having well-defined accounts receivable collection policies allows you to take a proactive stance on managing overdue payments and improving your overall workflow. Your collection strategy should be preventative rather than reactive. Rather than waiting until a payment is late, send a series of reminders leading up to the due date.
This gentle approach keeps the lines of communication open while ensuring that customers are aware of upcoming payment deadlines. Think about it like this: every interaction with your business is an opportunity for you to gently reinforce payment expectations.
Here’s another tip: if a customer has multiple overdue invoices, don’t just send the most recent one. Use that opportunity to include a summary of all outstanding balances. This helps clarify the situation for the customer and makes your collection process more efficient.
Having clear procedures in place allows you to be proactive when it comes to payment collection. Set up a process that prompts you to get in touch with customers on day 1 of an overdue payment. This informs them as soon as a payment is late and outlines the payment terms. You should also highlight the options available for making payments.
With electronic billing and payment systems, it is easier to centralise and resolve payment and invoicing issues with your clients. For instance, you can set up an automatic follow-up with clients the first day a payment is late, then every week until the account is paid in full. .
Automating communications with customers about their accounts will not only save you time but also keep manual processes to a minimum which in turn makes things much more consistent.
Getting the benefits of AR automation lies in eliminating the most time-consuming and repetitive parts of the process. This generally includes tasks such as drafting follow-up emails, generating and retrieving invoices, and managing routine reminders. Automate anything that’s manual, repetitive, or adds minimal strategic value.
Rather than wasting time on mundane tasks automation allows your finance team to focus on refining customer interactions using the right messaging and timing for sending invoices and payment reminders. These personalised, well-timed touches are what truly impacts timely payments.
Accounts receivable management software will deal with all these issues for you, it allows you to set up an email template that automatically goes with your invoice, another one to thank customers for payments and a reminder email for overdue payments.
A lot of businesses simply send a customer a balance summary or brief note without listing the specific outstanding invoices. Often, those details are in a separate attachment, which can lead to confusion. This part of the process should be automated, ideally through a customer portal or AR automation software. Providing a clear breakdown of what’s owed and when it’s due helps customers stay on top of their payments.
Offering online payment options is also highly recommended to accelerate the payment cycle.
Even if you're still using paper billing, you can still introduce automation to improve efficiency. Tools like Zapier can help by triggering automated actions based on data entries. For instance, when you log a payment in a spreadsheet, you could automatically send a confirmation email to the client or generate a task to print and mail a receipt. This saves time and reduces manual effort while keeping your workflow organised.
In most cases when you find yourself with problems around customer payments it's because they are struggling to receive, view or fully understand your invoices. Alternatively it could be that you are not offering them a quick and easy way to pay.
Its not a particularly well known fact that 70% of payment reminders are actually technical rather than commercial. So it's not the actual transaction that is the problem rather the method of payment. To help ensure you get paid on time you need to make it as easy as possible for customers to pay their invoices. To do this it is essential you streamline the process and enhance the customer payment experience. How do you do this ? Put an automated AR system in place making it simple for customers to make their payments. Think about using a payment portal which will allow customers to access all the information they need in one place, such as the amount of the invoice and how to pay.
It can be a common misconception that if a customer is late paying an invoice that they are unreliable, however this is not always the case. When a business is regularly getting paid late there is a good chance that your invoicing and payment systems are not fit for purpose. So, how do you remedy this ? The first thing to do is make it easy for your customers to pay invoices, communicate regularly and clearly and offer them easy to use online payment solutions.
Consider using an electronic invoicing system that has invoice details and direct payment links within the body of the email. This helps prevent your messages from being flagged as spam due to attachments.
Make it easy for clients to pay by offering a secure online payment portal with multiple payment options, such as credit cards. Enabling customers to pay immediately upon viewing the invoice can strengthen your client relationships and significantly reduce the risk of unpaid invoices.
A survey recently asked whether or not sales teams should involve themselves with cash collection, it probably won’t be a surprise that around 90% of people who responded said no. What this tells us is that there is a complete misconception around cash collection. It is important that members of the sales team are an integral part of your cash collection strategy because they need to make sure that when they make a sale it actually turns into cash that your company can utilise as working capital. Now this doesn’t mean you have to involve them in the whole collection process but the fact that they are in direct contact with clients during the collection process should be used to your advantage.
The idea that payments are a simple technical task handled solely by the finance team is a common misconception that needs to be reconsidered. In truth, effective cash collection is a collaborative effort that involves multiple departments. Including client-facing teams,such as sales in the accounts receivable process ensures your organisation is properly aligned when it comes to collecting payments.
When everyone is informed and involved, it enhances coordination, minimises duplication of efforts, and reduces errors that can lead to delays or lost revenue. This cross functional approach ultimately leads to a more streamlined and successful AR management strategy.
It is important that you involve all your teams in the process not just because getting paid is a key from a business point of view, but it is also an indication that the goods or services you offer are of high quality. As each stakeholder will have a unique relationship with your customer, their approach can be tailored to help ensure that payments are made on time.
If payments aren’t coming through and the issue isn’t technical, there’s likely to be a deeper problem within your internal processes. This is where your sales and customer service teams, the ones who interact directly with clients, can be valuable in uncovering the root cause and helping to resolve it.
The main thing to remember is that successful cash collection relies on collaboration. It’s a shared responsibility, with each department contributing to the overall process. No single team should be expected to manage it alone.
Utilising software to manage your accounts receivable will not only streamline your process but also automate some of those onerous jobs that not only waste time but also increase the chance of errors.
At Invevo we offer clients a full range of software that makes use of Artificial Intelligence that allows clients to automate collections making it easy for customers to pay you on time. If you want to find out more about our AR management automation software call the team here at Invevo today.
