Best Ways to Manage Accounts Receivable (Get Paid On Time, Every Time)
Manage accounts receivable like a pro. Set credit policies, invoice on cadence, work the aging report, and turn slow payers into reliable cash flow.
Quick Answer
To manage accounts receivable: (1) define a written credit policy with terms and limits, (2) invoice same-day with clear line items, (3) follow up systematically — reminder before due, firmer at 15 days, call at 30 days, escalation at 60, (4) review the AR aging report weekly, (5) write off uncollectible amounts so reports stay accurate.
Accounts receivable is money you've already earned but haven't collected. Managing it well is the difference between healthy cash flow and constant chasing.
Table of contents
Set a Credit Policy
Before extending credit, define who qualifies, on what terms, and what limits apply. For new clients, start with shorter terms or partial deposits. Document the policy — even one page is enough.
Invoice on a Cadence
Invoice immediately upon delivery or at agreed milestones. Delays in invoicing produce matching delays in payment. Block 15 minutes daily to issue invoices.
Systematic Follow-Up
A standard sequence works better than ad hoc chasing: friendly reminder near the due date, firmer reminder when overdue, direct conversation at 30 days, formal collection notice at 60 days.
Use the Aging Report
An AR aging report groups unpaid invoices by how long they've been outstanding (current, 30, 60, 90+ days). Focus collection effort on the oldest balances — collectibility drops sharply after 90 days.
Best Ways to Get Started
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Write a one-page credit policy
Terms, limits, deposit requirements, late-payment process. Apply consistently.
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Run credit checks on large new clients
Even informal checks (Google, LinkedIn, references) catch obvious risk.
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Invoice same-day with embedded payment links
Cuts collection time roughly in half.
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Send a courtesy pre-due reminder
3 days before due. Eliminates most 'forgot the invoice' cases.
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Run the aging report weekly
5 minutes. Focus the next week's collection effort.
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Escalate firmly but professionally
Tone stays cordial through 60 days. After that, formal escalation is appropriate.
Step-by-Step Plan
- 01
Document a credit policy
Terms, limits, deposits, escalation steps. One page is enough.
- 02
Set default payment terms in your software
Net 15 or Net 30, with automated reminders.
- 03
Embed online payment links in every invoice
Stripe, Square, ACH. Pay-in-one-click changes collection dynamics.
- 04
Schedule a weekly 15-minute AR review
Run the aging report. Action the oldest balances.
- 05
Build a standard follow-up template library
Friendly, firm, escalation. Pre-written saves time and emotion.
- 06
Write off uncollectible balances quarterly
Document the decision. Reports stay accurate.
AR Aging Buckets and Collection Likelihood
| Bucket | Collectibility | Action |
|---|---|---|
| Current (not yet due) | Very high | Courtesy reminder 3 days before due |
| 1–30 days overdue | ~94% | Friendly reminder, then firmer at day 15 |
| 31–60 days overdue | ~74% | Direct call, negotiate payment plan |
| 61–90 days overdue | ~50% | Formal notice, stop new work |
| 90+ days overdue | ~25% | Collection agency or write-off |
Mistakes to Avoid
- ✗Extending credit without a policy.
- ✗Letting AR sit untouched for weeks.
- ✗Being inconsistent in follow-up — some clients chased, others ignored.
- ✗Continuing to extend credit to clients with unpaid balances.
- ✗Refusing to write off truly uncollectible amounts — distorts reports.
Pro Tips Advanced
- ★Add a polite 'thank you for your prompt payment' line at the bottom of invoices.
- ★Offer a 2% early-payment discount on Net 30 invoices.
- ★Use automated reminders in your accounting software — frees you from manual chasing.
- ★Pause new work for any client more than 30 days overdue.
- ★Track DSO monthly. Slipping DSO is the earliest signal of collection problems.
Frequently Asked Questions
Sources
- • Publication 334: Tax Guide for Small Business — Internal Revenue Service
- • Generally Accepted Accounting Principles (GAAP) — Financial Accounting Standards Board
- • Small Business Financial Management — U.S. Small Business Administration
All articles are reviewed for factual accuracy by a credentialed accounting professional before publication.
David spent 11 years as a financial controller before joining Ledgerwise as a contributing editor. He writes about cash flow management, accounts receivable, and operational finance for owner-operated businesses.
