How do small businesses manage accounts receivable?

With one list of unpaid invoices and their due dates, a fixed day each week to invoice and to chase, and a decided rule for each kind of customer reply. A spreadsheet is enough to start.

How often should I review accounts receivable?

Once a week. Weekly is often enough to catch an invoice the day after it goes late, and short enough that it takes half an hour rather than an afternoon.

What is the difference between accounts receivable and accounts payable?

Accounts receivable is money customers owe you. Accounts payable is money you owe your suppliers. Your receivable is your customer's payable.

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How to manage accounts receivable without a finance team

Accounts receivable sounds like a department. For most small businesses it is one person, once a week, with a list. Here is what goes on the list and what to do with it.

CollectlyOctober 3, 20266 min read

The short answer: keep one list of every unpaid invoice with its due date, invoice on a fixed day, chase on a fixed day, and decide in advance what you do for each kind of reply. Thirty minutes a week, done every week, beats a stressful afternoon at the end of each month.

Accounts receivable is the money customers owe you for work you have already done. Managing it means three things: getting invoices out promptly, knowing at any moment what is outstanding and how late it is, and following up in a way that gets paid without damaging the relationship.

Keep one list

Every unpaid invoice, in one place: customer, invoice number, amount, date sent, due date, and the last time you were in touch about it. A spreadsheet is fine. What matters is that there is exactly one list, so nothing lives only in your head or your inbox.

Once a week, sort it by how late each invoice is. Grouping invoices into current, 1–30, 31–60, 61–90 and over 90 days late is called an aging report, and it tells you at a glance where your money is stuck.

A weekly routine

01Invoice everything finished since last week. Same day each week, so it never piles up.
02Update the list: mark what has been paid, add what you just invoiced.
03Check invoices due in the next few days have reached the right person.
04Send a reminder for every invoice that went late since last week.
05For anything over 30 days, change the approach: a phone call, or a message to whoever approves payments.
06Write down any date a customer has promised, and do not chase before it.

Decide your rules once

Most of the stress in chasing money is deciding what to say each time. Decide once, write it down, and follow it. A set of rules a small business can use as it is:

Paid already: thank them and stop. Check your bank before writing back to someone who says they have paid.
Promised a date: wait until the day after it, then follow up once.
Never received the invoice: resend it the same day, to the person who pays.
Disputes the amount: stop asking for payment and resolve the disagreement first.
No reply: get more specific, not more forceful. Ask when the next payment run is.
Upset or hostile: you reply yourself, by phone if you can. Not a template.

Watch two numbers

The total you are owed that is past due, and how long, on average, customers take to pay. The second is called days sales outstanding, or DSO. If either keeps rising month to month, something in how you invoice or follow up needs to change before it becomes a cash problem.

When to get help

If the weekly routine keeps slipping because there is too much to read and write, that is the part to hand off. A bookkeeper can run it for you. Software can take the reading and drafting off your plate.

Common questions

How do small businesses manage accounts receivable?: With one list of unpaid invoices and their due dates, a fixed day each week to invoice and to chase, and a decided rule for each kind of customer reply. A spreadsheet is enough to start.
How often should I review accounts receivable?: Once a week. Weekly is often enough to catch an invoice the day after it goes late, and short enough that it takes half an hour rather than an afternoon.
What is the difference between accounts receivable and accounts payable?: Accounts receivable is money customers owe you. Accounts payable is money you owe your suppliers. Your receivable is your customer's payable.