What is accounts receivable management? Tips and guidance

Accounts receivable management is an essential part of any business’s financial operations. It involves all the steps required to ensure that invoices are paid on time. When handled effectively, it helps maintain a steady cash flow and minimises financial risk. With the right strategies and intelligent tools—such as Payt’s accounts receivable software—you can streamline and automate the entire process.

Contents:

1. What is accounts receivable management?
2. Why is accounts receivable management important? 
3. The accounts receivable management process in 7 steps
4. How to measure accounts receivable management effectively
5. Accounts receivable management in practice: How Payt helps
6. Frequently asked questions about accounts receivable management

What is accounts receivable management?

Accounts receivable management is the process of ensuring your customers pay their invoices on time. It begins with sending a clear, accurate invoice and ends when the payment has been received. Staying on top of this process helps you maintain control over your cash flow and avoid unexpected financial setbacks.

But it goes beyond simply issuing invoices. Effective accounts receivable management also involves:

• Assessing whether your customer is likely to pay
• Sending timely and appropriate payment reminders
• Setting up payment arrangements that suit both parties
• Maintaining personal, proactive communication with your customers

By gently reminding customers in a clear and professional manner, you increase the likelihood of being paid on time—helping your business remain financially healthy and continue to grow.

It’s important to understand that accounts receivable management is not the same as debt collection. Debt collection agencies only come into play when prior reminders haven’t worked. The aim of accounts receivable management is to avoid that scenario altogether by establishing an efficient process and maintaining strong communication.

Whether you’re a sole trader, a small business, or a larger organisation, a well-structured accounts receivable process helps you stay in control, save valuable time, and maintain a reliable cash flow.

Why is accounts receivable management important?

Effective accounts receivable management provides several valuable benefits:

• Prevents late payments: Timely follow-ups help reduce the number of overdue invoices.
• Improves financial forecasting: Having a clear view of outstanding receivables enables better planning and informed investment decisions.
• Enhances customer relationships: Clear and open communication about payments helps build trust and maintain strong client relationships.
• Reduces workload through automation: Intelligent software tools lessen manual tasks and boost overall efficiency.

By remaining proactive and well-organised, your business maintains a healthier cash flow and operates more effectively.

The accounts receivable management process in 7 steps

Accounts receivable management generally follows a clear 7-step process. These steps are typically handled by an accounts receivable specialist and are designed to support timely payments and maintain a healthy cash flow.

• Send accurate invoices: Ensure invoices are issued promptly and include all essential details, such as due dates, item descriptions, and payment instructions.
• Set clear payment terms and conditions: Define your payment expectations upfront and communicate them clearly with your customer to avoid confusion later.
• Send a friendly first reminder: If the invoice remains unpaid after the due date, send a polite payment reminder shortly afterwards. A gentle prompt can often be enough.
• Follow up with a second reminder or formal notice: If there’s still no payment, follow up with a more formal message to stress the urgency and outline possible next steps.
• Reach out by phone: Personal contact can make a big difference. A quick phone call can clarify misunderstandings and prompt immediate action.
• Escalate to a collection agency if needed: When internal follow-up doesn’t work, consider passing the matter to an external agency as a last resort.
• Evaluate and refine your process: Regularly assess how your process is performing and make improvements where necessary to ensure better results over time.

With the right tools—such as automation and intelligent workflows—you can simplify this entire process, reduce manual work, and still keep your communication personal and professional.

How to measure accounts receivable management effectively

A well-organised accounts receivable management process helps your business get paid faster while reducing financial risk. But how can you measure whether your approach is truly working? It starts with tracking the right metrics. By focusing on clear KPIs, you’ll gain valuable insight into the performance of your process—and identify where there’s room to improve.

Here are three key indicators that show how well your accounts receivable efforts are paying off:

1. Average days to payment

This metric shows how many days it typically takes for a customer to pay after an invoice is issued. The fewer days it takes, the stronger your cash flow. If this number is decreasing, it’s a sign that your follow-up and communication are effective.

2. Days past due

In addition to average payment terms, it’s essential to monitor how many days payments are overdue. This helps you spot patterns in late payments and address them proactively. A rising number could mean you need to review your reminder strategy or clarify your payment terms.

3. Write-off rate

This percentage reflects how many invoices are ultimately written off due to non-payment. A low write-off rate indicates strong risk management and that your team is effectively resolving payment issues before they escalate.

Tracking these KPIs regularly helps you stay in control of your receivables and protect your cash flow. With the right software, you can monitor these metrics automatically and optimise them with tools like smart reminders and insightful reports.

Accounts receivable management in practice: How Payt helps

Managing accounts receivable can easily take up more time than you’d like—especially when you’re dealing with a high volume of invoices or multiple overdue payments. That’s where Payt steps in. With our accounts receivable management software, most of the manual work is taken off your plate.

Payt automates your entire process—from sending out payment reminders to arranging payment plans. You stay fully in control, while the follow-up happens automatically. The result? More time for the work that really matters to you and your team.

Here’s how Payt supports your business:

• Save up to 80% of your time spent on receivables
• Get paid up to 40% faster on average
• Benefit from consistent, automated follow-ups

Over 17,000 users trust Payt every day. Want to see what it could do for your business? Download our brochure and discover how to make your accounts receivable process smarter, faster, and more personal.

Frequently asked questions about accounts receivable management

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