10 Powerful Tips for Collecting Accounts Receivable in the Modern Day

10 April, 2023
10 mins
Brett Johnson, AVP, Global Enablement

Table of Content

Key Takeaways
What Is Accounts Receivable (AR) Collection?
10 Accounts Receivable Collections Best Practices to Boost Cash Flow
Transforming Collections into Customer Service - The Way Forward
How HighRadius Can Streamline Your Accounts Receivable Collection Process

Key Takeaways

  • Optimize accounts receivable collection strategies by leveraging customer data, being flexible in payment terms, and sending timely reminders.
  • Prioritize customer experience by training employees to empathize and communicate clearly.
  • Implement automation to streamline collection efforts, send prompt invoices, and manage credit risk effectively, freeing up your team for relationship-building.


The growth and success of any organization in today’s highly competitive business landscape heavily rely on the efficient management of cash flow. Accounts receivable, which represents the money owed to your business by customers or clients for the products or services provided, plays a crucial role in your revenue stream. To ensure financial health and success, it is essential to master the art of managing accounts receivable effectively.

Traditional methods of accounts receivable collection may often fall short. That’s why we are here to introduce you to modern-day strategies that can revolutionize your collection process, boost your cash flow, and foster strong customer relationships.

So, let’s dive into the world of cutting-edge accounts receivable collection strategies and discover how you can efficiently collect accounts receivable in the modern era. 

What Is Accounts Receivable (AR) Collection?

Accounts Receivable (AR) collection refers to the process of collecting outstanding payments from customers or clients for goods or services provided on credit. It is a critical aspect of financial management for businesses, as it directly impacts cash flow and the overall financial health of the company.

Efficient AR collection requires careful monitoring and analysis of payment trends, identifying potential issues or patterns of non-payment. By doing so, businesses can proactively address any problems and minimize the risk of bad debts.

Now, let’s explore some practical accounts receivable collection techniques that can help you boost your cash flow. By implementing these strategies, you can accelerate payment cycles, minimize overdue accounts, and improve your overall financial position.

10 Accounts Receivable Collections Best Practices to Boost Cash Flow

Remember, effective accounts receivable management not only ensures timely payments but also strengthens your relationships with customers, demonstrating professionalism and trustworthiness. So, without further ado, let's explore the tips.

Mastering the Art of Accounts Receivable Collection: 10 Invaluable Tips

1. Use data effectively

Data is the most valuable asset in this digital age. Having complete data about customers, including their payment statuses, trends, and financial health, is essential to ensure successful payment collection. Accurate customer data is crucial not only for effective client communication but also to prevent confusion or the dissemination of misleading information.

Utilizing technology can assist in centralizing all customer information, establishing a single source of truth. This approach enables you to easily access records for individual customers, and apply filters based on payment status, purchase details, etc., when contacting them for payment collections.

2. Be flexible in your payment terms

Many customers fail to pay because of cash woes at their end – sales might be bad or it might be a dull season. Check if restructuring their payment plan (e.g. making it Net45 instead of Net30) will help them. Or ask if they’d be able to make part payments or split payments. Your goal should be to get your due amount without affecting customer relationships. Putting too much pressure on a financially stressed customer to pay the whole amount immediately may even lead them to become delinquent, which is not in your best interests.

3. Send invoice immediately

Receivable collections are interrelated with other AR functions like invoicing and cash application. For faster collections, you must send customers invoices as quickly as possible. Also, make sure that the invoices are error-free. Wrong invoices delay collections. Adding payment links within the invoices helps make collecting accounts receivable faster. 

We surveyed 150 mid-market CFOs and found that sending invoices immediately is the measure that 37% of CFOs plan to undertake in order to enhance cash flows.


Source: The State of CFO’s Office: A Mid-Market Perspective 2022 Report

4. Send reminders well before the due date

A significant percentage of invoices are delayed because customers inadvertently miss the due dates. Implementing strategies such as sending reminder emails and push notifications through their accounts payable portal can greatly assist customers in recalling their payment responsibilities in a timely manner.

To further streamline this process, you can leverage an accounts receivable automation software to send reminders to clients at predefined intervals (e.g., a week before the invoice is due, 1-3 days before the due date, etc.). 

Depending on your relationship with the client, as well as the industry and geography in which you operate, you can also promptly call the customer for a friendly reminder. 

Additionally, employing reminder and dunning emails with embedded payment links is known to be more effective in collecting accounts receivables.

Check out RadiusOne e-Invoicing app to embed payment links within your invoices and dunning emails.

5. Follow up on overdue payments

Properly following up on overdue payments ensures that the outstanding invoices are addressed promptly, encouraging timely payments and improving cash flow. By maintaining regular communication with customers and sending reminders, businesses can emphasize the importance of fulfilling payment obligations. 

Following up on overdue payments demonstrates professionalism and dedication to financial stability. Effective follow-up strategies contribute to maintaining positive relationships with customers and reducing the number of outstanding invoices.

6. Manage credit risk

Payment collection is closely associated with customer credit risk as well. The higher the credit risk score of a customer, the more difficult it is likely to collect payments from them and vice-versa. Our AI-assistant Freeda can help you prioritize accounts and improve your receivables and collections management.

7. Follow standard procedures

Creating a written document that outlines the steps involved in collecting accounts receivable can assist your collectors in adhering to company-wide standard procedures when contacting clients for payments. 

This document should detail when to send dunning emails, when to initiate customer calls, and how to initiate collections conversations. 

Additionally, it can provide templates for emails and calls. 

Having a documented collection procedure greatly facilitates the training and onboarding of new staff members.

8. Train your employees

Collecting accounts receivable is no easy job. You have to walk the tightrope between maintaining customer relationships and ensuring cash flow. Training your employees on various skills such as negotiation, clear communication, ethics, and persuasion becomes important to ensure strong collections and customer relationships.

9. Offer a good customer experience

Receivables and collections management is a pivotal aspect of overseeing your business’s finances. However, it’s crucial to emphasize that these activities should never involve resorting to threatening language when communicating with your customers.

Instead, it's essential that your collectors possess the ability to empathize and engage in courteous conversations with clients. By understanding the reasons why customers might be experiencing challenges in meeting payment deadlines—such as their own cash flow limitations, banking complications, or product-related issues—you can foster good customer relationships.

At the same time, collectors also need to deal sternly with customers who give unreasonable excuses. Even then, ensure that you do not jeopardize relationships or hurt the reputation of your business.

10. Embrace automation

In today's fast-paced business environment embracing automation is crucial for optimizing your accounts receivable collections process. Through the implementation of accounts receivable automation software, you can digitize and centralize your collection efforts, send timely and error-free invoices, automate reminders and notifications, and effectively manage credit risk

This approach enhances collaboration between teams and streamlines routine tasks like invoice preparation and report generation. Furthermore, automation guarantees standardization, liberates your team from monotonous tasks, and empowers them to concentrate on cultivating robust customer relationships and analyzing customer behavior.

But how does this translate into real-world success? Take a look at our blog that delves into the working capital metrics of KDP, comparing them with competitors PepsiCo and Coca-Cola. The insights from this analysis, along with a discussion on O2C modernization efforts, provide a comprehensive understanding of the impact of such strategies on a company's financial health.

[Read more: KDP's Working Capital Metrics - A Comparative Analysis with PepsiCo and Coca-Cola]


Transforming Collections into Customer Service - The Way Forward

To be a successful organization today, you need to consider your collections activity as a customer service measure rather than as a means of customer intimidation. Studies show that it is 5x more expensive to acquire a new customer than it is to retain an existing one.

With choices in the market galore, you need to ensure that your teams, including finance and AR teams, provide exceptional customer experience at every touchpoint including when seeking payments.

According to our report, 52% of finance leaders measure the ROI of their digital transformation initiatives by tracking improvements in customer service metrics. For 86% of CFOs, implementing AR automation is important to keep pace with competitors. Falling behind in adopting AR technology leads to customer frustration (42%) and competitors providing superior customer experiences (41%).


How HighRadius Can Streamline Your Accounts Receivable Collection Process

Investing in an AR solution gives you the necessary data visibility and features such as worklist prioritization, in-app VoIP calling, and automated dunning to improve receivables collections. AR solutions work in tandem with your other systems such as ERP software or accounting system to create and send invoices, apply incoming cash to the right invoices, and track key metrics such as days sales outstanding (DSO), accounts receivable turnover ratio (ART), days deduction outstanding (DDO), receivables at risk, and collections effectiveness index (CEI).

HighRadius’ Collection Management Software is an affordable, easy-to-implement, and intelligent AR solution for businesses to meet their receivable goals. Clients such as ShurTech have seen a 75% improvement in their collection metrics (DSO) post implementation of our solution. Take a demo today to see how our solution works.



1) What is the difference between accounts receivables & collections?

Accounts receivable is the money owed to a business by its customers for goods or services provided, representing outstanding payments to be collected. Whereas Collections involve actively pursuing & receiving those payments.

2) What is the collection of accounts receivable?

Collection of receivables is the process of collecting payments owed by customers for goods or services that have been sold on credit. This process involves tracking and following up on outstanding invoices, issuing reminders, and taking appropriate actions to ensure timely payment.

3) What is the ideal receivable collection period?

Ideal receivable collection varies by industry and circumstances. Shorter period is better for cash flow and reducing overdue receivables. Strive for an efficient collections process to convert outstanding receivables into cash promptly. 

4) What are the key accounts receivable collection strategies?

Key accounts receivable strategies involve effective communication with customers, maintaining organized records, setting clear payment terms, offering flexible payment options, implementing timely follow-ups, & utilizing automation tools.

5) What percentage of accounts receivable should be over 90 days?

The percentage of accounts receivable that should be over 90 days varies with industry norms & business circumstances, but it is recommended to keep that percentage as low as possible, by regularly reviewing & managing aging receivables.

6) What are the key steps involved in receivables collection management?

Receivables collection management involves a series of essential steps to ensure the efficient and timely collection of outstanding payments from customers. It includes invoicing, monitoring payments, sending reminders, resolving disputes, and escalating efforts if needed.

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