Accounts receivable: turning invoices into money on time

Accounts receivable is the money customers owe you for work already delivered — invoices raised and not yet paid. On the balance sheet it is an asset. In practice it is a loan you made to your customer without a rate, a term you negotiated, or a decision to lend, and for small companies it is the most common reason a profitable business runs short of cash.

The instinct when receivables grow is to chase harder. That helps a little. What helps more is fixing the things that make an invoice slow before it is ever sent: unclear terms, the wrong recipient, a missing purchase order reference, an invoice raised three weeks after the work finished.

What good accounts receivable looks like

• Payment terms agreed in writing before work starts, including what happens when they are missed.
• Invoices raised promptly — the day the work is delivered or the milestone is met, not at month end out of habit.
• Invoices addressed to the person who pays, not the person who hired you. These are rarely the same, and the difference costs weeks.
• Every reference the customer's system needs: purchase order number, cost centre, contract reference. A missing PO is the most common reason an invoice sits untouched.
• One status per invoice that anyone can see — draft, sent, due, overdue, paid, disputed — rather than a shared belief about what has been paid.
• An owner per customer, so chasing is somebody's job rather than everybody's.
• An ageing view: what is due, what is 30 days late, what is 60, what is 90 — because the age of a debt predicts whether it will be paid.
• A defined escalation ladder, applied on dates rather than on mood.

Debt collectability falls sharply with age. An invoice chased at seven days late is usually an administrative fix; the same invoice at ninety days is often a dispute nobody raised, a contact who left, or a customer in trouble. The single highest-return habit in receivables is contacting early and politely, not later and firmly.

A collections routine that works

1. Confirm receipt. A short check a few days after sending — "has this reached the right person, is anything else needed" — catches the missing PO before the clock has run.
2. Send a reminder a few days before the due date. It is not chasing; it is a favour to whoever runs their payment run.
3. On day one past due, send a short factual reminder with the invoice attached again.
4. At around a week, telephone. One call resolves more late invoices than five emails, because most lateness is an internal blockage nobody has mentioned.
5. At two to four weeks, escalate to a named person on their side with a stated next step and a date.
6. Separate disputes from lateness immediately. A dispute is a different problem and chasing it as a late payment makes it worse.
7. Decide a point — often 60 or 90 days — at which the matter goes to a formal demand, a collections agency, or a legal route, and apply it consistently.
8. Review the ageing weekly, oldest first, and record what was agreed with each customer against the invoice.

Measuring it

Two numbers tell you most of what you need. Days sales outstanding shows how long, on average, money takes to arrive; the trend matters more than the absolute figure. The ageing profile shows where the risk sits — a receivables balance that is mostly current is healthy, one where a third is past 60 days is a warning regardless of the total. If a single customer is a large share of the balance, that concentration is worth naming out loud.

Ettex Invoices covers the mechanics: line items with quantities, rates, multiple tax rates and discounts, notes and terms fields where PO and contract references belong, sequential auto-numbering with your own prefix, a client and supplier book so entity names stay consistent between documents, and statuses from draft through paid so the ageing view is a filter rather than a rebuild. A responsible person on each invoice makes the weekly review possible. Reminder wording lives in Ettex Mail with reusable replies and scheduled send, the ledger side sits in Ettex Books, and the agreement that sets the terms goes through Ettex Signature.

Plainly: Ettex does not automate collections. There is no dunning schedule that sends reminders on its own, no payment gateway that turns an invoice into a pay-now link, no credit checking, no customer portal where a client sees their balance, and no integration with a collections agency. You get clean documents, visible statuses and an owner per invoice — the routine above is yours to run.

Why receivables go bad

• Invoicing late, which moves the whole payment cycle back by however long you waited.
• Terms never stated, so "net 30" and "when we get round to it" are both defensible.
• The invoice sent to the wrong person, discovered only when you chase.
• No purchase order reference where the customer requires one — the invoice is not rejected, it is simply never processed.
• Chasing that starts at sixty days, by which point goodwill and collectability have both dropped.
• Disputes handled as lateness, which turns a fixable disagreement into an unpaid debt.
• No owner, so every invoice is chased by whoever remembers, which is nobody in a busy month.
• Continuing to deliver work to a customer who is already ninety days late — the fastest way to turn a small loss into a large one.

Accounts receivable is a process problem before it is a chasing problem. Invoice the day the work lands, address it to whoever pays, include their references, and contact early — the ledger takes care of itself after that.