1. Create and manage an accounts receivable aging report
An aging report organizes accounts receivable by the length of time an invoice has been outstanding. It tells you which payments are coming due and which are past due and for how long.
Use the aging report to determine when it’s time to send a reminder to clients about an upcoming invoice or one that’s past due. Send a reminder a week before an invoice is due and another on the day it’s due. If the payment becomes overdue, send a reminder after 7 days, 30 days, 60 days and 90 days. At 120 days, you may want to consider sending the bill to a collections agency.
Shortening the average collection period for accounts receivable can have a positive impact on your cash flow. An aging report can also help you identify patterns with your customers that in turn can help optimize your billing. You may notice that some customers are chronically late making payments, and there may be something you can do to speed up the process. For example, you could send a reminder email at the same time you send your invoice. Or if you send a customer paper bills, you could ask if electronic bills work better with their systems.