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Accounts receivable and collection
Managing what customers owe from the moment the invoice is issued until the money arrives — chasing before it is due, resolving queries fast, and escalating in a defined order.
Also called: Credit control · Collections · Debtor management · AR
- Owned by
- Credit Controller
- Also involved
- Account Manager, Inside Sales / Sales Coordinator
- Documents
- Sales Invoice, Credit Note, Packing Slip / Delivery Note
- Measured by
- Days Sales Outstanding (DSO)
What it is
Accounts receivable is the ledger of money owed to you and the work of turning it into money held by you. Most of that work is not chasing. It is preventing the reasons an invoice will not be paid — before it is due, while the customer's approval process still has time to run.
The common misunderstanding is that collections is an argument about willingness to pay. In business-to-business trade it very rarely is. The overwhelming majority of late payments are administrative: the invoice failed a match, the goods receipt was never posted, the approver was on leave, the purchase order was exhausted, the invoice went to the wrong inbox. Nobody is refusing. Nobody has decided anything at all.
Which means good credit control looks less like pressure and more like early, specific, well-evidenced contact with the person who can actually release the payment.
Why companies do it
An invoice is not revenue until it is cash, and unpaid invoices are funded by you. Every day of delay is working capital you have lent, interest-free, to a company that did not ask for a loan and will not thank you for it. Beyond the cash, receivables is the early warning system for a failing customer — a payment pattern changes long before an insolvency notice arrives, and the company watching the ledger stops shipping first.
Inputs and outputs
What has to be there first
- Issued invoices with due dates — Raising the invoice
- Proof of delivery and supporting documents — Despatch and shipment
- The aged debt ledger — Finance system
- Customer contacts — accounts payable, not just the buyer — Customer master data
- Credit limits and payment history — Credit control
- Open disputes, complaints and returns — Account Manager
What it produces
- Cash allocated against invoices — Payment and cash application
- Resolved or escalated queries — Account Manager
- Credit notes where the claim is valid — Credit Note
- Credit holds and supply stops — Despatch and shipment
- A cash forecast — Finance
Built from the ledger and known payment behaviour, not from the invoice due dates alone.
How it is done
01Confirm the invoice was received and is approved — before it is due
A short contact around a week after issue, asking one question: is it in your system and approved for payment on the due date? Nearly every problem that would have surfaced on day 60 is visible on day 7, and at that point there is still time to fix it without anyone being late.
02Work the ledger by value and risk, not alphabetically
Sort by amount and by days overdue. A handful of accounts almost always carry most of the exposure, and an hour spent on the largest three is worth a week spent working the list in order.
03Resolve queries as their own workstream
A queried invoice is not a collections problem, it is an operations problem holding up cash. Log it, assign it to whoever can actually answer it, and give it a deadline. Queries left inside the collections process get chased repeatedly and resolved slowly.
04Escalate on a defined ladder
Statement, reminder, formal demand, account on hold, then whatever the contract allows. Each step should have a trigger, an owner and a date. Escalation that depends on how annoyed someone feels is inconsistent, and customers learn which suppliers are inconsistent.
05Keep sales informed and involved
The account manager has a relationship credit control does not, and often knows why the payment has stopped. Equally, they should not be the collector — mixing the sales conversation with the debt conversation weakens both.
06Use supply as leverage carefully and formally
Putting an account on stop is effective and blunt. It should be a documented decision with a named approver, communicated in writing before it takes effect, and never applied silently — a delivery that simply fails to arrive damages more than the debt is worth.
07Reconcile the ledger to the customer's
Periodically compare your open items to theirs. The differences are almost always invoices they never received, credits they applied and you did not, or payments allocated to the wrong invoice — and each of those is money that will otherwise age indefinitely.
08Write off deliberately, not by neglect
Some debt will not be collected. Recognising that with a decision and an approval keeps the ledger honest and the DSO meaningful. Leaving it to age quietly makes every other number on the ledger less useful.
What needs approval
Approvals only work when they happen before the commitment. Retrospective approval is a manager being told what has already been promised.
| Trigger | Approver |
|---|---|
| Placing an account on stopWith sales informed before the customer is. | Finance director or credit manager |
| Agreeing a payment plan | Credit manager |
| Issuing a credit note to settle a dispute | Finance, and sales where the cause is commercial |
| Referring a debt to a collection agency or solicitorEffectively the end of the customer relationship — a commercial decision, not a procedural one. | Finance director |
| Writing off a bad debt | Finance director |
The same £48,000, chased two ways
A worked example with real numbers.
Two suppliers each have £48,000 outstanding across six invoices with the same customer on 30-day terms.
Supplier A contacts accounts payable seven days after each invoice is issued, asking only whether it is approved for payment. On the third invoice the answer is no — the goods receipt was posted against the wrong purchase order line. It is corrected on day 9 and paid on day 31.
Supplier B waits. On day 45 credit control begins chasing. Two of the six invoices have queries: one missing a purchase order number, one where the customer's receipt shows a short delivery. Both take eleven days to resolve because the delivery notes have to be found and the despatch clerk is on holiday. One requires a credit and reissue, restarting its terms.
Supplier A collects the full £48,000 by day 33. Supplier B collects £31,000 by day 52 and the balance by day 88. Averaged across the six invoices, Supplier B carried the debt 27 days longer — about £3,550 of working capital tied up for a month, on one customer, in one quarter.
Neither customer refused to pay. Neither disputed the goods. The difference was entirely in when the first question was asked.
| Supplier A | Supplier B | |
|---|---|---|
| First contact | Day 7, before due | Day 45, after due |
| Problems found | 1, on day 7 | 2, on day 45 |
| Average time to resolve a query | 2 days | 11 days |
| Invoices requiring credit and reissue | 0 | 1 |
| Full amount collected by | Day 33 | Day 88 |
| Effective DSO on this customer | 31 days | 58 days |
The point
Both suppliers did the same amount of chasing. One did it before the due date, when problems were still cheap to fix, and the other did it afterwards, when every problem also carried a queue.
Common mistakes
MistakeWaiting until the invoice is overdue to make contact
Why it happens: It feels inappropriate to chase money that is not yet due. But the customer's approval process runs during that window, and by the due date any problem in it has already cost you the full term.
What to do instead: Contact before due date to confirm approval, not to ask for payment. It is a different conversation and almost nobody objects to it.
MistakeChasing the buyer instead of accounts payable
Why it happens: The buyer is the known contact. They do not process payments, and in a large organisation they may have no visibility of them at all.
What to do instead: Hold accounts payable contacts as master data. Establish them at account opening, when the relationship is new and helpful.
MistakeTreating every query as valid until proven otherwise
Why it happens: A query stops the clock, and some customers use them tactically. Without evidence to hand, the supplier concedes or waits.
What to do instead: Keep the POD, the acknowledgement and the order filed against the invoice. A query answered within a day with the signed delivery note attached rarely comes back.
MistakeInconsistent escalation
Why it happens: Chasing depends on who has time, so some customers are pursued relentlessly and others never. The pattern is visible from the customer's side, and payment behaviour adjusts to it.
What to do instead: A written ladder with dates and owners, applied to every account the same way. Predictability is what actually changes behaviour.
MistakeLetting sales stop the escalation indefinitely
Why it happens: The account manager asks for another week because a large order is in play. The week becomes a quarter, and the exposure grows alongside the new order.
What to do instead: Sales can pause the ladder once, with a date and a name against it. After that the decision moves up, because the person asking for the delay is not the person carrying the risk.
MistakeMeasuring only DSO
Why it happens: DSO moves with sales volume and hides everything underneath. A month of strong sales makes collections look worse; a weak month makes it look better.
What to do instead: Read DSO alongside the ageing profile, the value of invoices in query, and the percentage paid on time. The four together describe what one of them cannot.
Where the work happens
- Accounting or ERP receivables ledger
- Aged debt reporting
- Customer accounts payable portals
- Query and dispute log
- Credit insurance and credit reference agencies
Terminology
- Aged debt
- Outstanding invoices grouped by how long they have been unpaid — current, 30, 60, 90+ days. The shape of the profile matters more than the total.
- DSO
- Days sales outstanding. The average number of days between invoicing and payment, calculated from the ledger rather than from individual invoices.
- Dunning
- The structured sequence of reminders and demands sent as an invoice ages.
- Credit limit
- The maximum a customer may owe at any time. Enforced properly, it stops orders being accepted, not just invoices being chased.
- On stop
- A hold preventing further supply until the account is brought within terms.
- Remittance advice
- The customer's note of which invoices a payment covers. Without it, allocation is guesswork.
- Retention of title
- A clause keeping legal ownership of goods with the seller until payment, giving a claim to the goods themselves if the customer fails.
- Bad debt provision
- An accounting allowance for receivables not expected to be collected.
Common questions
›When should you start chasing an invoice?
Before it is due. The purpose of the first contact is not to ask for money but to confirm the invoice is received, matched and approved for payment on the due date. Almost every reason an invoice will be late is already true a week after issue, and it is far cheaper to fix then.
›Why do most B2B invoices get paid late?
Administrative failure, not refusal. A failed three-way match, a missing goods receipt, an absent approver, an exhausted purchase order, an invoice sent to the wrong destination. In most cases nobody has made a decision to withhold payment — the invoice is simply sitting somewhere without an owner.
›Should sales be involved in collections?
Informed, yes; responsible, no. The account manager often knows why a payment stopped and can open a door credit control cannot. But making them the collector puts the same person on both sides of the relationship, and the debt conversation loses every time.
›When should you stop supplying a customer who owes money?
When the exposure exceeds what you are willing to lose, based on a written limit rather than a mood. The decision needs a named approver, written notice before it takes effect, and sales told first. Stopping supply silently — by letting a delivery quietly fail to arrive — costs more relationship than the debt is worth.
›What is the difference between credit control and collections?
Credit control is the whole discipline: deciding who gets credit, how much, on what terms, and monitoring it. Collections is the narrower activity of recovering what is overdue. Companies that are strong on collections and weak on credit control spend their time recovering money they should never have been owed.
›How do you tell a good payer from a bad one before trading?
Credit reference data, filed accounts, trade references and payment behaviour reported by other suppliers. None of it is conclusive, which is why the practical control is a modest limit at the start, raised as the account proves itself, rather than a judgement made once at account opening.
Tools for this
Downloadable, self-contained, and yours to keep — they run in a browser with no account and no data leaving your machine.
- Accounts Receivable AgingFreeAge your unpaid invoices into buckets, see what is overdue and by how far, work out days sales outstanding, and print a chase list for whoever is collecting. Runs in your browser. Nothing is uploaded.
- Escalation TrackerProTrack escalations between the tiers of a daily management system — Tier 1 cell up to Tier 4 site leadership — with response and resolution service levels, breach flags, de-escalations and a report for the tier meeting; the general record of project problems is the separate issue log. Nothing is uplo
- Customer Complaint TrackerProTrack customer complaints from intake to closure — acknowledgement and resolution times, justified rate, complaint costs and category trends, with a customer-ready report. Nothing is uploaded.
Reviewed 2026-08-15. Nothing here is legal, tax or accounting advice — contractual and tax practice varies by jurisdiction.