The Accounts Receivable Follow-Up Process

Never send a reminder from an aging you have not checked. There is no faster way to lose standing with a customer than chasing money they paid three weeks ago — it converts a routine reminder into a conversation about your competence, and it makes the next reminder easier to ignore.

Run Reports → Who owes you → Accounts receivable aging detail and check three things:

• Unapplied payments. Cash received but never matched to the invoice, so the customer shows as owing what they have already paid. This is common enough to check every single time.
• Credit notes not applied. Same effect, different cause.
• Invoices in dispute. These need a resolution conversation, not a payment reminder. Sending a reminder into an open dispute reads as ignoring the dispute.

This is also step 9 of the month-end close checklist — if you close properly, the aging is already clean and this takes two minutes.

Three days before due — the pre-due note

The highest-return contact in the whole process and the one almost nobody sends. A short note confirming the invoice is due shortly, with the amount and how to pay.

It works because it catches the invoice while it is still moving through an approval process, and it is entirely non-confrontational — you are not chasing anything, since nothing is late.

1–15 days — neutral reminder

Assume administrative delay, because usually it is. Restate the invoice number, amount, due date and payment method. No implication of fault, no urgency, no consequence.

16–30 days — telephone

Stop emailing and call. An unanswered email is ambiguous; a conversation is not.

Ask one specific question: is the invoice approved, and what date is it scheduled for payment? That question is hard to answer vaguely, and the answer tells you which problem you have — an approval problem, a cash problem, or a dispute nobody mentioned.

31–60 days — written escalation

Move up a level. If you have been dealing with accounts payable, write to the person who commissioned the work — they have an interest in the relationship that a payables clerk does not.

Put the full position in writing: invoice, amount, dates of prior contact, and a specific consequence with a date. Only state a consequence you will actually carry out.

Over 60 days — decide

Past 60 days the same reminders produce nothing. Choose: suspend work, negotiate a payment plan, hand it to a collections agent or attorney, or write it off. Continuing to send reminders is not a fourth option, though it is the one most often taken because it feels like action.

Tone should escalate with the ladder, and the early rungs should be genuinely warm rather than passive-aggressively polite. Three principles hold throughout:

• Be specific. Invoice number, amount, date. "Following up on our outstanding balance" is easy to defer; "Invoice 1043, $8,400, due 14 March" is not.
• Make paying trivial. Include the payment link or details in every message. Any step you make the customer take is a step where this stalls again.
• Ask a question that needs an answer. "Let me know if you have questions" invites silence. "Can you confirm the scheduled payment date?" requires a reply.

Avoid apologizing for asking. "Sorry to bother you about this" frames a legitimate request as an imposition and quietly concedes that the invoice is negotiable. You did the work; the invoice is due.

Chasing is the expensive fix. These are the cheap ones, and they move payment timing more than any reminder ever will:

• Invoice immediately. The day work completes, not at month end. Batching invoices to the 31st adds up to thirty days of delay you chose.
• Invoice the right person. The approver, not a generic inbox. One misdirected invoice can sit for a month before anyone notices.
• Include what their system needs. Purchase order number, job reference, cost center. A missing PO number is a guaranteed rejection at many larger customers, and often a silent one.
• Offer easy payment. Card or ACH beats a check. Processing costs money — see reconciling processors — but a fee on money received beats no fee on money outstanding.
• Take deposits. For new customers or large jobs, a deposit both funds the work and tests whether they pay at all, before your exposure is large.
• Set terms deliberately. Net 30 because you chose it, not because it appeared on a template. Shorter terms for new customers is normal and rarely questioned.

Your largest customer pays late, always

The uncomfortable one, because the leverage runs the wrong way. Two things help. Price it in — if they will always pay at 60, that financing cost belongs in the quote. And phase the work so that stopping is possible without abandoning a half-finished job.

Note also that a customer who is both your largest and your slowest is a concentration risk in two dimensions at once, which is exactly what the stress scenario in the 13-week forecast is for.

They are disputing to delay

A dispute raised for the first time at day 45, about work signed off at day 5, is usually about cash rather than quality. Handle it as a dispute anyway — respond in writing, in detail, with the sign-off attached. A documented response removes the delay tactic and leaves the real reason exposed.

They are genuinely in trouble

Sometimes the customer cannot pay. A structured payment plan, in writing, with the first installment due immediately, recovers more than a demand for the full amount that produces nothing. Stop extending credit at the same moment, and be aware that being an unsecured creditor in an insolvency generally means recovering little.

Collections improves when it is measured, and two numbers are enough. Both take a minute a month once the aging is clean.

Days sales outstanding

Roughly, how long it takes to get paid on average. Divide your receivables balance by the revenue for the period, then multiply by the number of days in that period. A business with $180,000 outstanding against $300,000 of monthly revenue is running about 18 days.

The absolute figure matters less than the direction. Rising DSO means you are financing customers more than you were, and it usually rises quietly for two or three months before anyone feels it as a cash problem.

Percentage past due

What share of the receivables balance is beyond terms. This catches something DSO hides: an average can look healthy while concealing a handful of very old balances that will never be collected.

Watch the over-60 bucket in particular. A slowly growing over-60 column is the clearest early indicator that the follow-up ladder has stopped being run consistently, usually because the business got busy.

Stop when the expected recovery falls below the cost of pursuit — including your own attention, which is the cost owners systematically undercount. Recovery rates fall sharply with age, and an invoice past 90 days is materially less likely to be collected than one at 30.

Writing off is not defeat; it is accuracy. An uncollectable balance sitting on the aging overstates receivables, which overstates the cash forecast built on it, which means you are planning around money that is not coming. Write it off, record why, and use it when setting terms for the next customer of that type.

An hour a week is not much until you notice it is the hour most likely to be skipped — because chasing money is unpleasant, and there is always something more urgent on a Wednesday.

That is precisely why it fails. Collections rewards consistency above everything else, and consistency is exactly what an unpleasant discretionary task does not get.

The judgment calls — how hard to push a major account, whether a dispute is real, when to suspend work — are yours and should stay yours.

The rest is not judgment. Segmenting the aging, matching each invoice to its stage, drafting the right message at the right tone, and tracking who was contacted when is assembly work on data already in your ledger. It is also the part that quietly stops happening in a busy month, which is when it matters most.