💳 Receivables Management Strategy
Screen customers before extending credit, set clear payment terms, send invoices immediately, follow up systematically on overdue accounts, and use automation tools to streamline the entire process.
Poor Receivables Management Kills Cash Flow
Late payments and bad debt can destroy profitable businesses by creating cash flow crises. Every day money stays unpaid costs you interest, opportunity, and operational flexibility. Professional receivables management systems reduce payment delays, minimize bad debt, and improve cash flow predictability.
This guide shows you how to establish credit policies, create efficient invoicing systems, implement collection procedures, and use technology to manage receivables professionally.
Establish Credit Policies and Customer Screening
Prevent payment problems by qualifying customers before extending credit terms.
Customer Credit Application Process
Required Information
- • Legal business name and DBA
- • Business address and phone
- • Federal tax ID (EIN)
- • Years in business
- • Bank references (2-3 accounts)
- • Trade references (3-5 suppliers)
- • Personal guarantee from owners
Credit Verification Steps
- • Check business credit reports (D&B, Experian)
- • Verify business registration and licenses
- • Contact bank references
- • Call trade references for payment history
- • Review financial statements if available
- • Search for liens and judgments
- • Set appropriate credit limits
Professional Invoicing Systems
Efficient invoicing accelerates payment and reduces disputes.
📋 Professional Invoice Checklist
- ☐ Send invoices immediately upon delivery
- ☐ Use consistent invoice numbering system
- ☐ Include clear payment terms and due dates
- ☐ Provide detailed description of goods/services
- ☐ Show quantities, rates, and extended amounts
- ☐ Include your business contact information
- ☐ Add customer purchase order numbers
- ☐ Offer multiple payment methods
- ☐ Include remittance address and instructions
- ☐ Professional branding and formatting
Key Takeaways
- Screen customers: Use credit applications and verify references before extending terms
- Clear payment terms: Set reasonable terms and communicate them clearly
- Professional invoicing: Send detailed, accurate invoices immediately
- Systematic follow-up: Use consistent collection procedures
- Use technology: Automate processes to reduce administrative burden
- Monitor performance: Track key metrics to identify and address problems