How to Manage Accounts Receivable

How this usually works

Accounts receivable sits inside your order‑to‑cash flow: quote or contract, purchase order, delivery, invoice, payment, reconciliation and reporting. Small delays in any step create late cash and more follow‑up work.

Work backwards from the exact issue. Are invoices going out late, are terms unclear, are reminders inconsistent, or are receipts not being allocated in your software? Fixing the right link in the chain usually lifts cash flow fast.

Step‑by‑step: how to manage accounts receivable

1. Set credit policy and terms – Decide who gets credit, required purchase orders, deposit rules, limits and standard terms (e.g. 7, 14 or 30 days EOM). Confirm terms in writing on quotes, engagement letters and invoices.
2. Issue compliant tax invoices fast – Include your identity and ABN, the words “Tax invoice”, date, clear line items, GST shown (or statement that total includes GST). For invoices ≥ $1,000, include the buyer’s identity/ABN.
3. Offer easy payment methods – Add card, bank transfer, PayID, direct debit or online payment links. Reconcile merchant fees correctly.
4. Automate reminders and statements – Use software reminders at key intervals (before due, on due, 7/14/30 days overdue). Send monthly statements for accounts customers.
5. Allocate receipts and reconcile – Apply part payments and credits to the right invoices daily. Reconcile bank feeds weekly to avoid old, unmatched items.
6. Monitor aged receivables – Review 0–30, 31–60, 61–90 and 90+ day buckets weekly. Call high‑value accounts early and record promise‑to‑pay dates.
7. Escalate collections by stage – Friendly reminder, firm reminder, call with plan, final demand, stop‑supply/credit hold, then external collection/legal where proportionate.
8. Review bad debts and recoveries – When a debt is not recoverable, document attempts to collect and write it off. For accrual GST, process the decreasing adjustment in your BAS.
9. Track KPIs – Watch DSO, percent current, disputes by cause, and average days to invoice. Improve the upstream causes behind late payment.

Australian context to keep in view

• GST and BAS – On accruals, GST is generally due when you issue a tax invoice; on cash basis, when you receive payment. Bad debts on accruals can create a GST decreasing adjustment.
• Tax invoices – Include required details; ensure GST is shown correctly or state prices include GST. Keep documentation for ATO review.
• Payment terms and surcharges – Be clear and reasonable. If you surcharge, disclose it up front and calculate accurately.
• eInvoicing (Peppol) – Consider eInvoicing in Xero/MYOB/QuickBooks to speed delivery, reduce errors and improve matching.
• PPSR for supplied goods – If you supply goods on credit, consider registering security interests to protect against customer insolvency.

What to compare before you commit

Key reports and metrics

Use these to manage performance and spot issues early:

• Aged receivables – Watch the 61–90 and 90+ day buckets for early warning.
• Days Sales Outstanding (DSO) – Approximate as (Average AR ÷ Monthly Credit Sales) × Days in Month. Trend it monthly.
• Invoice lead time – Days from delivery/fulfilment to invoice issue; aim for same‑day.
• Dispute rate – Percentage of invoices queried; tie back to quoting, delivery or data errors.
• Collection rate – Percent collected within terms; segment by customer and product line.

Common problems and quick fixes

• Invoices sent late – Standardise templates and automate creation at delivery or milestone completion.
• Unapplied receipts/credits – Tighten allocation processes; reconcile bank feeds weekly.
• Frequent disputes – Improve quote clarity, proof of delivery, and include PO numbers to speed approvals.
• Chronic overdues – Shorten terms for risky accounts, require deposits, or move to payment up‑front.
• Growing 90+ bucket – Enforce credit holds and escalate earlier with scheduled call scripts.

Best next steps

Decide the outcome you want: faster cash, fewer disputes, cleaner ledger, or clearer reporting. Then choose the right help: a bookkeeper for day‑to‑day AR, a BAS agent for GST/BAS impacts, and an accountant for policy, KPI design and commercial terms.

Use the links below to move from this high‑level answer into the right service or comparison page, then make contact with a short brief and your latest aged receivables report.