What is accounts receivable management? Learn how it works, its benefits, and how it helps businesses collect payments on time.
Shyam Agarwal 
Late payments can quietly undermine a business. Even profitable companies often face cash flow problems when customers pay late. This is where Accounts Receivable Management (ARM) becomes essential.
Accounts receivable (AR) represents money owed to a company by customers for goods or services already delivered. It appears as a current asset on the balance sheet but becomes valuable only when collected.
Effective AR management directly improves:
Poor accounts receivable processes are a leading reason small and mid-sized businesses struggle despite strong sales.
This guide explains how to manage the accounts receivable process effectively, reduce days outstanding, and improve collections using practical steps, tools, key performance indicators, and modern automation.
Accounts Receivable Management (ARM) is the end-to-end process of tracking, managing, and collecting money owed by customers who purchase on credit. In short, it gives you control over when and how cash enters your business.
A strong accounts receivable management system ensures timely payments, accurate financial records, and healthier working capital. Companies that manage receivables experience fewer delays, fewer disputes, and stronger customer relationships.
Accounting or automation software to highlight the importance of monitoring accounts receivable by tracking outstanding balances, flagging overdue invoices, and notifying teams in real time. These tools speed up collections, reduce manual work, and minimize human errors.
When managed effectively, good receivable management reduces overdue balances, shortens accounts receivable days, and keeps your business financially stable and cash-flow positive.
It covers:
In simple terms:
A strong receivable management system helps businesses:
Today, companies increasingly use accounting software and AR automation tools such as Quick Receivable, QuickBooks, Xero, NetSuite, HighRadius, Tesorio, YayPay, and Billtrust to reduce manual work and accelerate collections.
Effective accounts receivable management strengthens cash flow and reduces payment delays, which is why accounts receivable is important for businesses that want to maintain financial stability and smooth operations.
Effective AR management impacts your business in several critical ways:
Accounts receivable cash flow measures how quickly your business converts credit sales into cash. When optimized, it strengthens working capital, increases profitability, and supports sustainable growth.
On-time payments ensure enough cash is available to run operations.
Late payments increase financing costs and reduce margins.
Better AR means less dependency on loans or overdrafts.
Tracking overdue accounts reduces chances of non-payment.
Clear billing and communication improve trust.
An effective AR system should:
Below is a combined, expanded, and modernized AR workflow with best practices.
| Step | Action | Best Practices & Tools |
| 1. Establish Clear Credit Policy | Define who gets credit, limits, terms, approval rules | Written policy, consistent enforcement |
| 2. Customer Credit Evaluation | Check ability to pay | Dun & Bradstreet, Experian, Equifax, financial statements, trade references |
| 3. Set Appropriate Credit Terms | Net 30, Net 45, 2/10 Net 30, COD, CIA | Adjust terms based on customer risk |
| 4. Accurate & Timely Invoicing | Send invoices immediately | Include PO number, due date, payment link, contact details |
| 5. Proactive Follow-up & Collections | Follow up before & after due date | Automated reminders at 7, 15, 30, 45, 60+ days |
| 6. Monitor Aging Report Daily/Weekly | Identify overdue accounts quickly | Prioritize large & high-risk balances |
| 7. Offer Early Payment Discounts | Encourage faster payments | 2/10 Net 30 or dynamic discounting |
| 8. Use Technology & Automation | Automate invoicing, reminders, cash application | QuickBooks, Xero, NetSuite, Quick Receivable, HighRadius |
| 9. Regular Reconciliation | Match payments, resolve disputes | ERP/payment gateway integration |
Bad Debt Management
Apply write-offs, provisions, and manage the deduction process in accounts receivable effectively
Follow IFRS/GAAP standards and resolve short payments before escalating to collections or write-offs
To simplify your AR process:
Explain payment rules before the sale.
Errors delay payments accuracy = faster cash.
Tools like Quick Receivable send reminders automatically and track payment status.
Spot overdue accounts early.
Send friendly reminders not aggressive ones.
Allow cards, UPI, ACH, bank transfer, digital wallets.
Small discounts increase on-time payments.
Identify late payers and adjust terms accordingly.
Consistency improves cash flow predictability.
| KPI | Formula | Ideal Benchmark |
| Days Sales Outstanding (DSO) | (AR × 365) / Annual Credit Sales | 30–45 days |
| Average Days Delinquent (ADD) | DSO – Best Possible DSO | 5–10 days |
| Collection Effectiveness Index (CEI) | [(Beg AR + Credit Sales – End AR) / (Beg AR + Credit Sales – End Current AR)] × 100 | >80–85% |
| Bad Debt to Sales Ratio | Bad Debt Expense / Total Credit Sales | 1–2% |
| AR Turnover Ratio | Net Credit Sales / Avg AR | 8–12 times/year |
| Percentage of Current AR | (0–30 days AR / Total AR) × 100 | >80% |
| Customer | Current (0–30) | 31–60 Days | 61–90 Days | Over 90 Days | Total Due |
| ABC Corp | $45,000 | $12,000 | $5,000 | $8,000 | $70,000 |
| XYZ Ltd | $20,000 | $0 | $0 | $0 | $20,000 |
| Acme Inc | $8,000 | $15,000 | $22,000 | $30,000 | $75,000 |
| Total | $73,000 | $27,000 | $27,000 | $38,000 | $165,000 |
Rule of Thumb:
If more than 20–25% of AR is in the 90+ day bucket, you have a serious collection problem.
| Tool | Best For | Key Features | Approx Pricing |
| HighRadius | Large enterprises | AI, auto cash application | Custom |
| Billtrust | Mid-large B2B | E-invoicing, payment portals | $5k–50k+/yr |
| Tesorio | Mid-market | Cash forecasting + AR automation | ~$20k/yr |
| YayPay | SMB–Mid-market | Smart dashboards, workflows | $10k–40k/yr |
| Invoiced | Small–mid | Payment links, basic AR automation | $500–5k/mo |
| Stripe Billing | SaaS & tech companies | Global payments + AR | Usage-based |
A modern AR system like Quick Receivable:
Effective accounts receivable management is more than an accounting function; it is a strategic growth driver. Tracking invoices, automating reminders, using accurate data, and following consistent processes help your business collect payments faster and reduce cash flow risk.
Tools like Quick Receivable make the process simple by helping you:
Mastering AR management transforms sales on paper into actual cash in the bank, the ultimate measure of business success.
Whether you're looking to streamline invoicing, set up secure online payments, or need a custom made payment solution, our team is always ready to help you move faster, safer, and smarter with QuickPayable.
Seamless AR Management – Sync, Track, Collect!