Learn how to collect cash from customers on account. Journal entries, AR impact, cash-flow effects, automation strategies, and faster collection methods.
Dadhich Rami 
Collecting cash from customers on account is a core part of the accounts receivable (AR) cycle. It is the moment when a customer pays an invoice for products or services already delivered and billed. When this step breaks down, cash flow tightens, DSO increases, and financial reporting becomes less reliable.
On Account Means:
The sale occurred on credit, and the customer is now paying down their outstanding AR balance.
Why It Matters:
The transaction converts Accounts Receivable into cash, increasing liquidity and strengthening your working capital position without affecting revenue.
With tightening credit markets and rising operating costs, efficient accounts receivable collections are mission-critical for SaaS, B2B, and e-commerce businesses. This guide explains how the journal entry works, outlines the step-by-step collection process, details the financial impacts, and shares best practices for faster payments.
Collecting cash from customers on account is a foundational outcome of strong accounts receivable discipline, but many finance teams overlook the broader framework behind it. To truly understand why timely collections matter, it helps to first understand what is accounts receivable management the structured process of invoicing, tracking, collecting, and reconciling customer payments. Without a defined AR management strategy, even profitable businesses can struggle with delayed cash inflows and rising financial risk.
| Aspect | Cash Sale (Immediate Payment) | On-Account Collection (AR Payment) |
| Timing | Payment at sale | Payment 30–60+ days after invoice |
| Journal Entry | Dr Cash / Cr Revenue | Dr Cash / Cr Accounts Receivable |
| Revenue Recognition | Immediate | Already recognized |
| Cash Flow Impact | Immediate inflow | Converts AR to cash; improves working capital |
| Risk Level | Low | Moderate (aging, potential bad debt) |
| Best For | Retail, instant checkout | SaaS, subscriptions, B2B services |
The accounting principle is simple: once the customer pays, cash increases and accounts receivable decreases.
Dr Cash............................... 5,000
Cr Accounts Receivable............. 5,000
Dr Cash............................... 3,000
Cr Accounts Receivable............. 3,000
Dr Cash............................... 4,900
Dr Sales Discounts.................... 100
Cr Accounts Receivable............. 5,000
These keep AR clean and revenue recognition compliant with ASC 606 / IFRS 15.
One of the most overlooked drivers of faster collections is the importance of monitoring accounts receivable on a regular basis. Reviewing aging trends, customer payment behavior, and overdue balances helps teams identify risk early before invoices turn into write-offs. Consistent AR monitoring enables smarter follow-ups, better customer segmentation, and more accurate cash-flow forecasting.
Use structured reminder intervals (before due date, on due date, and after due date).
Accept ACH, wire, check, or card and match them to the correct invoice.
Update the ledger or allow your AR automation tool to post it automatically.
Sync bank feeds, clear unmatched items, and keep AR subledgers accurate.
Track partial payments and re-engage customers using email or phone sequences.
For SaaS and subscription billing, integrate with tools like Stripe, Chargebee, or Zuora to automate the entire cycle. Each step in the collection cycle, from aging review to reconciliation, works best when it is part of a broader accounts receivable management strategy. Effective AR management ensures invoices are issued accurately, follow-ups are timely, and payments are applied correctly, reducing disputes and accelerating cash flow. Businesses that treat collections as a proactive process rather than a reactive task consistently see lower DSO and improved working-capital stability.
A decrease in AR increases operating cash flow.
Example: AR decreases by $10,000 → OCF increases by $10,000.
Invoices billed on net-30; auto-drafted payments sync to deferred revenue schedules.
Bulk orders billed to AR; ACH payments reduce aging and improve inventory turnover.
Time-and-materials invoices; retainer collections improve utilization and cash predictability.
| KPI | Formula | Benchmark (SaaS/B2B) |
| DSO | (Avg AR ÷ Credit Sales) × Days | < 45 days |
| CEI | (Beg AR + Sales – End AR) ÷ (Beg AR + Sales – Avg AR) | > 80% |
| AR Turnover | Net Credit Sales ÷ Avg AR | > 8× annually |
| Bad Debt % | Write-offs ÷ Sales | < 1% |
| Cash Conversion Cycle | DIO + DSO – DPO | < 60 day |
Fix: Automate bank-to-GL posting.
Fix: Require invoice numbers in payment references.
Fix: Record discounts separately and apply rules automatically.
Fix: Move to an AR automation platform.
Fix: Record fees separately or net them out properly.
Fix: Segment by risk, geography, or revenue to tailor follow-ups. To consistently collect cash on time, businesses must go beyond reminders and manual follow-ups. Learning how to manage accounts receivable effectively involves combining automation, clear credit policies, real-time reporting, and customer-friendly payment options. When AR processes are optimized end-to-end, collections become predictable, disputes decline, and finance teams gain better control over liquidity and growth planning.
QuickReceivable eliminates manual work and gives AR teams a fast, automated, and error-free way to collect payments.
By replacing spreadsheets and manual reconciliation, QuickReceivable helps finance teams accelerate collections, reduce errors, and maintain accurate cash forecasting.
Use automated reminders, offer multiple payment methods, set clear terms, and follow a structured escalation process. Accounts receivable automation tools significantly improve collection speed.
AR platforms like
Receivable automates invoicing, reminders, payment matching, reconciliations, and real-time tracking.
Collecting cash from customers on account is more than a routine accounting task; it directly affects cash flow, liquidity, and financial health. Companies that use a consistent, data-driven collection process achieve better working capital, fewer overdue accounts, and stronger financial performance.
Businesses that adopt AR automation tools like QuickReceivable consistently achieve faster payments, greater accuracy, and more predictable cash flow. Even small improvements in your collections workflow can lead to significant financial results.
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!