Accounts Receivable: Managing Outstanding Invoices and Credit Risk
By James Mante · Accounting & Finance Professional
Understand receivables ageing, collections, disputes and practical credit-control safeguards.
Why receivables management matters
Revenue recorded on credit is not yet cash collected. Effective receivables management protects cash flow, helps resolve disputes promptly and reduces the risk of irrecoverable balances.
1. Start with accurate invoices
Check customer details, agreed terms, purchase-order references, tax treatment and invoice dates. Send invoices promptly and retain evidence of delivery or acceptance where appropriate.
2. Prepare an ageing analysis
Group unpaid invoices by how long they have been outstanding, using a consistent basis such as days past due. This helps prioritise follow-up without treating every overdue balance as uncollectible.
3. Fictional ageing example
A fictional company has £4,000 current, £1,500 overdue by 1–30 days, £800 overdue by 31–60 days and £700 overdue by more than 60 days. Total receivables are £7,000; the £700 oldest balance merits prompt review, but age alone does not establish whether it is recoverable.
4. Follow up proportionately
Use polite reminders, customer statements and agreed escalation procedures. Record promised payment dates, identify invoice disputes and coordinate with sales or operations to resolve them.
5. Assess credit risk and accounting treatment
Review customer concentration, payment history and other available evidence. Assess expected credit losses or bad-debt provisions under the accounting framework applicable to the business; do not automatically write off every overdue invoice.
6. Monitor useful indicators
Track overdue balances, collection trends, disputed invoices and days sales outstanding (DSO). Interpret metrics alongside seasonal sales, payment terms and the quality of underlying data.
Note: This article is educational. Any example figures and businesses are fictional; accounting treatment depends on the facts and applicable standards.