Accounts receivable management: how to deal with customers who pay late

What are accounts receivable and why do they need separate control?

Accounts receivable is the money customers owe you for goods or services already delivered but not yet paid for. Selling on credit is normal practice in B2B: wholesale buyers, distributors and corporate clients often pay later. The risk is not in the payment terms themselves but in leaving them unmanaged.

Receivables appear as an asset on the balance sheet, but you cannot use them to pay salaries, rent or suppliers. That is why the job is not done when the sales team says “deal closed”: until the money arrives, the sale is not really complete.

A simple example: if a company sells the same volume every month but customers pay after 60 days instead of 30, the amount of cash tied up roughly doubles. The company has to cover that gap from its own funds or with a loan. That is why shortening payment times is often as effective as growing sales.

Prevent bad debt upfront: a credit policy

Collecting overdue debt is far harder than preventing it. A credit policy turns the question of who gets credit, how much and for how long into a written rule.

• Spell out payment terms in the contract: due date, payment method and what happens if payment is late.
• Set a credit limit for every customer; start new customers with a small limit or prepayment.
• Check the customer’s details (tax ID, legal name, bank details) before the first order.
• Send the invoice immediately after delivery; a late invoice means a late payment.
• Decide in advance whose approval is needed to release a new order when the limit is exceeded.
• Review limits once or twice a year based on payment discipline.

Aging analysis: which debt is the most dangerous?

An accounts receivable aging report splits all receivables into groups by how overdue they are: not yet due, 1–30 days, 31–60 days, 61–90 days and over 90 days. Even if the total is the same, the situation is serious if most of the debt sits in the older buckets.

Experience shows that the longer a payment is overdue, the less likely it is to be collected in full. So each bucket needs its own action plan: a polite reminder is enough for the first one, while the oldest buckets call for management-level talks and legal steps. Update your aging analysis at least once a week.

A step-by-step plan for late payments

The strength of this plan lies in consistency. Customers learn that late payment gets noticed and that the same steps follow every time. Reminders should be polite, factual and specific: which invoice, what amount, overdue since when. An emotional or threatening tone damages the relationship and does not speed up payment.

• Send a reminder a few days before the due date and confirm that the invoice was received.
• Call in the first working days after the due date, find out the reason and agree on a specific payment date.
• Confirm the agreement in writing and set a task to check the result on that date.
• If the promise is not kept, limit new orders to prepayment or manager approval.
• For long delays, meet the customer’s management and agree on a realistic payment schedule.
• If nothing works, gather the documents and discuss next steps with a lawyer.
• Log every contact: who spoke, when and what was promised.

Which metrics should you track?

Review these metrics alongside the sales report. A salesperson who hits the sales plan while their customers’ debt keeps growing is not doing as well as it seems.

• Total receivables and the share that is overdue.
• Debt-to-sales ratio: current debt divided by sales for the recent period.
• Days sales outstanding (DSO): the average number of days between a sale and the money coming in.
• Breakdown by aging bucket and the amount overdue by more than 90 days.
• The top 10 debtors and their share of total receivables.
• The number of customers over their limit or blocked.

Common mistakes

Receivables problems rarely come from one big decision; they build up from small concessions. These are the mistakes we come across most often in consulting projects.

• Leaving debt collection to accounting alone; the salesperson owns the relationship and needs to be involved.
• Giving a large customer unlimited credit “so as not to lose them”.
• Relying on memory for payment promises instead of recording them.
• Releasing new orders automatically even after payments are overdue.
• Tracking only the total debt and ignoring the aging buckets.
• Paying salespeople bonuses on sales value alone, regardless of whether the customer has paid.

Tracking receivables in SBT CRM

The Finance section of SBT CRM shows unpaid orders and sent invoices together: total and overdue debt, the number of customers with debt, the debt-to-sales ratio, and at-risk and blocked customers. The Aging tab splits debt into not yet due, 1–30, 31–60, 61–90, 91–120 and 120+ days, shows each customer’s limit, longest delay and risk score, and exports the table to Excel.

The Credit and debt panel on the customer card is where you set a credit limit or block a customer; when the limit is exceeded, new orders wait for credit approval. In the Invoices section, a sent invoice past its due date becomes Overdue and the responsible person gets a reminder, and partial payments can be recorded. Contracts automatically create invoice drafts for recurring services so invoices go out on time. These modules are available on the Standard, Business and Enterprise plans.

At SBT Consulting & Solutions, we always start receivables projects by writing down the credit policy. Once the rules are clear, the software applies them every day and management sees the debt as it builds up rather than at month-end.

Frequently asked questions

What are accounts receivable?

Accounts receivable is the amount customers owe a company for goods or services that have been delivered but not yet paid for. Put simply, it is money your customers owe you.

How do you set a credit limit for a customer?

Usually you look at the customer’s monthly purchase volume, the payment term and their payment history. It is safer to start new customers with a small limit and raise it as payments arrive on time.

What is an accounts receivable aging report?

It groups receivables by how long they are overdue: not yet due, 1–30, 31–60, 61–90 days and more. It shows which debts are riskiest and where to focus your attention.

How is an unrecoverable debt written off?

Writing off bad debt requires documentation in line with tax legislation. Talk to your accountant or tax adviser before making that decision.