AR collections
Accounts receivable collections: a strategy your team can run every day
Good collections are not about chasing harder. They are about knowing whom to call, what to say, and what happens next if the promise breaks. This is the method I teach collectors and team leads.
1. Diagnose before you chase
Before calling, ask why the invoice is unpaid. In my experience almost every overdue balance falls into one of four reasons:
- Invoice problem: wrong price, missing PO, wrong GST details, not received.
- Dispute: quality, quantity, service level or commercial disagreement.
- Process: stuck in the customer's approval workflow or payment run.
- Ability or willingness to pay: cash flow trouble, or simply paying others first.
Each needs a different action. Sending the same reminder to all four wastes everyone's time.
2. Segment your customers
| Segment | Who | Approach |
|---|---|---|
| Strategic | Top 20 by balance | Named owner, pre-due calls, monthly account review |
| Core | Regular mid-size accounts | Reminder cadence plus calls from 7 days overdue |
| Long tail | Many small balances | Automated emails and statements, calls only above a threshold |
| High risk | Broken promises, 90+ days | Escalation, credit hold, recovery plan |
3. Prioritise every morning
Sort the worklist by overdue value and age, then flag broken promises and disputes close to resolution. Work the top of the list first. Ten calls on the right accounts beat fifty on the wrong ones.
4. A call structure that gets commitments
- Confirm you are speaking to the person who can release payment.
- State the facts: invoice numbers, amounts, due dates.
- Ask an open question: "What is stopping this payment?"
- Agree a specific promise: amount, date, and who will make the payment.
- Confirm in writing the same day, and diarise a follow-up for the day after the promise.
5. Escalate on a clear ladder
Agree the ladder with sales and finance leadership in advance, so nobody is surprised: collector at due date, team lead at 30 days, finance head at 60 days, sales leader and credit hold at 90 days, and legal or recovery review after that. A written ladder protects the relationship because escalation becomes routine, not personal.
6. Track the right KPIs
- DSO and average days delinquent (use the DSO calculator).
- Overdue % and 90+ day % of total receivables.
- Collection effectiveness index (CEI): how much of what could be collected was collected.
- Promise-to-pay kept %: the best leading indicator of next month's cash.
- Dispute ageing and top root causes.
- Unapplied cash as a % of receivables.
Turn your ageing into a plan
Upload your ageing report to the ageing strategy tool. It reads the file in your browser, replaces customer names with codes, and gives you priorities by customer, a 30-60-90 day plan, email and call scripts. For teams, I also run collections training built around this method.
Frequently asked questions
What is a collection strategy in accounts receivable?
A collection strategy defines how you segment customers, prioritise overdue accounts, communicate, take promises to pay, escalate and measure results, so that cash is collected consistently.
How do I prioritise overdue accounts?
Rank by overdue value and age, then bring forward broken promises and disputes that are close to resolution. Work the highest value and highest risk accounts first each day.
What should a collections call script include?
Confirm the decision maker, state the invoice facts, ask what is preventing payment, agree a specific amount, date and payer, and confirm the promise in writing the same day.