How to Manage Accounts Receivable in a Small Business

Accounts receivable — the money customers owe you — is one of the most critical areas of small business financial management. For Calgary businesses that invoice clients rather than collecting payment at the point of sale, managing receivables effectively is the difference between healthy cash flow and constant stress.

Set Clear Payment Terms

Your payment terms should be clearly stated on every invoice. Common terms include Net 15 (due in 15 days), Net 30 (due in 30 days), or Due on Receipt. Shorter terms generally mean faster payment, but you need to be realistic about your industry's norms. Whatever terms you choose, communicate them upfront and apply them consistently.

Invoice Promptly

The faster you send an invoice, the faster you get paid. Waiting weeks to invoice after completing work delays your payment cycle and signals to clients that payment isn't urgent. Invoice the same day the work is completed or the product is delivered.

Run an Aging Report Weekly

An aging report categorises your outstanding invoices by how overdue they are: current, 1-30 days, 31-60 days, 61-90 days, and over 90 days. Review this report weekly. Invoices that are 30+ days overdue need immediate follow-up. Invoices over 90 days may become uncollectible.

Follow Up Systematically

Have a consistent follow-up process. Send a friendly reminder at 7 days past due. Follow up by phone at 14 days. Send a formal notice at 30 days. At 60+ days, consider whether the debt is collectible or should be written off. Accounting software can automate reminder emails.

Offer Multiple Payment Methods

The easier you make it to pay, the faster payment arrives. Accept credit cards, e-transfer, and online payments through your invoicing software. The small processing fee is worth the faster collection.

Know When to Write Off

If a client cannot or will not pay, write off the invoice as a bad debt. You can deduct bad debts on your tax return and recover the GST you remitted on the original invoice. Carrying stale receivables inflates your books and gives you a false picture of your financial position.

Castle Manages Your Receivables

Castle Bookkeeping tracks accounts receivable for our clients, runs aging reports, and flags overdue invoices for follow-up. Clean receivables management is part of our monthly bookkeeping service. Contact us for a free consultation.