Jul 20, 2023·4 min read

Get Paid Faster: Challenges and Strategies for Managing AR

by Matt DarnerVP, Business Dev. | Co-founder

Accounts receivable (AR) is an essential aspect of any business. It refers to the money that a company is owed by its customers. However, managing accounts receivable can be challenging, particularly for small and medium-sized businesses (SMBs). So here are a few of the most common accounts receivable challenges and how to solve them.

Challenge 1: Delayed Payments

Delayed payments are a common challenge faced by businesses. Customers may delay payments for various reasons - such as cash flow problems, invoice disputes, or simple forgetfulness. Whatever the reason, payment delays can cause cash flow problems for businesses, negatively impacting their operations, growth, and even ability to continue.

Solution: It is essential to have clear payment terms and policies in place. Just as important, these policies need to be communicated to customers in advance. Businesses can also consider offering incentives for early payments, such as discounts or rewards. Additionally, regular follow-ups with customers on all outstanding payments can help ensure customers pay on time. Consistent and clear communication is best, but can be very time-consuming. So if you can’t follow up regularly, consider hiring an accounts receivable service provider to keep current or a payment collection agency to handle the worst offenders for you.

Challenge 2: Inaccurate Invoicing

This issue can lead to delayed payments and disputes over payments. Inaccurate invoices can contain any number of error types: incorrect pricing, quantities, or product descriptions, unclear charges, or just general errors like customer details or even date and contact mistakes. All of these can lead to confusion and frustration for customers. This can harm the relationship between the customer and the business.

Solution: Businesses should ensure their invoicing process is accurate and streamlined. This can be achieved by using invoicing software that automates the invoicing process and therefore reduces the risk of errors. Additionally, businesses should ensure invoices are clear and easy to understand. This way all the necessary information remains consistent and clearly stated.

Challenge 3: Disputed Invoices

Disputed invoices arise when customers disagree with an invoice - anything from the amount to the general validity of the invoice might be at issue. Disputes can arise for various reasons, such as inaccurate invoicing or disputes over the quality of goods or services provided. Disputes can be time-consuming and costly for businesses. Obviously, they can strain the relationship between the business and the customer.

Solution: Having a clear and accurate invoicing and sales process can prevent this issue. This should include a clear and detailed sales process that explains all charges. The invoices that follow should include all relevant information, such as pricing and quantities. They should be consistent with the information the customer has been given during the sale. Additionally, businesses should ensure that they have a clear dispute resolution process in place to allow prompt resolution of any disagreements or misunderstandings that arise.

Challenge 4: Bad Debt

When a business is unable to collect its accounts receivable, it becomes a bad debt. This might occur for any number of reasons: a customer going bankrupt or simply refusing to pay. Bad debt can have a significant impact on a business's cash flow and profitability. This is particularly true when a product or service that is unpaid has cost your business a significant amount of money to produce.

Solution: As a business, you should conduct credit checks on customers before offering credit, particularly when a sale means a significant investment of time and energy on your part before you receive payment. This way, you can trust that customers have a good credit history and are likely to pay on time. Additionally, businesses should have clear credit policies that outline the terms and conditions of credit. This should include the actions that will be taken if payment terms are not honored by the customer. You can also consider offering incentives for early payment or hiring accounts receivable services to engage in consistent follow-up on your behalf or working with a debt collections service to handle any delinquent collection for you.


Accounts receivable management is essential for the success of any business. However, managing accounts receivable can be challenging. Businesses can set themselves up for success by having clear policies and processes in place, including clear payment terms, accurate invoicing, a clear dispute resolution process, and clear credit policies. By implementing these measures, you can increase the likelihood that your accounts receivable and cash flow will remain healthy and keep your business profitable.

Sign up for CollBox today to ensure your business gets paid faster! Our simple A/R solution follows up on invoices, so you don't have to. With integrations to QuickBooks, Xero, FreshBooks, and Sage, CollBox is “A/R Done For You” for small business.

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