Not every past-due invoice should be chased forever. There comes a time where the business has to decide what’s worth it and what’s not. Tough to do, but has to be done.
One of the biggest AR mistakes is spending too much time on receivables that are unlikely to turn into cash. That effort drains focus from accounts that actually will pay and you’re wasting your time/efforts on something that you know isn’t going to turn into cash in the bank.
Signs it’s time to reassess
Repeated broken payment promises. Especially if in writing and they default.
No response despite consistent follow-up, but “need” your services to keep their doors open. (only pay when paid…not good).
Ongoing disputes that never move forward and they do these disputes weeks after having the invoice. Intentional delays.
Balances aging past 60 or 90 days with no progress. Prioritize this asap or it’s a lost cause.
At this point, the issue is no longer timing. It’s collectability and if you have dealt in AR for any amount of time or are a solid CPA that’s managing a company’s finances you understand the likelihood of that cash coming in the door is slim to none.
Why this matters
Time spent chasing low-probability cash slows overall collections. What’s going to give you the most bang for your buck???
AR reports look inflated but cash doesn’t improve month over month.
Teams lose momentum and confidence not only in customers, but in leadership when they don’t have support. Big one…better fix that!
What to do instead
Pause new work if terms allow. Hold them accountable to terms/limit.
Escalate the conversation to decision-makers and set firm timelines for resolution.
Reconfirm willingness and ability to pay as some may not have the cash flow to pay you…red flag.
Decide whether to continue pursuit, restructure terms, or write it off and if you move on, best to inactivate so you don’t sell to them again.
Clarity beats optimism
Good AR management means knowing where to focus and where to stop your team from wasting time. Clear decisions free up time, improve cash flow, and reduce frustration. February is about receivables that actually get paid. That includes knowing which ones won’t.
If AR feels bloated or frustrating, reply to this email, message me in the community, or email [email protected].
Learn how to make AI work for you
AI won’t take your job, but a person using AI might. That’s why 2,000,000+ professionals read The Rundown AI – the free newsletter that keeps you updated on the latest AI news and teaches you how to use it in just 5 minutes a day.
Sponsoring the Cash Flow Chronicles today is WISPR FLOW!
Thank you for supporting our newsletter. Each time a reader engages with our sponsor’s ad, this directly supports CFC’s mission to be the TOP FINANCIAL newsletter Beehiiv has to offer.
Even if you do not buy a product, subscribe, etc. this greatly supports our mission. Take 5 seconds today and check them out!
Veteran business owner? Take command of your cash flow and tighten your financial systems. Join The Profit Platoon — a community built for Veterans.
