How to Improve Cash Flow by Speeding Up Accounts Receivable

Cash flow, or the money moving in and out of the business, is the lifeblood of any company. Healthy cash flow ensures you can cover payroll and loan payments, pay suppliers, invest in growth, and keep day-to-day operations running smoothly. Accounts receivable (A/R), the money owed to you by customers who have been invoiced but not yet paid, directly affects your cash flow. The longer it takes to collect receivables, the tighter your cash flow.

Fortunately, there are several steps you can take to accelerate A/R collections so you have cash available when you need it.

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How to Improve Accounts Receivable Collection

Here are nine strategies that can help ensure a healthy cash flow.

Establish Clear A/R Policies Upfront

Set expectations from the beginning. Be transparent about payment terms, deadlines, late fees, and any discounts for early payments. Put it in writing—on contracts, proposals, and invoices. This reduces confusion and gives you leverage if a customer consistently pays late.

Send Invoices Promptly

The sooner you invoice, the sooner you can get paid. Delayed invoicing signals payment isn’t urgent. Ideally, you should invoice immediately after delivering a product or service.

If you're working on a large or ongoing project, consider billing in monthly increments or based on milestones. That way, you can invoice at regular intervals during the project and collect those payments faster.

Leverage Technology in Your Accounts Receivable Processes

Manually tracking invoices and payments is a recipe for delays and inefficiency. Modern accounting software can generate invoices instantly, send reminders, and offer customers convenient electronic payment options. Most software today includes automation features to reduce administrative work and shorten the gap between when you deliver services and when you have cash in hand.

Ninety-one percent of mid-size businesses that fully automate their accounts receivable process report increased savings, cash flow, and growth.

Build Strong Customer Relationships

Sometimes, getting paid quickly is less about systems and more about relationships. When customers trust you and value your partnership, they’re more likely to prioritize your invoices. A positive working relationship—as well as a quick check-in call or a friendly reminder when invoices are coming due—goes a long way toward ensuring payments arrive on time.

Follow Up on Outstanding Invoices Quickly

Don’t let unpaid invoices sit. Following up as soon as a payment is overdue communicates that you take payment seriously. Adopting a structured follow-up process—for example, sending invoice reminders at seven, 14, and 30 days past due—keeps collections consistent and professional.

Offer Early Payment Discounts

A small incentive can encourage faster payments. For example, consider a “2/10 net 30” policy. This means you offer a 2% discount if the customer pays the invoice within 10 days; otherwise, full payment is due in 30 days. Discounts motivate customers to pay earlier, improving cash flow while still maintaining profitability. Just make sure the discount doesn’t cut too deeply into your margins.

Implement Late Fees

While discounts reward timely payments, late fees discourage late payments. Even a modest late fee, like 1.5% per month, can encourage customers to pay before penalties accrue. Consistency is key here. Apply late fees fairly and communicate the policy clearly and consistently.

Collect Up-Front Payment for Chronic Late Payers

If a client repeatedly misses deadlines or has poor credit, consider requiring a deposit or full payment up front. This protects your cash flow and ensures you’re not financing someone else’s business. While this may feel like a tough stance, it’s sometimes necessary to protect your company from unnecessary cash flow problems.

Send Delinquent Accounts Receivable to Collections

Despite your best efforts, some customers will avoid paying invoices as long as possible. As a general rule, if an account is more than 90 days past due and repeated follow-up attempts have been unsuccessful, it may be time to involve a collections agency. While this step can strain customer relationships, it prevents you from sinking more time and resources into chasing down money that may never arrive. Be sure to weigh the potential recovery against the cost of using a collections service, and document all communications before turning an account over.

Strong cash flow is crucial for business health, and speeding up your accounts receivable is one of the most effective ways to achieve it. By automating processes, setting clear expectations, and taking a proactive approach to invoicing and follow-up, you can reduce payment delays and keep your business financially stable.

If you’re ready to take a closer look at your cash flow and A/R practices, contact Slate today. We can help you implement strategies and tools to improve collections and strengthen your business’s cash flow management.