Top 10 Best Practices for Accounts Receivable (AR)

1. Clear and Well‑Documented Credit Policies 

• Define credit approval criteria. 

• Establish customer‑specific credit limits and payment terms. 

• Review credit risk periodically. 

2. Accurate and Timely Invoicing 

• Issue invoices immediately after delivering the product or service. 

• Ensure the invoice contains all correct information (PO, taxes, descriptions, dates). 

3. Automation of the Invoicing Process 

• Use ERP systems, workflows, and automatic invoice delivery. 

• Minimizes errors and speeds up the collection cycle. 

4. Proactive Accounts Receivable Follow‑Up 

• Send reminders before and after the due date. 

• Contact customers early if they have a history of late payments. 

5. Periodic Reconciliation of the AR Aging 

• Review overdue balances by aging category. 

• Identify delay patterns and high‑risk customers. 

6. Structured Dispute Management 

• Record each dispute with cause, owner, and date. 

• Resolve quickly to avoid payment delays. 

• Maintain complete traceability. 

7. Offer Multiple Payment Methods 

• Bank transfers, ACH, credit cards, digital platforms. 

• Facilitates payment and reduces customer friction. 

8. Correct and Timely Payment Application 

• Avoid unapplied or misallocated payments. 

• Keep customer accounts clean and up to date. 

9. KPIs and Dashboards for Monitoring 

• DSO (Days Sales Outstanding). 

• Percentage of overdue collections. 

• Open vs. closed disputes. 

• Average resolution time. 

• Cash forecast based on AR. 

10. Effective Communication with Customers 

• Confirm invoice receipt. 

• Maintain a professional and collaborative tone. 

• Document every interaction.