As a business owner, managing your accounts receivable (AR) is essential for maintaining healthy cash flow. However, sometimes things get out of control, and overdue payments start piling up. Whether it’s due to miscommunication, financial struggles from clients, or simply a lack of follow-up, it’s important to take a structured and professional approach to handle this situation.

Here’s a 5-step guide for tackling accounts receivable that has gotten out of control—without letting stress or emotional decisions take over. 

1. Create an AR Process to Avoid Future Problems 📇

The first step to getting your accounts receivable under control is establishing a clear and organized AR process moving forward. This means creating a workflow for invoicing, follow-up, and payment collection. Set up a schedule for sending invoices, reminders, and overdue notices to clients. Automate where possible (QuickBooks Online Advanced can help with automating invoicing and reminders), and ensure you’re tracking AR aging to catch overdue payments early. 

Having a documented process means you won’t get into this mess again. You’ll know exactly who is responsible for following up, when reminders need to be sent, and how to address overdue payments efficiently. 

2. Decide on Next Steps for Non-Responsive Clients 🤔

Dealing with overdue accounts requires a clear plan for how to approach clients who are unresponsive. It’s essential to decide on the steps you’ll take in advance, so you don’t make emotional decisions under pressure. Will you take the client to small claims court? Send their debt to collections? Or will you write off the debt as uncollectible? 

Before you make any decision, create parameters that define when and how you will take action. For example, if a client hasn’t responded after three reminders or has been uncommunicative for over 60 days, you might decide to escalate the matter to collections. Knowing these parameters up front ensures that your decisions are rational and consistent. 

3. Draft a Friendly Email to All Overdue Clients 📩

Your next step is to reach out to clients who are overdue, and the tone of this communication is key. Approach your overdue clients with a friendly, professional tone that encourages cooperation. Send a statement along with any outstanding invoices and politely remind them that their account is past due. 

Here’s an example of how you could structure the email: 

By providing clients with a specific payment date and an option to discuss payment terms, you demonstrate understanding while still maintaining a professional approach. 

4. Follow Up Three Times by Email, Then Pick Up the Phone📞

Email follow-ups are great, but sometimes they get lost in the shuffle of a busy inbox. People are busy, and some clients may have simply forgotten to make a payment. So after your initial email, follow up three more times, spaced out over a week or two. After three emails, it’s time to pick up the phone. 

A personal phone call is an excellent way to prompt action. When clients hear your voice and understand the seriousness of the situation, they are more likely to respond promptly. Keep the call polite and professional, and express your willingness to work with them to resolve the issue. 

5. Focus 80% of Your Efforts on Clients Who Are Just Overdue, 20% on Those Who Are 90+ Days Late 📆

When your AR is in trouble, it can feel overwhelming to address all overdue accounts at once. To make the process more manageable, focus 80% of your efforts on clients who have just moved into overdue status—those who are 30 or 60 days overdue. These clients are more likely to pay you quickly, as they haven’t let their balance sit for too long. 

The remaining 20% of your focus should be on clients who are 90+ days overdue. While it’s important to address these, you’ll likely need to escalate things—whether that means starting legal action, sending the debt to collections, or writing off the amount. By prioritizing the clients who are more likely to pay, you can resolve the situation quicker and more efficiently. 

Final Thoughts ⭐

Managing accounts receivable that has spiraled out of control doesn’t have to be a stressful experience. By implementing a clear process, setting expectations for follow-up, and maintaining a professional tone, you can regain control of your cash flow. Stay focused on your most likely payers, be firm but understanding with your clients, and ensure you take the right steps at the right time. 

The more systematic your approach to AR management, the easier it will be to maintain healthy cash flow and avoid the headaches of overdue accounts in the future.