5 Accounts Receivable Collection Mistakes You Should Avoid

Many businesses underestimate the importance of their accounts receivable (A/R) process, assuming they’ll “get paid eventually.” This mindset often leads to underinvestment in collections efforts, and when budget cuts are necessary, accounting departments like collections are typically the first affected. However, maintaining a steady cash flow is essential for business survival, and efficient collections directly impact the bottom line. Businesses should view accounts receivables as a revenue generator, not a back-office function.

Below are five common accounts receivable mistakes that A/R specialists should avoid. By addressing these accounts receivable challenges proactively, businesses can eliminate most of their collection inefficiencies.

1. Taking a Reactive Approach to Accounts Receivables

When A/R teams respond to issues only after invoices go unpaid for a long time, it creates unnecessary stress and delays. Instead, payment reminders should be sent as close to the invoice issue date as possible, with consistent follow-up reminders scheduled one to two weeks before the due date to minimize late payments.

A proactive A/R approach includes linking financial data with other enterprise resource planning (ERP) data, so businesses can avoid manual tracking and gather the necessary data to accelerate payments. Automating cash applications also boosts cash flow by reducing errors, allowing customers to receive payment confirmations faster.

Tip: Adopt a proactive approach to A/R. Reach out to customers as soon as an invoice is late, send reminders well in advance, and automate cash application and ERP integration for seamless A/R management.

2. Not Prioritizing Customers Correctly 

Most customers—about 85%—intend to pay on time. Half of these customers pay reliably, while the other half may just need a reminder. Only 15% of customers have complex payment issues, often due to financial challenges or internal bottlenecks. An automated A/R solution like Gaviti can streamline collections from the 85% of timely payers, allowing A/R teams to focus on the 15% who need personalized follow-up.

Tip: Focus A/R resources on the 15% with complex issues requiring human intervention, and use automated A/R solutions to handle collections from the rest.

3. Waiting Until the End of the Year to Address Collections

Waiting until the end of the year to collect outstanding invoices is a risky, reactive approach that can make collections more challenging and time-consuming. Businesses that rely on manual processes may struggle with tracking down unpaid invoices, verifying payment statuses, and resolving any issues with invoice details. Additionally, if the primary point of contact for the customer may have  changed, this can delay payment further. Plus, your customers may have other priorities for the end of the year. 

Tip: Avoid year-end crunches by managing collections consistently throughout the year, as close to the invoice date as possible. Send payment reminders before the invoice is due and follow up consistently and regularly. 

4. Sending Invoices Only on the Due Date

Some companies wait until the due date (or even later) to send invoices and only follow up once payments are overdue. This is a common issue, especially in companies with small collections teams. Sending timely and consistent reminder follow-up payments and collections reminders close to the invoice issue date helps keep collections on track by keeping payments top of mind for customers.

Tip: Use dunning emails with enough lead time, ideally starting from the invoice issue date, with reminders one to two weeks before the due date. Some A/R automation platforms offer workflows for customized reminders based on customer profiles.

5.  Forgetting Important Data Necessary for Payment

Incomplete invoices can cause delays, especially if a required documentation like a W9 form is missing. Missing details, such as purchase order numbers or bank information, can lead to disputes or delays in processing payments. Ensuring all necessary forms and data are included at the start helps streamline the payment process.

Tip: Use A/R solutions with template features to ensure all essential information is included. Advanced A/R tools often provide a customer payment portal that centralizes necessary payment details, making it easier for customers to complete payments on time.

How Gaviti Streamlines the Accounts Receivable Processes

These common mistakes can be avoided by adhering to a “golden rule”: Manage invoices as close to the issue date as possible and ensure they contain all necessary details to ensure you are taking a proactive approach to collections. Gaviti’s autonomous invoice-to-cash platform helps you avoid these mistakes by enabling businesses to automate collections actions, making it easier to streamline processes, reduce manual errors, and make strategic A/R decisions that drive growth.

Its modules include: 

• A/R management and automation. Automate collections actions based on predefined criteria, such as due date, aging of invoices, payment history, or credit terms. Gaviti’s platform enables you to automate reminders, internal or external escalations, and other collections actions, streamlining your collections process.
• Collections analytics. Analyze collections performance over time, identify bottlenecks in the process, and implement targeted improvements. Leverage data-driven decision-making to optimize collections strategies, reduce DSO, and improve cash flow.
• Customer invoice distribution. Send invoices automatically to multiple distribution channels so that your customers receive invoices in the way that is most convenient for them. Schedule invoice delivery at specific intervals or trigger them based on predefined events, such as order fulfillment or project completion.
• Self-service payer portal. Deliver an enhanced customer experience where customers can conveniently make payments online 24/7 with  a variety of payment options including ACH, electronic payments, check, debit and credit customers, and more. Customers can also use it to view invoices, payment history, and any customer credit requests.
• Cash application. Automatically match payments to invoices with near 100% accuracy, eliminating the need for manual intervention, expediting the cash application process, and reducing processing delays. 
• Disputes and deduction. Categorize deductions to gain insight into recurring issues, identify root causes, and take proactive measures to minimize future deductions.
• Credit management and monitoring. Get real-time credit risk alerts about customers with increased credit risk to minimize the impact on your cash flow and reduce the likelihood of bad debt.

Want to learn more about how Gaviti can streamline and automate your A/R management and collections process? Get a demo today!  

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