Accounts Receivable (AR) Management

Description

Receivables problems are usually described as customer behaviour problems. They are more often process problems. An invoice goes out on the last day of the month with a purchase order number that does not match the customer system, so it sits unapproved for three weeks and nobody knows. A payment arrives without a remittance advice and is applied against the wrong invoices, so the ageing shows a dispute that does not exist. A customer raises a short-payment on a delivery shortfall and the deduction is never investigated, so it hardens into a permanent loss. None of these are collection failures. They are all failures of follow-up discipline.

The cost is direct and expensive. Every additional day of days sales outstanding is a day of working capital funded by someone, usually a cash credit facility at a real interest rate, sometimes by the promoter, occasionally by stretching your own suppliers and pushing the problem down the chain. Beyond the funding cost sits the ageing itself: the probability of recovering an invoice falls sharply the longer it sits, and by the time an item passes a year it is frequently a provisioning discussion rather than a collections one. Growing businesses feel this hardest, because receivables scale with revenue while the person chasing them usually does not.

What the engagement covers

We run the receivables cycle end to end. That starts before collection: invoice accuracy, purchase order referencing, e-invoicing and delivery confirmation, because an invoice the customer cannot process will not be paid regardless of how often it is chased. Then a structured dunning cadence keyed to the customer segment and the ageing bucket, escalating from courtesy reminder through statement of account, formal demand and escalation to a named commercial owner. Promises to pay are logged with dates and followed on the date given rather than at the next cycle. Disputes and deductions are registered at first mention, routed to the internal owner who can resolve them, and tracked to closure, which is where most ageing quietly accumulates. Cash application matches receipts to invoices from remittance advices and bank narrations, with unapplied cash pursued rather than parked.

What gets measured

Baseline first. Before any target is discussed we measure current DSO, best possible DSO given your stated credit terms, the collection effectiveness index, ageing distribution across the standard buckets, dispute volume by root cause, and the difference between contractual and actual payment behaviour by customer. That baseline is what improvement is measured against. Reporting thereafter is monthly at minimum, covering collections against forecast, ageing movement between buckets, the dispute register with resolution ageing, promise-to-pay reliability by customer, and a provisioning view aligned to the expected credit loss approach under Ind AS 109 or IFRS 9 so the finance team is not surprised at year end.

How the virtual delivery model works here

The team works inside your systems and, where you want it, under your email domain, so customers experience a consistent point of contact rather than an obvious third party. Tone and escalation authority are set by you: what a first reminder says, when a commercial owner is brought in, what is never said to a strategic account, and at what point an account is stopped. We do not initiate legal action or field recovery, and we do not use pressure tactics; both would damage the commercial relationship the receivable depends on. Customer personal data is handled under documented processing arrangements consistent with your obligations under the DPDP Act 2023.

Who this is built for

B2B businesses selling on credit terms where receivables have outgrown informal follow-up. Manufacturers and distributors dealing with large customers who have formal invoice-processing workflows. Services firms whose billing depends on milestone acceptance. Companies preparing for a funding round or an audit that need the ageing cleaned and defensible.

Engagement models

Monthly retainer · Per-invoice or per-account volume pricing · Fixed fee ageing clean-up project

Expected turnaround

Transition typically takes two to four weeks from access provisioning, covering ledger validation, baseline measurement and policy sign-off before the cadence goes live. Once operating, the cycle runs daily with a monthly reporting pack. Measurable ageing movement usually appears within two to three collection cycles, though the pace depends on your customer mix, contractual terms, dispute backlog and how much authority the escalation matrix carries. Backlog work on heavily aged receivables is scoped separately.

Scope of Work

• Invoice accuracy and delivery control covering purchase order referencing, e-invoicing compliance, supporting documentation and confirmation that the invoice has entered the customer workflow
• Customer master and credit terms validation, including agreed payment terms, credit limits, billing contacts, portal registration requirements and escalation contacts by account
• Structured dunning cadence differentiated by customer segment and ageing bucket, escalating from reminder to statement of account to formal demand on a defined schedule
• Promise-to-pay capture with committed dates, value and contact, followed up on the date promised and tracked as a reliability measure at customer level
• Dispute and deduction management with a register recording root cause, internal owner, value at risk and ageing to resolution, reviewed until each item is closed
• Cash application and remittance matching from advices and bank narrations, with active pursuit of unapplied and on-account cash rather than allowing it to sit
• Statement of account circulation and periodic balance confirmation to keep customer-side and your-side ledgers aligned before differences become disputes
• Ageing analysis across standard buckets with movement tracking between periods and identification of accounts deteriorating rather than merely overdue
• DSO, best possible DSO, collection effectiveness index and average days delinquent measured against an opening baseline established during onboarding
• Customer risk scoring combining payment history, promise reliability, dispute frequency and exposure concentration, with recommendations on limits and stop-supply
• Credit policy documentation covering approval authority, terms by segment, security requirements, escalation matrix and the conditions triggering stop-supply
• Expected credit loss input schedules supporting provisioning under Ind AS 109 or IFRS 9, with the ageing evidence and recovery assessment behind each estimate

Key Deliverables

How the Engagement Runs

What You Gain

Industries We Serve With This Engagement

Frequently Asked Questions