Improving Cash Collection With Outsourced Accounts Receivable

Blog / Bookkeeping

Improving Cash Collection With Outsourced Accounts Receivable

Cash collections will regularly exceed payment terms if businesses do not take a proactive approach to dealing with cash collection.

In many cases, slow cash collection is not the result of poor credit quality of customers or dissatisfaction with services or products delivered. Instead, it can be driven by a lack of communication between buyers and sellers.

This is why having a qualified bookkeeper is so important for small and medium-sized businesses. 

Outside of poor credit or customer dissatisfaction, here are some surprisingly common reasons that we find for invoices not being paid on time.  

Common Reasons For Late Invoice Payments

The wrong banking information 

As many businesses are beginning to pay invoices through electronic funds transfer, having the wrong banking information can delay payment receipt.

Approval has not been received to pay the invoice on time

For higher value invoices this can be a considerable problem.  Often, invoices require multiple layers of approval which keep the invoice from getting to the accounts payable department for payment by the due date if it gets stuck with one of the approvers.  Invoices can, for example, get stuck on the desk of an approver for weeks while they are on vacation.

Invoices have not been received 

Accounting staff may turn over or go on vacation.  This can result in the invoice sitting in an inbox or on someone’s desk for weeks or months without being addressed.  In the case of paper invoicing, sometimes the invoice just lands on the wrong desk altogether and sits there until the busy recipient does something about it.  

Poorly documented invoicing 

Invoices for multiple projects that require approval from multiple different people creates complexity in the approval process.  For reasons similar to #2, there is a greater chance that the invoice will get help up for payment.  


Often invoices land on the desks of managers and becomes a low priority matter.  Managers frequently feel pressured for time and consequently paying and approving invoices can be seen as low priority, especially where a vendor that they are dealing with does not follow up diligently on late payments.  So as you neglect to follow up on overdue debts, your customers will keep being complacent.

How to Improve Cash Collection with Outsourced Accounts Receivable

If you bring in the right outsourcing service provider, they can help you build processes to expedite cash collection.

Many businesses fear that outsourcing their accounts receivable process will have a negative impact on the relationship with their customers.  

The first and most important mind-shift here is to realize that asking to be paid for your products or services, as long as the communication is respectful, should not negatively impact your relationship with customers. Especially where your customers are businesses, they will understand that cash is essential to your survival.  

Most businesses, if not all businesses, have at some point felt the pain associated with a lack of cash and it is surprising how sympathetic your customers might be to your cash collecting initiatives.  

The next thing to realize is that many follow up processes can occur between your service provider and your client’s accounting department directly.  Many of the matters above can be addressed without being escalated to the senior decision-makers in your customer’s organization.

A service provider may be able to get involved in making phone calls to the accounts payable department of your customers well in advance of payment date to ensure that the invoice has been received, that the right banking information or payment address is on file, and that the approvals are in place to pay the amount by the due date.

If anomalies are found, your service provider should try to politely remedy the issue with their direct contact.  Perhaps an invoice needs to be resent or banking information needs to be provided.  If the matter requires escalation, for instance in cases where the right approvals are not in place or there are disputes over the invoice, then the matter should be communicated back to your team so that it can be resolved at a more senior level.  

Regular reporting and communication are critical in this process.  Your service provider should develop a standard reporting process to help you understand areas where problems may be on the horizon.  

Omar Visram
About Omar Visram
Omar Visram is the Co-founder and CEO of Enkel Backoffice Solutions Inc. Headquartered in Vancouver, Enkel provides bookkeeping, payroll, accounts payable and accounts receivable services to over 300 organizations Canada-wide.