Five credit and collection goals for accounts receivable teams
Strong accounts receivable performance starts with the right goals. Discover five actionable credit and collection targets that help AR teams reduce risk, improve cash flow, and boost efficiency.
Effective accounts receivable (AR) management isn’t just about cash—it’s about the processes that support it. Improved cash flow naturally follows when your invoicing and customer communication are consistent and efficient. Start with the right operational goals instead of focusing solely on financial outcomes. If you meet those, the cash will come.
Here are five practical goals to help your AR team improve collections, reduce risk, and support overall financial health.
1. Spot invoice issues early
A key goal is to identify invoice errors as early as possible. Common issues—like missing purchase order numbers or incorrect recipient details—can delay payment and strain customer relationships.
Build a policy that triggers a review of any invoice the day it becomes overdue. Consider reviewing high-value invoices before sending them out. What’s considered “high value” may differ depending on your business. For some, that might be $1,000; for others, $50,000.
2. Send invoices sooner
The faster your customer receives the invoice, the sooner you can get paid. Aim to send invoices promptly after the transaction—ideally the same day. Switch from manual to electronic delivery (email, EDI, etc.) to speed things up. Even small businesses can adopt a weekly invoicing schedule to give customers ample time to process payments.
3. Set up payment reminders
Even a simple reminder can reduce delays in payment. Establish a system that alerts customers 3–5 business days before their due date, especially for larger balances. If your team’s capacity is limited, focus on high-value or high-risk accounts.
4. Improve Days Sales Outstanding (DSO)
Once you understand how long it typically takes to receive payment, set a goal to reduce that timeframe. For example, if your average is 60 days on a Net 28 invoice, aim to shorten that by 10–20%. Achieving this starts with the steps above: sending accurate invoices quickly and following up before they’re past due.
5. Measure the financial impact
Your AR goals should support financial efficiency, even if they’re operational in nature. Getting paid faster reduces your need for short-term borrowing. For instance, on $1 million in credit sales with a 60-day DSO, reducing payment time by 12 days could save over $3,000 annually in financing costs.
Similarly, reducing bad debt write-offs by improving invoice accuracy and communication can yield significant savings. If your annual write-off rate is 4%, improving it by 20% saves $8,000 annually on $1 million in credit sales. These numbers scale as your business grows.
You may also want to reduce invoice processing costs as discussed previously. Maybe you can’t implement electronic invoicing for all of your customers but cost savings for just half of your customers could be significant.
Setting the right AR goals helps reduce risk, improve customer satisfaction, and strengthen cash flow. While technology like automated invoicing or AR software can support these efforts, success begins with clear policies and measurable targets.
