Finance & Accounting

What are Outstanding Receivables and how can you reduce them?

What are Outstanding Receivables?

Controlling the accounts receivables is one of the major challenges faced by many businesses. Controlling and managing the outstanding receivables is a way to staying on top. It does not just help you in knowing how much your parties owe but also helps you to recover the dues on time. In this article, we shall discuss about outstanding receivable and also discuss how you can reduce it.

Meaning of Outstanding Receivables

Receivables means the debt owed to a company. If a business agrees to provide its products and services and accept payment later, such items qualify as outstanding receivables until they are paid.

When you make sales on credit, you should keep track of the amounts due that your parties owe you. Such dues from your parties fall under Outstanding Receivable.

How can delayed payments affect your business?

The importance of timely payment is well understood by businesses, and delayed payments can be frustrating, and follow-up can be time-consuming. Therefore managing outstanding receivable should be the priority of any business. In case there is a delay in payment, it can affect your business in the way that you won’t be able to invest in other areas, thus obstructing your future investment plans and returns.

There are no doubt occasions where late payments happen due to misplaced invoices, cash flow constraints, and even misunderstanding of actual payment terms. However, it is critical that your business has a proper process in place to deal with late payments.

How can you reduce outstanding receivables?

Here in this segment, we provide you with ways through which you can reduce your average accounts receivable days outstanding.

How can you reduce outstanding receivables?
  • Send the invoice immediately
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Businesses should consider sending invoices immediately. It is surprising to see businesses taking too much time to send invoices to their customers. An invoice should be dated and should be sent the day a service is provided, unless specified in terms which were previously established with the customer. The sooner the invoice is sent, the earlier you will get paid.

  • Sound clear about your terms of payment on the invoice

Invoices without payment expectations provides customers an unlimited time to pay. Therefore make sure that payment expectations are clear. Even the term i.e. “Due upon receipt” can be vague, thus leaving too much space for customer interpretation.

  • Send a reminder to your customer before the invoice due date

If a customer has a tendency to make late payments, then consider sending him a gentle reminder. This shows to your customer that you have an invoice tracking process[1]. This technique has been employed by more prominent companies, especially if you make payments via an online process. It’s not wise that you wait for the late payment to happen and then contact such customer.

  • Initiate action as and when the invoice is overdue

The timing of this may differ from company to company, but an invoice that is late by a week is worthy of follow-up action. An email can help in this regard which contains details like the invoice number, amount outstanding, and the due date. A professional and non-threatening correspondence provides a clear reminder of what the customer owes.

  • In case the invoice is yet not paid, switch to a phone call
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There are occasions where people in an organization change roles without any notification to an outside organization. A phone call can unveil the reasons for delay in payments. However, such a phone call should be courteous and professional. Late payments are not meant to insult your business; in fact, delinquent customers are busy and forget about invoice.

  • Further interactions regarding overdue invoices

In case more contact is required with the customer, you may alternate between calls and correspondence. You may listen to the cause of delayed payments and be helpful where you can. Wise interactions can open the scope of payment.

  • Get rid of clients who practice delayed payments

It could be possible that you have a few clients who are not delivering well or they are negligent or unresponsive therefore get rid of such clients.

  • Automate the receivable process

There are many automated invoicing systems that can make it easier for companies to bill their clients automatically, and that too in a cost-effective manner. Credit professionals spend a lot of time in manual processes that should be automated to the point where it is easier to manage. Some tasks that can be automated include reprinting of invoices and statements, due date reminders, and communications regarding past due collections.

By applying the above steps, your business would be able to better deal with outstanding receivables.   


Getting companies to pay invoices could be tricky, especially if they are large multi-faceted client and with multiple departments and teams of people to work through when you are looking to get your outstanding receivables. It is true that you deserve the money that you are owed but be careful about fostering your relationships. It implies that if you are too forceful in demanding your payment, you may damage important business relationships down the road.

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