As a small business owner, how you manage your accounts receivable can result in positive or negative cash flow. Because of this, accounts receivable is important to your business’s financial success. 

But there are some common challenges you may encounter when it comes to managing your accounts receivable. 

This guide will discuss accounts receivable challenges, including: 

  • What is accounts receivable?
  • What are some common accounts receivable challenges?
  • How can you overcome these common challenges?

What is accounts receivable?

Accounts receivable is the money that you have earned for your business but not yet received. You completed these sales and services, and they are listed as current assets on a balance sheet, but you have yet to receive the cash from customers. 

Accepting credit for your services can make it easier for clients to purchase from you. But, you’ll need to transfer that credit to cash. This will lead to better financial performance. You can do this through strong accounts receivable management. 

Learn more about how accounts receivable works here

What are some common accounts receivable challenges?

There are a few common challenges that can hurt your accounts receivable management. If you’re aware of them, you can fix these problems. 


One of the most common accounts receivable challenges is disorganisation. If you don’t keep track of your owed invoices then you may not stay on top of the money clients owe your business. This could lead to forgetting what customers owe and failing to collect the money you’ve earned.  

Also, poor organisation can lead to low productivity. If you fail to organise your invoices and balance sheets, you won’t maintain financial clarity. This means keeping track of who to invoice and when to process them. Failure to control this could hurt your business’s cash flow because it will reduce how often you bring money into your accounts. 

Late payments

Another major challenge for accounts receivables is keeping track of your invoices to make sure you receive money on time. If you don’t follow up on invoices, clients may not fulfil them promptly. 

To understand your small business’s invoice efficiency, look at your average days sales outstanding (DSO). Your DSO is the average time it takes for you to convert your sales into cash. If you have a high DSO, you may not be collecting money for services as frequently as you should be. 

Even more, it can be a challenge to chase up late payments. If you fail to follow up on late invoices, clients may forget to pay for your services altogether. Not only does this eat into your profits but you won’t have enough money flowing into the business, which you need for operational costs and future growth investments. 

Poor communication 

Infrequent or late payments could be due to poor communication. If you don’t communicate with clients regularly and clearly, they may not fully understand the payment process or the time constraints you have set. This means sending payment reminders and following through on client questions. 

Poor communication may lead to clients forgetting to pay your invoices. This could be because you don’t have clear communication channels or you don’t check them regularly. If you maintain a relationship with your customers, you will have an easier time improving your accounts receivable. 

Lack of policies

A lack of clear payment policies for your clients can also drag down your accounts receivable process. It may lead to confusion so the payments will not come in promptly and consistently. 

When conducting business with clients, you’ll need to make sure your expectations are clear. You may want to consider who you work with and be sure they will be reliable with their payments by doing a credit check.

How can you overcome these common challenges?

Once you understand what accounts receivable challenges to expect, you can use this knowledge to plan for better practices. There are a few ways to overcome these challenges. 

Establish clear policies

Write clear payment policies on every invoice to ensure clients know what they owe you and when it’s due. You can set a time frame for invoices to be paid, such as 14 days or 30 days, so people will know when they’re expected to pay.

So, review your credit and invoice process to see how you can streamline it. Make sure your customer understands and accepts your terms of sale before any purchase so there are no surprises after you’ve provided services or supplied products.

Consider putting together late payment reminder templates to send to clients. These will help you remain professional when you chase payments. You can also consider adding repercussions for late payments, or incentives for clients to pay on time. For example, could offer a discount to clients who pay within a week. 

Also, keep a record of all late payment reminders and communications in case you need to take legal action. 

Improve client interactions 

If you focus on improving your customer service, you can better manage your accounts receivable. Make sure you have options for communication, such as email, phone or live chat and monitor these channels frequently. Respond to these communications regularly and respectfully. If you focus on building relationships, your clients could be more likely to trust you and pay on time. 

Get organised 

Consider scheduling time into your workday that you can dedicate to managing and maintaining your records, managing your owed invoices and reconciling your paid bills. 

If you focus on your financial organisation, you’ll be more aware of outstanding invoices and can deal with them accordingly. As a result, you can bring more cash into your business and make the money you worked for.  

Organise your finances with Countingup

The right business financial software can help you keep your accounts receivable up to date. That’s why thousands of business owners use the Countingup app to make their financial admin easier. 

Countingup is the business current account with built-in accounting software that allows you to manage all your financial data in one place. With the app, you can instantly create professional invoices. Then, you can send these invoices to customers support your accounts receivable process. Countingup will notificatfy you when invoices have been paid and automaticallymatch them to payments.

Plus, with features like automatic expense categorisation, receipt capture tools, tax estimates, and cash flow insights, you can confidently keep on top of your business finances wherever you are. 

You can also share your bookkeeping with your accountant instantly without worrying about duplication errors, data lags or inaccuracies. Seamless, simple, and straightforward! 

Find out more here.