Accounts receivable collections: process and strategy
Accounts receivable collections is the work of getting customers to pay overdue invoices. Here is the process, how to build a reminder and escalation cadence, and which accounts to chase first.
Accounts receivable collections is the work of getting customers to pay invoices they owe, on time and in full. It covers the reminders before an invoice is due, the follow-ups after it goes overdue, and the escalation steps for accounts that keep not paying. Done well, it keeps cash flowing and DSO low without souring customer relationships. Done badly, it ties up cash in the ledger and forces the business to borrow against money it has already earned.
The accounts receivable collections process
The process starts before anything is overdue. A clean invoice, sent to the right contact through the right channel, removes the most common reason for late payment, which is that the customer never received or never processed the invoice.
After the invoice goes out, the flow moves through predictable stages:
- Pre-due reminder. A short note a few days before the due date, confirming the amount and the date.
- Due-date notice. A reminder on the day payment is due.
- Overdue follow-ups. A series of messages after the date passes, escalating in tone and frequency.
- Escalation. Phone calls, involvement from a manager or the account owner, and for stubborn accounts, a payment plan, a credit hold, or handoff to a collections agency.
At each stage the outreach pauses when something changes, such as a logged dispute or a promise to pay. Chasing an invoice the customer is already disputing wastes effort and erodes goodwill.
How to build a reminder and escalation cadence
A cadence is the fixed schedule that governs when each message goes out and what it says. The point of writing it down is consistency. Accounts that fall through the cracks usually do so because outreach depended on someone remembering to send it.
A workable default for net-30 terms looks like this:
- Day -3: friendly reminder, email.
- Day 0: due-date notice, email.
- Day +7: first overdue notice, firmer tone.
- Day +14: second notice plus a phone call to the AP contact.
- Day +30: final notice, escalation to the account owner, and a warning about credit hold.
Tune the timing to your terms and your customer base. Enterprise customers with formal AP cycles need different spacing than small businesses paying from an inbox. The cadence should also vary by segment: a key account warrants a call before a stern email, while a long tail of small invoices can run entirely on automated reminders.
Which accounts to chase first
Aging alone is a poor way to prioritize. An invoice that is 60 days late but worth 400 dollars matters less than one that is 10 days late and worth 80,000. Sort the open book by the cash at stake first.
Then layer in risk. Move these accounts up the queue:
- Large balances from customers who have stopped responding.
- Broken payment promises, where a customer committed to a date and missed it.
- Accounts with a worsening payment pattern over the last few cycles.
- Invoices blocked by an unresolved dispute, which need resolution before any payment will come.
The goal is to spend the team's limited hours where they recover the most cash and prevent the most write-offs.
Where automation fits
Most of the collections process follows rules, which makes it a strong fit for automation. Reminders on a cadence, pausing outreach when a dispute is logged, ranking the book by balance and risk, and updating the ledger when cash arrives are all repeatable steps a system can run.
What does not automate is judgment: whether to grant a payment plan, when to pull a strategic account out of the standard cadence, and how hard to push a customer the sales team is mid-renewal with. The useful split is to let software clear the volume so the team spends its time on the exceptions and the relationships.
Agentic systems extend this further. Rather than only scheduling reminders, an agent like Rex can read a customer's reply, tell a dispute from a payment promise, take the next action, and surface only the cases that need a person to decide. That keeps the routine cadence running on its own while a smaller team manages a larger book.
Frequently asked questions
- What is the accounts receivable collections process?
- It is the sequence of steps a company follows to collect payment on credit invoices, from sending the invoice and pre-due reminders to escalating overdue accounts and resolving disputes. A typical flow is invoice, reminder before the due date, a series of escalating follow-ups after it passes, then escalation to a manager or collections agency for accounts that stay unpaid.
- How do you decide which accounts to chase first?
- Rank open invoices by the cash at stake and the risk of not collecting, not by age alone. A large balance from a customer who has gone quiet matters more than a small balance a few days late. Most teams sort by dollar value of overdue balance, then prioritize accounts with broken payment promises, disputes, or a worsening payment pattern.
- What is a dunning cadence?
- A dunning cadence is the schedule of payment reminders sent on a fixed timeline, with the tone and channel escalating as an invoice ages. A common cadence is a friendly reminder a few days before the due date, a notice on the due date, then follow-ups at 7, 14, and 30 days overdue that move from email to phone calls.