The Longer Your Accounts Receivable is Outstanding, the More You Lose

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The Longer Your Accounts Receivable is Outstanding, the More You Lose

For every dollar of your small business's revenue that goes uncollected, you lose $0.14! That's a staggering figure. And it only gets worse the longer an account is outstanding.

The Cost of Aging Accounts Receivable

Days Outstanding	Average Cost of Collection as % of Revenue
0-30	0.1%
31-60	0.9%
61-90	2.1%
91-120	3.6%
120+	5.5%

As you can see, the cost of collecting accounts receivable increases exponentially the longer they are outstanding. This is because the longer an account is outstanding, the more difficult it becomes to collect.

Tips for Collecting Accounts Receivable

There are a number of things you can do to collect your accounts receivable more quickly and efficiently. Here are a few tips:

Invoice promptly. The sooner you invoice your customers, the sooner they will pay you.
Offer discounts for early payment. This can incentivize customers to pay their invoices early.
Follow up regularly. Don't be afraid to contact customers who have not yet paid their invoices.
Be firm but fair. Let customers know that you expect them to pay their invoices on time, and you will not hesitate to take action if they do not.
Use a collection agency. If you have been unable to collect an account on your own, you may want to consider using a collection agency.

Success Stories

Here are a few success stories from businesses that have implemented effective accounts receivable management strategies:

Company A reduced its days sales outstanding (DSO) from 55 days to 30 days by implementing a number of strategies, including invoicing promptly, offering discounts for early payment, and following up regularly with customers.
Company B increased its collection rate from 85% to 95% by using a collection agency to collect on overdue accounts.
Company C improved its cash flow by 10% by implementing a new accounts receivable management system that automated the invoicing and collection process.

Call to Action

If you are struggling to collect your accounts receivable, don't wait any longer to take action. By implementing some of the tips and strategies outlined in this article, you can improve your collection rate and reduce your losses.

Remember, the longer your accounts receivable is outstanding, the more you lose. So take action today!