Cash is the lifeblood of all businesses. Yet, even the successful ones may have some problems with the effective collection of accounts receivable. In a company, delayed payments are viewed as common hiccups. However, chronic inefficiencies in accounts receivable can be known as the most significant operational risk.
In Canada, over 43% of B2B invoices are paid late, according to Atradius. This, therefore, creates a cascading effect for accounting professionals and BPO firms that handle client-side finance operations. It affects payroll, investment decisions, and client satisfaction.
So, what is the best way for finance leaders to sharpen their strategy for managing Accounts Receivable? It starts by avoiding the following five costly, often overlooked mistakes.
1. Relying on Manual Processes for AR Management
One major, yet harmful, Accounts Receivable mistakes are using spreadsheets and emails to keep track of outstanding invoices. Although for very small operations the manual system may be okay, it is vulnerable to errors, duplication, and delays.
Manual AR systems cannot scale efficiently. In the BPO sector, where there are different time zones and industries, and the teams work for multiple clients, these inefficiencies are multiplied.
Avoid spreadsheets and emails for invoicing. Use online accounting software to cut manual effort and improve accounts receivable efficiency. All customer details, products, and prices are included in the system.
Integrate with your ERP or accounting system through a cloud-based AR automation platform and use tools that will give you real-time dashboards, automated reminders and workflow visibility, which will ultimately reduce your Days Sales Outstanding (DSO) by up to 30%.
2. Lack of Defined AR Policies and Escalation Protocols
A lot of BPO and finance teams face issues with vague payment terms, not following up properly, and not having clear escalation timelines. In the absence of formal AR policies, teams do not take the right initiative.
Why It’s a Problem:
It becomes difficult to enforce due dates, apply late fees, or escalate to collections without a clearly defined policy, hurting AR turnover ratios.
How to Avoid It:
Develop a standardised AR policy document that outlines:
Payment terms
Follow-up intervals
Late fee protocols
Escalation timelines
Train your team and let your clients know about this policy so everyone stays on the same page.
3. Inadequate Credit Risk Assessment
Another very common mistake is the act of extending credit to new customers without a formal vetting process. In high-volume industries such as manufacturing or B2B services, where the stakes are already quite high, imagine just one high-risk client defaulting on a large invoice; it can disrupt cash flow in the end.
Why It’s a Problem:
According to the Office of the Superintendent of Bankruptcy, Canada’s corporate insolvency rate increased by 31.6% in 2023. This should be a very clear warning to any firms that rely on intuition rather than credit data.
How to Avoid It:
Integrate automated credit scoring models using data sources such as Equifax Canada and Dun & Bradstreet; monitor client creditworthiness often, particularly when extending payment terms.
4. Ignoring Customer Communication Dynamics
Many businesses see collections as more of a transaction than a relationship. But in the BPO space — where client relationships are the first priority — how you communicate is as important as when.
Why It’s a Problem:
Bad communication can make a partnership go wrong in the long term. A rigid or impersonal tone might push back a resolution, or even worse, put a strain on valuable business relationships.
How to Avoid It:
Use a tiered approach to communicate
Early reminders via e-mail
Mid-phase reminders with personalized calls
Final notices with escalation language
Try grouping clients based on how they pay. After that, change how you communicate with them.
5. Failing to Monitor AR Metrics Beyond Aging Reports
The irony is that most AR teams use aging reports only to track overdue payments. But concentrating merely on how long invoices have been outstanding can obscure broader trends and root causes.
Why It’s a Problem:
You may be missing those early warning signs of either client distress or internal inefficiencies, especially if the average DSO is rising, but aging buckets appear stable.
How to Avoid It:
Track comprehensive AR performance metrics like DSO, CEI (Collection Effectiveness Index).
Current vs. overdue invoices trends by payments done by customers in a client-specific way
Use them to fine-tune your collection strategy and proactively flag high-risk accounts
Final thoughts:
Preventing these five Accounts Receivable mistakes does not just apply to the delayed payments. It applies to building an AR process that is scalable, resilient, and data-driven. For Canadian BPO firms and accounting professionals, good AR management can enhance client output quality and help make cash flow more predictable, plus add operational steadiness.
Take Action Now
Perform an internal check of your AR workflows. Do you still use old tools or common talking points? Start small: pick one of the five areas above and make a big change this quarter. Better cash flow and trust from clients will come next.
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