8 Steps to Improve Past Due Accounts Receivable Collection

Waiting on overdue payments is frustrating. You did the work, sent the invoice, and now you’re stuck chasing the money. Late payments slow down cash flow, take up your time, and create financial stress for your business.

The accounts receivable automation market was worth $4.3 billion in 2024 and is expected to grow by 12.9% each year through 2030. This shows that more businesses are looking for better ways to collect past-due A/R and manage cash flow.

In this blog, we’ll explain what past-due accounts receivable are. Then, we’ll go through 8 simple steps to collect overdue payments faster, from automating your invoice payment process to using a collection agency. These steps will help you get paid on time and keep your business financially healthy.

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What Exactly is Past Due Accounts Receivable?

Past due Accounts Receivable (A/R) are unpaid invoices that have exceeded their due date. When a customer doesn’t pay on time, their invoice becomes “past due,” meaning your business is still waiting to receive the money you’re owed. 

These overdue payments can create cash flow problems, increase collection costs, and even lead to bad debt if not properly managed. Common reasons for past due A/R include:

• Customers forget to pay or delay payments on purpose.
• Disputes over invoice amounts or terms.
• Financial difficulties on the customer’s end.
• Poor follow-up or inconsistent collection efforts.

Understanding past due accounts is just the beginning, now, let’s explore actionable steps to improve your collection process.

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Simple 8 Steps to Improve Past Due Accounts Receivable Collection

To help you recover outstanding balances faster, here are eight practical steps you can take to improve your past-due accounts receivable collection.

Step 1: Automate Your Invoicing and Payment Process

Relying on manual invoicing can lead to delays, errors, and lost invoices. Automating your invoicing process ensures that invoices are sent on time, reminders are scheduled automatically, and recurring payments are set up for long-term customers.

With automation, you can:

• Reduce billing errors that cause disputes.
• Send invoices immediately after a sale or service.
• Schedule reminders before and after due dates.
• Track payment status in real-time.

Pro Tip: Choose an invoicing system that integrates with your accounting software (like QuickBooks or Xero) to keep everything synced and avoid extra work.

Step 2: Offer Incentives for Early Payments

Encourage customers to pay faster by offering small discounts for early payments and applying penalties for late payments. For example, a policy like “2% off if paid within 10 days” can motivate customers to settle their bills sooner, while a late fee of 1.5% per month on overdue invoices encourages timely payments.

Benefits of offering incentives:

• Increases cash flow by getting money faster.
• Builds customer goodwill for those who pay early.
• Creates urgency to prevent delayed payments.

Pro Tip: Clearly state early payment discounts and late fees on every invoice and contract to avoid misunderstandings.

Step 3: Keep Customer Information Up to Date

Incorrect billing information can lead to delayed payments, disputes, and unnecessary back-and-forth with customers. Keeping your customer records updated ensures that invoices are sent to the right person, at the right email, with the right details.

What to update regularly:

• Contact details (email, phone, address).
• Billing and payment terms.
• Purchase order requirements.
• Preferred payment method.

Pro Tip: Use a CRM (Customer Relationship Management) system to centralize and manage customer data efficiently.

Step 4: Communicate Regularly with Customers

Many late payments happen simply because customers forget or are juggling multiple invoices. Proactive communication can prevent overdue accounts and keep payments on track.

Steps for better communication:

• Send reminders before the due date (3–5 days prior).
• Follow up immediately after an invoice is overdue.
• Use multiple channels, email, phone, text, or mail.
• Keep a record of all communications for reference.

Pro Tip: Use email templates or automated reminders to make follow-ups easier and ensure consistent messaging.

Step 5: Focus on High-Priority Accounts

Not all overdue accounts require the same level of effort. Some customers are consistently late, while others might just need a simple reminder. Prioritizing collection efforts ensures that you recover the largest outstanding amounts first.

How to prioritize:

• Identify large overdue balances that affect cash flow the most.
• Focus on customers with long overdue payments (60+ days).
• Track repeat late payers and adjust terms if necessary.

Pro Tip:  Use accounts receivable aging reports to monitor overdue accounts and adjust your collection strategy accordingly.

Step 6: Align Your Team for Better Results

Collections shouldn’t fall on just one department. Your sales, finance, and customer service teams all play a role in ensuring timely payments. A coordinated approach helps resolve payment issues faster and improves customer relationships.

Ways to align teams:

• Train sales teams to set clear payment expectations upfront.
• Ensure finance teams send timely invoices and reminders.
• Allow customer service teams to handle disputes efficiently.

Pro Tip: Hold weekly or monthly meetings to review overdue accounts and discuss collection strategies.

Step 7: Accept Multiple Payment Methods

Making it easy for customers to pay reduces the chances of late payments. Some customers prefer credit cards, while others may prefer Automated Clearing House (ACH) transfers, wire transfers, or digital wallets (PayPal, Venmo, Apple Pay, etc.).

Benefits of offering multiple payment methods:

• Eliminates payment delays caused by limited options.
• Increases convenience for customers.
• Speeds up the payment process.

Pro Tip: List all accepted payment methods on invoices and reminders to ensure customers know their options.

Step 8: Use a Collection Agency as a Last Resort

If internal efforts don’t work, a professional collection agency can help recover overdue payments while maintaining customer relationships.

When to use a collection agency:

• If an invoice remains unpaid after 90+ days.
• If the amount is substantial and worth the agency’s fee.
• If the customer is unresponsive to all previous attempts.

That’s where you can go ahead with South East Client Services Inc. (SECS). It has over a decade of experience in converting overdue receivables into cash.

The image above features the homepage of SECS, a trusted third-party agency with expertise in turning overdue receivables into cash.

• SECS uses a proven collection strategy, advanced analytics, and strict legal and ethical practices to ensure effective account resolution. 
• Their commitment to client satisfaction and compliance makes them a reliable partner for handling past-due accounts.

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Conclusion

As we’ve discussed, collecting past-due A/R requires a proactive and structured approach. From automating invoicing and offering early payment incentives to prioritizing high-risk accounts and ensuring strong team coordination, each step plays a crucial role in reducing overdue payments and maintaining a steady cash flow. Consistency and clear communication with customers are key to preventing payment delays and improving overall collections.

A more efficient way to handle overdue invoices is by partnering with SECS. They offer a comprehensive collection strategy designed to convert distressed receivables into cash. With a sophisticated and technologically advanced management system, they streamline the recovery process while ensuring full compliance with state and federal laws.

Don’t let past-due receivables disrupt your business, contact SECS for expert assistance in improving collections!

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