Cash Collection Process: Best Practices to Get Paid Faster
Alex Louisy
Feb 17, 2025
This article has been co-written by Luis Lomanov, Managing Partner at Upward Insights, and Alex Louisy, cofounder at Upflow.
According to a survey by Intuit Quickbooks, 73% of SMBs are negatively impacted by late payments. Obviously, this is a major concern for business owners.
Chasing invoices can be time-consuming and sensitive: you want to be assertive enough with your debtors, without risking the relationship.
And yet, cash collection is a fundamental step in the order-to-cash cycle and is paramount in ensuring business growth. Most of your customers won’t pay you in a timely manner without the right tracking system in place. And once your invoice is past due, chances are, you’ll never get paid. Keep reading to learn more about:
Collection emails are an important part of you collection process. Download our free email templates to improve your collection process!
Cash Collection Process: What are the steps?
A well-structured accounts receivable (AR) collections process is crucial for maintaining healthy cash flow and strong customer relationships. Here are five essential steps to efficiently managing AR collections:
1. Generating and Sending Invoices
The process begins with issuing accurate invoices in a timely manner. Each invoice should clearly state payment terms, due dates, and available payment methods to prevent confusion or delays. When done right, this step lays the groundwork for smooth collections.
2. Tracking Payments
Once invoices are sent, it’s important to monitor payments closely. This helps identify which invoices have been paid, which are overdue, and which are nearing their due dates. Platforms like Upflow offer real-time tracking dashboards, enabling quick action on overdue payments and improving cash flow oversight.
3. Sending Payment Reminders
Reminders—both before and after the due date—can help reduce payment delays. These should be professional yet firm, reinforcing the importance of timely payments. Consider automating reminders to ensure consistency and save your team time.
4. Handling Disputes
Customers may occasionally dispute invoices, and resolving these issues quickly and professionally prevents further delays. Addressing disputes efficiently helps maintain trust and keeps customer relationships strong.
5. Escalating and Following Up
For overdue invoices, escalation may be necessary. This can include more persistent follow-ups, negotiating payment plans, or involving external collection support if needed. A structured approach to escalation ensures timely resolution while minimizing conflict.
Optimizing Your Collection Process
Now that you know the steps in the cash collection process, let’s put a specific focus on three areas within the process that you’ll need to get right to ensure it’s working at it’s best.
Chasing Unpaid Invoices
We discussed this with Luis Lomanov, Managing Director at Upward Insights, a firm that specializes in helping high-growth businesses set up scalable financial processes and systems.
According to him, the issue is often the same: there’s no structured process when managing AR. Every once in a while, the company’s CEO will look at an aging report and realize that there’s too much cash outside of the bank account.
CEO turns to CFO, who then turns to his controller. From there, the controller frantically spends the next couple of business days sending emails and phone calls to customers past the due date... Issues start to resolve themselves and overdue invoices get paid… Until the next wave of cash flow problems where the broken process repeats itself
Late payment reminders often fall outside of sales cycles. Stranded between different teams whether it be finance, sales, or management, reminders like that aren’t a priority for any single department within the company.
And yet, they should be a top priority for everyone. Bringing cash into the business is just as important as sales and production. It’s also a key indicator of the business’s health and its good-or-bad performance. It should be a big focus in each company’s financial reporting.
Finance teams are usually on the front lines when it comes to cash collecting and cash handling procedures. However, they often lack the time and resources necessary to focus on more than just the largest outstanding cash receipts. While it makes sense to address the most urgent matters, oftentimes they end up neglecting smaller amounts of even more outstanding, yet smaller invoices. Most importantly, when calculated as a whole, these smaller invoices can end up representing a significant amount.
Most of the time sales teams are out of the loop when it comes to unpaid bills. This is “not their responsibility”, is too time-consuming, and we often hear C-levels saying “our salespeople should be more focused on closing deals, and nothing else”.
While it is common for sales teams to be paid on commission, these commissions are usually based on the amount invoiced, and not the amount of cash collected by the company. This does not incentivize them to participate in debt collection, even though these teams are responsible for handling customer relations. We believe this doesn’t help profitability.
A customer who doesn’t make amends to pay may just simply be a bad customer. It should be a primary concern for salespeople, especially when dealing with returning customers. How is it possible to build long-term relationships with customers that do not pay your Company?
Top management and executives should also be concerned about unhealthy AR. A wobbly cash collection process, forgotten invoices, and bad paying customers are risks that impact their working capital and can quickly translate into an empty cash drawer for the company.
Systematic cash collection processes can be tricky to implement since accounting and billing tools are usually poorly adapted to tracking late payments. Improving AR management is a cross-disciplinary business problem. Solutions that attempt to address this problem without involving finance, sales, and management teams are usually doomed to failure.
Having all teams stay on top of receivables is key to the company's performance and long-term success.
Need help writing effective collection emails? Have a look at our free templates
Get to Know Your Late Paying Customers
Luis gave us a great tip on how to classify late-paying customers and how to identify them. He likes to think of the aged AR list as consisting of 3 types of customers: "The slipped through the cracks customer", "The perpetually late customer" and "The one who never pays".
1) The Slipped Through the Cracks Customer
This customer frequently says “I’m so sorry, I didn’t even realize this was an issue. Let’s resolve this ASAP”.
This is a good customer
2) The Perpetually Late Customer
This customer frequently says “Oh that’s right. Sorry. The Accounts Payable Manager is on vacation and we’ll pay it once he’s back”
This is often a stalling technique because the business is having cash flow issues
If excuses are a norm when talking to this customer, decide if you want to keep them as a customer for much longer
3) The one who never pays
This customer frequently says “Your service is crap and I don’t intend to honor the agreement because you under-delivered and I can’t give you specifics” or “We’re experiencing some challenges and have to prioritize cash outflow”
Unless your service really sucks, these customers were never going to pay you anyway and likely treat their other vendors the same way. Learn to identify them early and not do business with them
This is an excerpt from the book: Financial Foundations: Entrepreneur’s Guide to Becoming a Builder
By setting up a systematic cash collection process, you’re more likely to identify those types of payers early and manage them proactively. That's where Upflow comes in handy! Our product sends out automated yet personalized emails and offers detailed analytics that will help you get a good overview of your A/R.
The Importance of Customer Experience
Managing accounts receivable is not just about collecting payments—it’s about fostering strong, long-term customer relationships. While automation certainly can improve efficiency, businesses must move beyond transactional interactions and prioritize the customer experience in their collections process.
The truth is, most late payments don’t happen because customers are unwilling to pay. Instead, they result from friction in the payment process—lost invoices, unclear payment instructions, or follow-ups that create unnecessary tension.
Traditional accounts receivable practices, including generic dunning emails and outsourced collection agencies, often alienate customers rather than encourage timely payments.
Instead of treating payment delays as a problem with the customer, businesses should recognize that a poorly designed AR process is often the real issue. Here at Upflow, our own analysis indicates that around 70% of late payments stem from inefficient payment workflows rather than intentional non-payment.
Rather than viewing collections as a back-office function, companies should leverage it as a strategic tool for growth. Upflow enables finance teams to take a more customer-centric approach by:
Enhancing customer experience – A streamlined, user-friendly payment process reduces friction and speeds up collections.
Increasing retention – Positive payment interactions build trust and loyalty, reducing churn.
Optimizing cash flow – Faster collections improve financial stability, freeing up capital for growth initiatives.
When businesses make it easier for customers to pay, they not only improve cash flow but also strengthen relationships and increase long-term value. A well-designed accounts receivable process should be as seamless and frictionless as possible—because getting paid shouldn’t damage the very relationships that drive business success.
Best Practices for an Effective Cash Collection Process
Over the last few years, we’ve talked to hundreds of business owners at Upflow and Upward Insights. Here are our findings from the best-performing companies when looking for the right practices in setting up an efficient cash collecting process.
Systematic
All unpaid invoices must be followed-up with payment reminders. It’s an obvious fact, but it is rarely the case.
Systematization, like automatic dunning, will solve the majority of AR problems because most customers want to pay - they just forgot and need a reminder. By addressing the easy accounts with systematization, you can now focus the hard leg-work on the more difficult accounts.
Systematization will also help you identify problematic customers because those are the ones who ignore automated dunning. Now you know who they are, so you don't have to waste time figuring out which customers will be problematic and need special attention.
Additionally, reminders must go through a clearly defined timeline to identify which issues are
related to technical issues (invoices not received, errors in billing content, credit card failure, an invoice pending internal approval) usually managed by your finance/controller team
or relating to commercial issues (problems with services, credit notes, returns) that are usually taken care of by account managers
It’s important to create a systematic escalation process, with proactive steps.
Most customers want to pay. They just need systematic reminders. For the remainder, the earlier you find the issue, the faster it’ll be resolved or addressed.
Personalized
Efficient reminders take into account your customer’s business context. The root cause of late payments may vary significantly from one customer to another, different geographic locations, payment methods, etc. The more you take into account their business context, the more likely you are to have an impact on customers.
On the contrary, we often see impersonal, inaccurate, automated emails that do not reflect the business context and relationship you have with your Customer. At best, customers dismiss these emails, and worse, they could potentially damage your relationship with them.
Personalize your reminders to improve your response rate and find the solution to resolve underlying issues with late payments faster.
Collaborative
Even though first reminders are often sent out by finance teams, project leaders or sales teams often need to intervene when a commercial issue has been identified (dispute, rebate needed, etc.). There should be a seamless and systematic transition between the teams involved, and it’s usually a best practice that account managers be aware of any potential issues with late payments. Their involvement will be a quick fix to solving the problem faster!
Broaden how your team is aligned on cash collection to make it more efficient.
Multi-channel
Each communication channel (email, calls, texts, and sometimes letters) should serve a specific purpose as part of your cash collection process. Most importantly, they should involve the right people on both ends of the conversation. Sending reminder emails to the right billing contact, calling the finance department, and escalating issues to your commercial contact via different channels allows you to correctly gauge the level of urgency and obtain feedback from your customer.
Diversify your channels of communication to make the cash collection process more impactful.
Example: How Staffmatch saves 35 hours per month with a truly multi-channel collections strategy
Prior to adopting Upflow, Staffmatch relied on a manual dunning process that was both time-consuming and error-prone. As a temporary employment agency, Staffmatch's business model involves rapidly matching temporary workers with client companies, often on short-term contracts.
This rapid turnover and reliance on timely payments to compensate temporary workers necessitates a robust and efficient collections process.
Cécilia Côny, Customer Service and Collections Manager at Staffmatch, explained, "We lacked direct visibility into the status of customer accounts and often struggled to maintain a consistent reminder schedule."
This manual approach was not only inefficient but also risked overlooking important follow-ups, which could have significant financial implications for Staffmatch.
Upflow's intuitive platform offered a comprehensive solution to Staffmatch's challenges. By automating routine tasks and providing real-time insights, the tool has enabled the company to:
Streamline finance operations: Automating 2,000 reminders per month has saved Staffmatch an estimated 35 hours per month, allowing their team to focus on more strategic tasks. Those automated reminders have been part of a truly multi-channel strategy, which has also included the automated sending of around 300 regular and registered letters per year.
Enhance visibility into Accounts Receivable: Upflow's centralized dashboard provides a clear overview of overdue balances, DSO, and payment trends, enabling Staffmatch to identify potential issues early on. “The dashboards and analytics enable me to monitor our progress and the objectives set internally, and to identify the periods with the most movement and those with the most fluctuation”, noted Cécilia. “The real added value lies in being able to be more productive by anticipating situations ahead of time that might be on the way to turning into bad debt - and doing something about them”.
Improve customer relationships: By sending timely and personalized reminders, Staffmatch has strengthened its relationships with customers while maintaining a professional and efficient approach. “Our debtor customers now receive our reminders at regular intervals. And the way in which reminders are scheduled, and the content of these reminders, has allowed us to establish a consistent dialogue with our customers around payment.”
Reduce costs: Upflow's automation capabilities have reduced the need for additional staff, leading to significant cost savings. “By using Upflow, we've optimized our resource allocation. We've reduced the need for additional staff, allowing us to allocate our resources more strategically. This helps us justify hiring decisions based on real needs, rather than simply to manage increasing workloads.”
Quantifiable and data-driven
Set quantifiable and visible objectives to mobilize your teams when implementing your cash collection processes.
To start, these objectives may target reducing the total amount of overdue invoices. “We currently have $1,500,000 overdue, let’s bring it down to $500,000 by year-end” This is a great way to start, but could sound like a one-off.
Choosing an objective that relates to the invoice flow on a recurring basis makes more sense if aiming to maintain an ongoing effort. Reducing the average payment delay, or Days Sales Outstanding (DSO) is the best intermediary for this. “We’re aiming to keep DSO below 35 days” is a long-term, quantifiable objective.
Communicating internally on quantifiable metrics and objectives is the best way to align your team around cash collection.
Setting Up a Collection Process for Your Business
Same as with any business decision, changing behaviors is where it starts. Accounts receivable are usually managed correctly when top management makes it a priority for the company. That’s your first step! Hiring a firm or consultant with a proven track record that is skilled in structuring financial processes such as Upward Insights can help you get started and/or keep ongoing.
Once you’ve aligned your team on this, choosing the right tool will become key in making sure the idea is actually being translated into a real process. Your accounting software (QuickBooks, Xero, etc.) or ERP (Netsuite, etc.) might be the right place to start, but many companies are still using spreadsheets to manage AR, while their volume of invoices increases. That makes it difficult to apply the guidelines stated above. If you are looking to move to the next level to manage your AR, please reach out to us, and we can help you supercharge your cash collection process and significantly improve your working capital.
Upward Insights is a consultancy that provides in-sourced finance teams to high-growth businesses. They’re just as engaged as an in-house team but without the cost, training, and heavy management that’s required for an in-house accounting and finance department. Their focus is on building scalable financial infrastructures for their clients. Upward Insights also sponsors a zero to low-cost solutions-driven learning platform for entrepreneurs and employees: CFOPrinciples.com
Upflow is the leading platform for setting up and managing systematic cash collection processes. With Upflow, financial teams can measure and implement efficient processes to regain control over their receivables. Leading companies such as TripleByte, Productboard, or Lattice are using Upflow to master their cash collection.
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