Cash flow is the lifeblood of any business — and the two biggest drivers of day-to-day cash flow are accounts receivable (money owed to you) and accounts payable (money you owe). Managing both well is the difference between a business that always has cash when it needs it and one that’s constantly scrambling.
FJ & Associates, PLLC integrates AP/AR management into every bookkeeping engagement — tracking what’s owed, flagging overdue balances, and giving you a real-time cash flow picture every month.
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Accounts Receivable Best Practices
Invoice promptly. The sooner you invoice, the sooner you get paid. Same-day or next-day invoicing after work is complete is the standard. Delays in invoicing directly delay cash receipt.
Set clear payment terms. Net 30 is standard; Net 15 improves cash flow. State payment terms on every invoice and in every client contract. Charge late fees (if your contract allows) consistently — it changes collection behavior.
Run AR aging reports weekly. An AR aging report sorts outstanding invoices by age — current, 1–30 days, 31–60 days, 61–90 days, 90+ days. Follow up on anything in the 31–60 day bucket immediately. By 90+ days, the probability of collection drops significantly.
Automate reminders. QuickBooks Online, Xero, and most invoicing platforms can automatically send payment reminders to overdue clients. Set up reminders at 7 days before due, on the due date, and at 15, 30, and 60 days overdue.
Evaluate customer creditworthiness. For large or ongoing engagements, consider requesting a deposit upfront or running a basic credit check. Extending significant credit to an uncredited customer is a cash flow risk.
Accounts Payable Best Practices
Track all bills as they arrive. Enter vendor invoices into your accounting system when received — not when paid. This gives you accurate AP aging, prevents missed payments, and ensures your financial statements reflect actual liabilities.
Use AP aging to manage cash flow. An AP aging report shows what you owe and when it’s due. Use it weekly to plan payments — prioritizing by due date and taking advantage of early-payment discounts when cash allows.
Capture early payment discounts. Many vendors offer terms like “2/10 Net 30” — a 2% discount if paid within 10 days. A 2% discount for 20 days of early payment is equivalent to a 36.5% annualized return on capital. Take these when available.
Separate payment authorization from payment processing. For businesses with staff, the person who approves bills should not be the same person who processes payments. This internal control prevents both errors and fraud.
Reconcile vendor statements. Vendors occasionally issue statements that don’t match your records — duplicate invoices, disputed items, missing credits. Reconcile vendor statements quarterly to keep AP clean.
Cash Flow Impact of AP/AR Management
| Action | Cash Flow Impact |
|---|---|
| Invoice same-day vs. week-late | 7 days faster cash receipt |
| Net 15 vs. Net 30 terms | 15 days faster cash receipt |
| Following up at 31 days vs. 60 days | Recover cash 30 days earlier |
| Taking 2/10 vendor discount | 2% savings on every invoice paid early |
| Extending AP payment to due date | Preserve cash for 30 days interest-free |
AP/AR management is free cash flow management — and it costs nothing except discipline and systems.
AP/AR Management FAQs
What does an AR aging report tell me?
It shows every outstanding invoice grouped by how overdue it is: current (not yet due), 1–30 days past due, 31–60 days, 61–90 days, and 90+ days. It tells you who owes you money, how much, and how overdue — giving you a prioritized collection action list.
Should I charge late fees?
Yes — if your contracts allow it and you apply them consistently. Even modest late fees (1.5%/month is common) change client payment behavior. Inconsistent enforcement signals that late fees aren’t real, which undermines their deterrent effect.
What do I do with invoices I can’t collect?
After exhausting collection efforts, write off uncollectable invoices as bad debt expense. If you previously recognized revenue on the invoice (accrual basis), the write-off offsets that revenue. Cash-basis businesses don’t recognize the revenue until paid — so no write-off is needed. Consult us before writing off significant balances.
Better AP/AR — Better Cash Flow
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See also: Cash Flow Analysis & Forecasting | Monthly Bookkeeping Services | Essential Bookkeeping Practices
Missy Dennis, CPA | Partner | FJ & Associates, PLLC | Kaysville, Utah
Missy holds a Master of Accounting degree from the University of Utah and is a licensed Certified Public Accountant. With more than twenty years of public accounting experience, Missy specializes in tax preparation and advisory, bookkeeping strategy, estate and trust taxation, audit and consulting services, and small- and mid-sized business advisory.
