Accelerate Cash Flow: 6 Tactics to Improve AR Performance

How to Turn Accounts Receivable from a Bottleneck into a Strategic Cash Lever

In today’s economic environment, few priorities are more critical, or more within your control, than improving how quickly you convert accounts receivable (AR) into cash. When working capital is tight, the strength of your quote-to-cash (Q2C) process becomes a direct reflection of your company’s financial agility. Yet in many organizations, AR collections remain reactive, fragmented, or overly dependent on customer goodwill. With borrowing costs still elevated and liquidity under pressure, optimizing AR isn’t just smart—it’s essential.

While it's tempting to assume that slow payments are solely a customer-side problem, many of the most common causes originate within your own operations: inaccurate invoices, format mismatches with accounts payable (AP) systems, outdated payment options, and overly liberal credit policies. And although your sales team may be focused on revenue, it's your collections team that determines when, or if, that revenue turns into usable cash. A well-run AR operation doesn’t just chase payments; it removes friction, prevents disputes, and improves visibility into risk. Done right, collections become a strategic lever to improve both cash flow and customer experience.

Below are six practical, high-impact strategies that finance and credit leaders can use to accelerate collections, reduce DSO, and drive cash performance, without compromising customer relationships.

1. Deliver Accurate Invoices—Fast and in the Right Format

Timely, accurate invoicing is the foundation of fast payment. Any mismatch between your invoice, purchase order, or proof of delivery will delay approvals, especially with customers using automated AP systems. Invoices must be correct the first time and sent in a format the customer can easily process, whether via EDI, PDF, or integrated portal upload.

Errors in pricing, quantities, or terms often stem from upstream issues in fulfillment or billing. These errors not only cause delays but also generate disputes and deductions that slow cash application and require manual resolution.

📊 Insight: Companies in the top quartile for invoice accuracy and delivery speed are paid 19 days faster on average, according to the American Quality & Productivity Center (APQC).

2. Offer Flexible Payment Options

Checks are no longer the default. ACH is now the most common B2B payment method, but credit card usage is growing—especially for mid-sized or riskier accounts. Increasingly, buyers expect the convenience of modern options like PayPal or other digital wallets.

Ensure that all payment methods are clearly listed on your invoices and statements. Better yet, embed direct payment links and offer a self-service portal where customers can view open invoices, retrieve supporting documents, and submit payments securely.

💡 Pro tip: Removing friction from the payment process reduces excuses for non-payment and shortens the AR cycle.

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3. Use Early Payment Discounts Strategically

Early payment discounts (e.g., 1% 10 Net 30) are a time-tested tool to improve DSO. The cost to the buyer for missing a 1% 10 discount equates to a 18.2% annualized interest rate, an attractive incentive even in high-rate environments. By the same token, you are giving up 1% of your margin on every purchase the customer makes. To maximize adoption and effectiveness:

• Only offer discounts with a short payment window (10 days or less) on electronic invoices, where faster invoice delivery supports quicker payment approval.

• Consider using a 15-day discount window for check-paying customers to reduce unearned discount claims.

• Before offering prompt pay discounts, have a process in place to ensure customers comply with the terms. Are you prepared to push back on customers who take a discount beyond the window allowed?

🎯 Bonus: Offering a discount can improve your position in the customer’s payment queue, ahead of suppliers with 30-day or more net terms.

4. Strengthen and Automate Collections

Collections need to be proactive, structured, and data-driven. Start with these three tactics:

• Increase effort: Allocate more time and resources to collections.

• Prioritize and plan: Focus collection efforts on high-risk or high-balance accounts first. Use predefined workflows based on days past due, customer risk, and balance size.

• Automate dunning: Set up scheduled reminders via email or customer portals. Include summaries of outstanding invoices and embedded payment links. Use escalating tone and cadence to reflect urgency.

⚙️ Automation reduces manual follow-up and ensures consistency across the AR portfolio, allowing your team to focus on accounts that truly need attention.

5. Tighten Credit Policies

Your credit policy directly impacts DSO. Liberal terms may drive sales, but they also tend to delay cash inflow and increase risk. Consider:

• Lowering credit limits or shortening terms for higher-risk accounts.

• Holding orders when customers exceed limits or carry aged balances will trigger collection conversations.

• Shifting marginal accounts to credit card or prepaid terms to offload credit risk while preserving the relationship.

🔐 Tip: Use credit tools (e.g., guarantees, credit insurance, UCC filings, or letters of credit) to support sales without increasing exposure.

6. Leverage Receivables Financing

If you consistently offer terms but need cash faster, AR financing solutions can bridge the gap. Options include:

• Invoice factoring and discounting: Get paid in days rather than weeks while a third party assumes the risk.

• Supply Chain Finance (SCF): Ideal when your customers have stronger credit than you do, letting them pay later while you get paid earlier.

• Buy Now, Pay Later (BNPL) for B2B: A growing model, especially for high-velocity, lower-ticket transactions.

💵 Insight: These solutions convert AR into working capital without pressuring customers to pay early—ideal for improving liquidity in unpredictable conditions.

Final Thought: Smooth the Stream

Think of your Q2C process as a stream feeding your cash reserves. Invoicing errors, fulfillment delays, and outdated credit practices act like debris, slowing the flow. Improving AR collections isn’t just about making more calls; it’s about fixing the upstream issues that cause payment delays in the first place.

Your receivables tell the story of your Q2C process. Where cash gets stuck, process improvements are needed. Moreover, the bonus from making process improvements isn’t only about accelerating cash flow—it's also about increasing customer satisfaction and building loyalty.