18 Examples of Accounts Receivable Goals and Objectives

Updated March 10, 2023

Effective accounts receivable goals and objectives have an important role in running a successful business. Establishing processes for ensuring customer payment allows you to spend more time on other aspects of your business and prevents revenue loss. Some business owners face challenges in pursuing overdue payments, but creating accounts receivable goals and objectives can help you overcome those obstacles. In this article, we discuss what accounts receivable goals and objectives are, examples of accounts receivable goals and tips for setting accounts receivable goals.

What are accounts receivable goals and objectives?

Accounts receivable goals and objectives are actionable intentions set by business managers to promote, monitor and maintain an efficient system for collecting debts. Some companies excel in certain aspects of accounts receivable but could use goals and objectives to make improvements in other areas, while others benefit from the establishment of a new system. You can customize your accounts receivable goals and objectives based on the specific challenges you aim to overcome.

18 examples of accounts receivable goals

Here are some examples of account receivable goals and objectives:

1. Keep customer contact information updated

If the contact information you have for your customers has changed, they may not receive the invoices you send to them. Make it a habit of confirming contact information with vendors when they place orders. Making sure you have more than one way to contact them, such as by email and mail, can help as well, as you can follow up using secondary contact information if necessary.

2. Integrate a structured credit approval process

Choosing to approve or deny credit for a vendor could impact your revenue, so it's important to consult with finance and accounting departments when establishing a system for credit approval. Determine the qualifications for establishing a line of credit with your company, including override and credit hold circumstances. Allowing your customers to apply through an automated system can decrease clerical errors and help prevent fraud.

3. Send the invoice as soon as possible

Companies can handle invoicing much faster in recent years, especially when they use online billing. Sending invoices on a scheduled, regular basis gives customers the message that your invoice is important and that you want them to pay it right away. Consider sending invoices at least once a week or even once a day during peak seasons.

4. Send reminder emails

When you collect contact information from your customers, be sure to get their email. Even if they prefer paper billing, you can use their email to send them reminders when they have an upcoming payment or if they miss their payment. Scheduling automated payment reminder emails for every customer who places an order can simplify the process and it also gives customers the option to unsubscribe.

5. Set earlier due dates

Payment terms vary by company, so you might try different ones to see what yields the best outcome. Net 60 invoices allow customers up to 60 days for payment. For customers that receive large invoices, this approach may give them the time they need to settle the debt. However, vendors may set small bills with an extended due date aside and forget about them. Creating net 60 or even net 10 invoices can help minimize this issue.

6. Automate your billing process

Streamlining invoicing processes helps companies avoid billing errors that can cause serious problems, such as incorrect payment amounts and undelivered invoices. Billing automation makes it easy for companies to send invoices to customers and many types of software allow the recipient to pay directly from the invoice. Even if you still have some customers who prefer paper bills, automated solutions can contribute to a more efficient system than handling all accounts receivable manually.

7. Apply cash payments to accounts immediately upon receipt

If you allow your customers to make cash payments, it's important to apply them to their balance as soon as you receive them. While checks and credit cards have identifying information that ties them to a specific customer, unassigned cash can become misplaced or added to the wrong account. Depositing cash payments daily or weekly can also prevent loss and keep your cash payment system organized.

8. Give customers multiple payment options

Most companies prefer to conduct business online but some would rather use cash or checks for their invoices. For example, some software allows customers to pay with a credit or debit card, ACH bank draft or by mailing a payment. Using a billing platform that allows you to send invoices and accept multiple forms of payment makes it more convenient for customers to pay their invoices.

9. Check for accounts receivable errors regularly

Record all complaints, errors and concerns you receive regarding your accounts receivable process. You can then address them regularly to keep your system operating smoothly. Consider scheduling accounts receivable maintenance for a specific day and time of the week, and keep a log of the changes you made in case you encounter them again in the future.

10. Create a system for resolving billing disputes

Nearly all companies handle disputed invoices and having an established procedure for resolving them can lead to happier customers and more paid bills. Keeping the vendor informed about the terms of the transaction before providing them with a product or service allows them to ask questions or raise any concerns before receiving an invoice. If a vendor disputes their bill, explain each item on the invoice and offer an alternative solution, such as a payment plan.

11. Bill your customers electronically

Billing customers online simplifies the accounts receivable process for your team by making it faster and easier to send invoices. It also prevents delivery issues associated with billing by mail and streamlines record-keeping. If you have vendors who prefer paper invoices, send notices informing them of the expected switch to paperless billing. Include your contact information so they can call you if they have questions.

12. Take steps to avoid using a collection agency

Companies that acquire large amounts of unpaid invoices sometimes enlist the help of collection agencies to recover debts. While this method can be successful, collection agencies require a significant portion of the paid invoices as commission. Developing a system for following up with customers improves your chances of receiving payments without the need to pay someone else. For example, some companies start by calling or emailing vendors shortly after they miss billing due dates and gradually escalate to other methods, such as site visits, to collect on unpaid invoices.

13. Update your current credit policy

Credit policies often change as businesses grow and when the government modifies credit industry regulations. You can prevent issues associated with outdated credit policies by reviewing yours occasionally and making changes as needed. Some aspects of your credit policy you may consider updating include benchmarking, escalation and credit scoring.

14. Improve the process by finding the origin of the problem

It may seem easier to fix recurring problems as you encounter them but it often requires more effort over time. If you have multiple people working within the same software, it also increases the chance of inconsistent data entry and invoicing processes. When you discover a problem within your system, taking a few minutes to find its origin and correct it on that level can help you prevent the same type of issues in the future.

15. Provide accounts receivable personnel with training on credit laws

Businesses have a responsibility to abide by federal and state laws when giving customers a credit line with their company. These laws change frequently, so it's important to keep accounts receivable personnel updated on relevant regulations. Federal credit laws every accounts receivable professional should know include:

Truth in Lending Act
Fair Credit Billing Act
Equal Credit Opportunity Act
Fair Credit Reporting Act
Fair Debt Collection Practices Act

Some states also established credit laws. Companies should consider providing training to personnel on both federal and state laws to ensure they stay informed on changes to regulations and meet the legal requirements for providing credit.

16. Reward and encourage accounts receivable teams

Working in accounts receivable has its challenges, especially when handling billing disputes or errors. Accounts receivable teams work hard to overcome these obstacles and maintain the flow of revenue into companies and their achievements deserve recognition. Giving your team regular praise and rewards increases morale and encourages members to succeed.

17. Adjust bad debt reserve calculations on a schedule

Many companies maintain a bad debt reserve to buffer the effects of unpaid invoices on revenue. These funds allow businesses to account for a certain percentage of loss associated with billing without affecting revenue every time a customer has an unpaid invoice. To determine how much to put into a bad debt reserve, the accounts receivable team calculates their percentage of bad debt. Because a company's amount of bad debt changes along with updates to the company's operations, review your bad debt reserve at least once annually and adjust it if necessary to avoid losing profit.

18. Review credit lines to maximize revenue

Your vendors' credit lines can affect how much they spend with your company, and monitoring them may contribute to an increase in revenue. Trusted customers who order from you frequently and pay their invoices on time may be eligible for higher credit lines, which could benefit your company by encouraging them to spend more. Similarly, it's important to disable the accounts of vendors who have high credit limits or continue to use their credit line with your company but have a history of late payments.

How to set accounts receivable goals

Setting accounts receivable goals and objectives allows companies to operate their invoicing and payment collection processes productively. Long-term and short-term goals have an important role in the efficacy of an accounts receivable system. SMART goals can help your team achieve both by making their objectives actionable. A SMART goal is:

Specific: The goal relates directly to a particular problem you want to resolve.
Measurable: You can monitor your progress by tracking metrics such as key performance indicators (KPIs) that tell you how much you've completed and where you can improve.
Achievable: The goal is realistic and you can attain it using the SMART process.
Relevant: The goal resolves a specific concern, but it also contributes to the success of a larger vision.
Time-bound: Your goal has a reasonable deadline.

Teams can work together to set and achieve SMART goals. For example, an accounts receivable team may coordinate with finance to establish new credit policies. It's important to write each SMART goal, as it provides motivation and simplifies collaboration between colleagues.

Example of SMART goal use

Here is an example of a situation in which a professional may set goals using SMART methods"

Anna realized that her company's accounts receivable software was outdated, so she decided to set a SMART goal for updating the system. She wrote, "Find and implement a more effective accounts receivable software that meets our invoicing needs and the needs of our vendors." To measure her progress, she created a spreadsheet with names of software and their capabilities so she could compare them with the team.

Anna made sure her goal qualified as achievable by setting a budget for the software and she gave herself a deadline of 30 days to complete the project. Once she implemented the new software, it would resolve the immediate issue while also saving on labor and potentially increasing revenue.