For CFOs and Controllers at professional services firms, accounts receivable isn't an administrative function. It's the engine of cash flow and a direct reflection of operational control. In a sector where project margins are tight and client relationships are paramount, a reactive AR process quietly erodes profitability.

The median DSO for professional services often hovers between 65 and 85 days. This ties up working capital that could otherwise fuel growth or be returned to partners.

Shifting from a reactive collections model to a proactive, orchestrated system is no longer optional. This requires a strategic blend of clear policy, intelligent technology, and human insight.

This guide details 10 specific, operator-led accounts receivable best practices. We cover credit policy, invoicing, collections automation, and performance measurement to predictably reduce DSO, improve cash flow, and solidify your firm's financial foundation.

1. Automated Invoice Delivery and Payment Processing

Manual invoicing is a significant operational drag. It introduces unnecessary delays and human error right at the start of the payment cycle. A high-impact AR best practice is to automate invoice generation and delivery.

Accounts receivable automation integrates directly with accounting software like QuickBooks. Invoices are generated and delivered to clients via a secure portal or email the moment a project milestone is met.

This ensures accuracy and immediacy, removing the lag time between completing work and issuing the bill. Firms see a direct reduction in DSO as the invoice-to-receipt timeline shrinks from days to minutes.

Why This Practice Is Critical

The faster a correct invoice reaches the client's AP department, the faster it enters their payment queue. Automating this step removes the single biggest source of controllable delay in the AR process.

For a firm billing $5M annually, a 5-day reduction in DSO frees up approximately $68,500 in working capital. This is a direct, measurable outcome of implementing AR automation.

Actionable Implementation Steps

• Start with High-Volume Clients: The efficiency gains will be most significant, providing a strong business case for wider adoption of AR software for professional services.

• Provide Clear Transition Support: Proactively communicate the change to clients. Offer simple guides or a brief training on how to use the new portal.

• Monitor Core KPIs: Track Invoice Accuracy Rate and Invoice-to-Payment Time before and after. A successful rollout should show marked improvement.

• Integrate Payment Options: Ensure the automated invoice includes a clear link to an online payment portal, bridging the gap between receipt and payment.

For a deeper dive into available tools, explore this guide to accounts receivable automation software.

2. Early Payment Discount Strategy (2/10 Net 30)

Waiting for standard 30- or 60-day payment terms to mature can strain working capital. A proven accounts receivable best practice is to implement a strategic "2/10 Net 30" early payment discount program.

This offers a small discount (e.g., 2%) if clients settle an invoice within 10 days instead of the full 30 days. For a professional services firm, accelerating a $50,000 payment by 20 days is often more valuable than the $1,000 discount.

This tactic directly improves cash availability for payroll, investments, or operational expenses, trading a small margin for immediate liquidity and reduced collection risk.

Why This Practice Is Critical

An early payment discount strategy transforms accounts receivable from a passive waiting game into an active cash management lever. It provides a predictable way to shorten the cash conversion cycle and reduce DSO.

The cost of an early payment discount should be evaluated against your company's cost of capital. If a 2% discount is less expensive than financing the same amount through a line of credit, it's a financially sound strategy.

Actionable Implementation Steps

• Analyze the Financial Impact: Before launching, model the effect on your profit margins. A 2% discount is an annualized rate of over 36%, so ensure the cash flow benefit justifies the cost.

• Clearly Define and Communicate Terms: Display the discount terms prominently on every invoice (e.g., "2% 10, Net 30").

• Segment Your Client Base: Consider offering more attractive discounts to new clients to build good payment habits or to large, strategically important accounts.

• Monitor Discount Adoption Rate: Track which clients take advantage of the discount. A low adoption rate may indicate the discount isn't compelling enough or their AP processes are too slow.

3. Proactive Collection Management and Follow-up

Waiting for an invoice to become overdue before taking action is a reactive approach that erodes cash flow. A core accounts receivable best practice is to implement a proactive collection management system.

This strategy shifts the focus from chasing delinquent payments to preventing them. It uses systematic monitoring and early, helpful communication to guide invoices toward on-time payment.

Rather than letting an account age, the AR process should include automated reminders to confirm invoice receipt and ensure there are no issues. This transforms collections from a confrontational task into a customer service function.

Why This Practice Is Critical

Proactive follow-up systematically removes common payment barriers like lost invoices or overlooked due dates. It helps identify potential disputes much earlier, giving both parties time to find a solution.

The most effective collection activities happen before an invoice is late. A simple, friendly reminder 3-5 days before the due date can resolve over 90% of the issues that typically lead to late payments.

Actionable Implementation Steps

• Implement a Tiered Communication Cadence: Create a multi-step workflow: a confirmation of invoice receipt, a reminder 5 days before the due date, a firm notice on the due date, and a follow-up call at 7 days past due.

• Segment Clients for Personalized Outreach: Use payment history data to segment accounts into tiers (e.g., prompt payers, occasional late payers). Tailor the follow-up intensity accordingly.

• Train Staff in Negotiation: Equip your AR team with the skills to understand the client's situation and secure payment commitments while preserving the relationship.

• Use Analytics to Identify High-Risk Accounts: Leverage accounting data to flag accounts that show signs of payment risk, such as a sudden change in payment patterns.

4. Credit Risk Assessment and Customer Creditworthiness Analysis

Extending credit without a formal evaluation process is a direct path to cash flow instability and bad debt. A fundamental accounts receivable best practice is establishing a rigorous, data-driven process for assessing customer creditworthiness.

This involves a systematic analysis of a potential client's financial health, payment history, and industry stability to set appropriate credit limits and terms from the outset.

By leveraging financial data and credit reports, you can score and segment potential clients. This ensures the credit extended aligns with their ability to pay and preemptively filters out high-risk accounts.

Why This Practice Is Critical

A robust credit assessment framework is your first line of defense against bad debt. It directly minimizes the risk of non-payment by identifying financially unstable clients before significant work is performed.

The most effective way to manage a difficult collection is to avoid it altogether. A formal credit policy ensures you are building a client portfolio that is both profitable and financially sound.

Actionable Implementation Steps

• Document a Formal Credit Policy: Create a clear document outlining your credit application process, evaluation criteria (e.g., credit scores), and standard credit limits.

• Utilize Multiple Data Sources: Combine information from credit reporting agencies, trade references, and financial statements. Consider implementing robust B2B data enrichment strategies.

• Establish Risk-Based Segments: Categorize clients into tiers (e.g., low-risk, medium-risk, high-risk) and assign standard credit limits and terms to each. High-risk clients may require an upfront deposit.

• Schedule Periodic Reviews: Creditworthiness is not static. Implement a policy to review the credit status of all active clients at least annually or when a major new project is initiated.

5. Customer Portal and Self-Service Payment Options

Relying on your AR team to manually field every inquiry about invoice copies or payment status creates an administrative burden. An effective accounts receivable best practice is to empower clients with a secure, self-service online portal.

This platform provides customers with 24/7 access to view invoices, check their balance, and make payments without direct intervention from your staff.

This approach transforms the customer experience from a reactive, phone-and-email process into a proactive, transparent digital interaction, freeing up your finance team for higher-value tasks.

Why This Practice Is Critical

A customer portal directly reduces the workload on your AR team while accelerating payments. When clients can easily find invoices and pay with a few clicks, primary barriers to prompt payment are removed.

This enhances client satisfaction by offering the convenience they expect. The result is a notable reduction in payment turnaround times and a decrease in inbound administrative queries by as much as 30-40%.

Visual Idea: A cinematic shot over the shoulder of a CFO looking at a clean, well-designed dashboard on a tablet. The dashboard shows real-time DSO, aging buckets, and cash flow projections, conveying a sense of calm control.

Actionable Implementation Steps

• Prioritize Intuitive Design: Ensure the portal is easy to navigate, with minimal clicks required to view an invoice and complete a payment.

• Offer Diverse Payment Methods: Integrate multiple payment options directly within the portal, including ACH, credit card, and digital wallets.

• Communicate the Benefits Proactively: Announce the new portal to clients, highlighting how it saves them time and provides greater control.

• Integrate with Your Accounting System: The portal must sync in real-time with your QuickBooks or ERP software to ensure payment statuses and balances are always accurate.

6. Lockbox and Payment Consolidation Services

For firms with high volumes of check payments, manually processing each one is a significant resource drain. Lockbox services offer a streamlined alternative by outsourcing this workflow to a financial institution.

Customers mail payments directly to a dedicated post office box managed by the bank. The bank then processes the deposits and provides a digital record for reconciliation, cutting down on mail and processing float.

This practice allows your finance team to focus on higher-value tasks like analysis and collections strategy. It ensures funds are deposited and available much faster than through manual in-house processing.

Why This Practice Is Critical

A lockbox service is highly effective for accelerating cash flow from non-electronic payments. The primary benefit is a sharp reduction in float—the time between a check being mailed and funds becoming available.

By centralizing and automating the deposit process, a lockbox can reduce this period by several days, directly improving your cash position and providing more predictable daily liquidity.

Actionable Implementation Steps

• Conduct a Cost-Benefit Analysis: Evaluate the bank's fee structure against your current internal processing costs and the financial benefit of reducing float to confirm the ROI.

• Update Invoicing and Communication: Clearly communicate the new remittance address on all invoices, statements, and client-facing billing materials.

• Integrate Bank Data Feeds: Work with your bank and IT team to set up an automated data file that integrates with your accounting or ERP system for efficient cash application.

• Monitor Service Levels and Accuracy: Regularly review the bank’s performance. Track metrics like Processing Accuracy Rate and Same-Day Deposit Percentage.

7. Days Sales Outstanding (DSO) Monitoring and Analytics

What isn't measured cannot be effectively managed. Systematically tracking and analyzing Days Sales Outstanding (DSO) is a foundational accounts receivable best practice.

DSO represents the average number of days it takes to convert receivables into cash. Consistent monitoring moves your AR function from a reactive, "gut-feel" operation to a data-driven, strategic one.

This KPI acts as a financial health barometer, revealing the effectiveness of your credit, invoicing, and collections policies. It allows leaders to identify negative trends before they escalate into critical cash flow problems.

Why This Practice Is Critical

DSO is an early warning system. For professional services firms, a rising DSO can signal client dissatisfaction, invoicing errors, or an inefficient collections process.

A low and stable DSO indicates a healthy cash conversion cycle, operational efficiency, and a solid customer payment culture. A sudden increase is a clear signal that a component in your order-to-cash cycle is broken.

Actionable Implementation Steps

• Establish a Calculation Cadence: Calculate DSO on a consistent schedule—at least monthly, but weekly is better for tighter control.

• Segment Your DSO Analysis: Break it down by customer segment, project type, or service line. You might find large corporate clients have a 60-day DSO while smaller clients pay in 25 days.

• Benchmark and Set Targets: Compare your DSO to historical trends and industry averages. Set clear, realistic DSO reduction targets for the AR team.

• Use Analytics to Drive Action: Leverage BI tools to visualize DSO trends. When you see a spike, drill down to identify the root cause, whether it’s a single large overdue invoice or a systemic issue.

This is a crucial element within the broader order-to-cash process.

8. Account Reconciliation and Exception Management

Inaccurate receivables records are a silent killer of cash flow. A critical accounts receivable best practice is establishing a systematic process for account reconciliation and exception management.

This involves meticulously matching incoming payments to their corresponding invoices. It also means swiftly resolving discrepancies like partial payments, unauthorized deductions, or disputed charges.

This practice is about maintaining a pristine and trustworthy ledger. It ensures your AR aging report is an accurate reflection of what is truly owed, not a collection of unresolved errors.

Why This Practice Is Critical

A disciplined reconciliation process prevents small discrepancies from escalating into major collection challenges. It provides clarity to both your team and your clients, fostering trust.

The primary benefit is improved data accuracy, which directly impacts the reliability of your financial reporting and cash flow forecasting. Without it, you end up chasing phantom debts or failing to collect valid balances.

Actionable Implementation Steps

• Implement Automated Matching Rules: Use AR software to set up rules that automatically match payments to invoices based on invoice number, amount, and customer ID.

• Establish Clear Exception Protocols: Create a documented workflow for handling exceptions. Define who is responsible for investigating a short payment and set a strict resolution target, such as 3-5 business days.

• Analyze Exception Patterns: Regularly review the root causes of exceptions. If a specific client consistently makes partial payments, it signals a need to clarify your billing policy with them.

• Maintain Detailed Audit Trails: Ensure every adjustment, credit memo, or write-off is thoroughly documented for internal controls, audits, and resolving future client inquiries.

9. Collections Outsourcing and Specialized Third-Party Services

When internal efforts to collect on severely delinquent accounts yield diminishing returns, engaging a third-party service becomes a strategic necessity. Outsourcing collections allows your team to focus on current receivables.

This involves partnering with external collection agencies who possess the dedicated infrastructure, technology, and legal expertise to manage late-stage debt recovery.

This is a critical accounts receivable best practice for maximizing recovery on otherwise lost revenue. It frees your team from tasks that can strain client relationships and consume disproportionate resources.

Why This Practice Is Critical

Outsourcing late-stage collections protects your team’s time and focus. The primary benefit is a significant increase in the recovery rate for accounts that would likely be written off as bad debt.

Your team's core competency is managing client relationships and current receivables. A third-party agency's core competency is recovering difficult debt. Using both in a tiered approach maximizes efficiency and cash flow.

Actionable Implementation Steps

• Establish a Clear Hand-Off Trigger: Define a specific trigger for sending an account to a third party, such as when an invoice reaches 90 or 120 days past due without a payment plan.

• Vet Partners Thoroughly: Evaluate providers based on their industry experience, recovery rates, compliance records (FDCPA, TCPA), and technology. Request client references from firms similar to yours.

• Define Strict Service Level Agreements (SLAs): Your contract must clearly outline performance metrics, communication protocols, reporting requirements, and fees.

• Start with a Pilot Program: Begin by outsourcing a small, controlled batch of aged accounts. Monitor the process and results closely before expanding the partnership.

10. Integrated Technology Stack and ERP System Implementation

Siloed financial systems are a primary source of data friction and operational delays. A foundational accounts receivable best practice is to build an integrated technology stack centered around a robust ERP system.

This approach unifies data from sales (CRM), billing, and finance, creating a single source of truth that powers all other AR functions, from invoicing to cash application. AI AR automation tools can then leverage this clean data for predictive analytics.

An integrated system ensures that a sales order flows seamlessly into the ERP to generate an accurate invoice without manual data entry. This creates an unbroken data chain and provides real-time visibility.

Why This Practice Is Critical

A disconnected technology stack forces AR teams to manually transfer data between systems, which is inefficient and prone to costly errors. An integrated ERP serves as the central nervous system for your firm's financial operations.

This holistic view enables leaders to make strategic decisions based on accurate, up-to-the-minute cash flow and receivables data. An integrated technology stack is the strategic foundation upon which all other AR optimizations are built.

Actionable Implementation Steps

• Define Clear Success Metrics: Before selecting a system, establish specific KPIs you aim to improve, such as Order-to-Cash Cycle Time and Data Entry Error Rate.

• Prioritize Data Quality and Cleansing: Begin with a thorough data audit and cleanup. Migrating inaccurate or incomplete customer data into a new ERP will only amplify existing problems.

• Invest in Change Management: An ERP implementation is a significant operational shift. Invest heavily in training, clear communication, and securing buy-in from your finance and AR teams.

• Create an Integration Roadmap: Plan how the ERP will connect with other critical tools. Refer to a comprehensive guide to ERP system implementation for best practices.

Explore the top accounts receivable automation benefits for your collections process.

Accounts Receivable: Top 10 Best-Practices Comparison

From Best Practices to Operational Excellence

Individual tactics deliver incremental gains. Real transformation occurs when these strategies are woven into a cohesive, orchestrated system. For professional services firms, mastering this system is a competitive advantage.

The objective is to move AR from a reactive, administrative function to a proactive, strategic asset. This requires a system that actively protects and enhances your firm's working capital.

The Shift from Manual Effort to Strategic Orchestration

The common thread connecting these practices is the strategic application of automation. Manual follow-ups and data entry consume valuable time and introduce risk. Accounts receivable automation empowers your finance team to shift from chasing paper to analyzing data and managing exceptions.

This shift is critical. Instead of your best people spending days on repetitive tasks, they can resolve complex disputes, negotiate payment plans for strategic accounts, and analyze payment trends to forecast cash flow with greater accuracy.

Visual Idea: A side-by-side comparison chart. "Manual AR vs. Automated AR." Left side shows tasks like "Manual Invoice Follow-up," "Data Entry," "Spreadsheet Tracking." Right side shows "Automated Dunning Cadences," "Auto-Cash Application," "Real-time DSO Dashboard." Metrics like "Team Time Spent" and "Average DSO" are shown for each.

Actionable Next Steps: Building Your AR Roadmap

Implementing a full suite of these best practices is a phased evolution, not an overhaul.

1. Benchmark Your Current State: Calculate your core metrics: DSO, Collection Effectiveness Index (CEI), and Average Days Delinquent (ADD).

2. Identify the Biggest Bottleneck: Where does cash get stuck? Is it delayed invoicing, dispute resolution, or inefficient cash application? Focus initial efforts on the area with the biggest impact.

3. Prioritize Technology and Process in Tandem: Select a single practice to refine, such as implementing an automated reminder sequence. Document the new workflow, train the team, and set clear KPIs before moving to the next area.

Ultimately, excellence in accounts receivable is about creating a system that balances financial discipline with client empathy. It ensures you get paid on time, consistently, without jeopardizing the relationships that are the lifeblood of your firm.

Resolut automates AR for professional services—consistent, accurate, and human. See how you can reduce DSO and improve cash flow at Resolut.