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Managing accounts receivable – money owed to a business – is a critical yet sometimes overlooked task that directly impacts cash flow and financial health.

Amanda Crawford, a People & Performance expert from CMPartners, shares insights on why people avoid this task, the consequences of poor debtor management and practical steps to improve your accounts receivable processes.

People & Performance expert Amanda Crawford has partnered with CMPartners for over a decade. As an executive coach, facilitator and chartered accountant, she has a rich background in corporate structuring, commercial management and consulting. Her own business, Leadership Shapers, leverages this extensive knowledge to drive client’s business outcomes by elevating leadership, building high performing teams and embedding a mentoring culture that empowers people to thrive.

Learn how to maintain healthy cash flow while fostering positive client relationships.

Nathan: Many people feel reluctant to chase up clients for unpaid invoices. Why do you think this is? 

Amanda: Often it’s because we’re uncomfortable asking for money. 

Many of us were raised in environments where earnings—and certainly debts—were never discussed. This awkwardness, or even fear, causes uncertainty, worry and discomfort.

As a result, people often avoid following up on what they’re owed because they feel bad about it, even though they shouldn’t. 

Nathan: What’s the best way to ‘ask for money’ or follow up with clients? 

Amanda: We want to maintain positive relationships while ensuring clients adhere to our terms. Including payment terms on invoices is crucial—clear communication of the process and what’s expected within the business relationship. 

Automatic reminders are incredibly helpful to streamline processes, while removing awkwardness. 

Nathan: Are there consequences to having a large amount of accounts receivable? 

Amanda: Definitely—businesses suffer. Ignoring unpaid invoices, hoping clients will eventually pay, impacts cash flow and the business’ ability to pay its own debts. 

Poor debtor management quickly escalates cash flow problems, potentially leading to insolvency and personal liability for business owners. Having worked in insolvency, I’ve seen many businesses fail because of poor debtor management. 

Nathan: What can business owners do to better manage cash flow? 

Amanda: Understand your financial outlook, projections and risks. You might be running with an unhealthy amount of accounts receivable without realising it.

Seek help from experts like CMPartners—they can help you identify potential issues and risks, and create a plan. 

Nathan: Say you’ve uncovered a problem and CMPartners have created a plan, but it starts by chasing unpaid invoices – how do you handle it?

Amanda: You’ll likely have a list of people to call and ask for money. If you’re experiencing discomfort, acknowledge it and realise it’s normal and okay to feel like that. 

Set aside time to get into the right headspace before contacting clients. Remind yourself that you’ve done good work; you’ve got bills or staff to pay; you delivered a product or service that your client benefited from and you deserve to be paid. 

It’s possible the client is so busy they simply overlooked it and would appreciate the reminder, or they may be struggling with their own cash flow problems (which is a way to relate but not an excuse!).

Try some effective communication strategies—such as mentioning the end of the quarter or financial year, which can open up dialogue.

For example, I say: “as the end of the financial year is approaching, we’re trying to clear as many debtor notices” or “as it’s the end of the quarter…”. 

Nathan: And what if a client causes you headaches, month after month?

Amanda: Don’t be afraid to break-up with them. Ask yourself: is this really who I want to be working with? 

Dealing with bad clients, the headaches, take a toll and stifles growth. Partner with people who value your work by paying on time. 

Nathan: Any final advice for business owners?

Amanda: Set clear payment terms, use automatic reminders and ensure accurate bookkeeping. 

I’ve seen a business become insolvent due to a human bookkeeping error—they’d accidentally made double accounts receivable entries, making the business look healthier than it was which resulted in miscalculated business decisions. Don’t fall victim to avoidable or fixable mistakes. 

Misinformation leads to poor decisions. Make sure your books are in good hands; and don’t feel guilty for seeking another provider if they’re not. 

Reach out to CMPartners for more assistance and guidance—they’re good hands you can trust.  

Call 1300 10 10 45 or to send CMPartners a message at https://cmpca.com.au/contact-us/