A Founder's Guide to Accounts Receivable Management
Don't let unpaid invoices kill your runway. This guide is a tactical playbook for managing accounts receivable, from setting credit terms to getting cash in the bank faster.
TL;DR: Accounts Receivable (AR) is money owed by customers. Unmanaged AR drains your cash flow. To fix this, create a strict credit policy with Net 0 or Net 15 terms as your default, invoice immediately with automated tools like Stripe or Chargebee, and follow a persistent, escalating collections process for late payments. Monitor your AR Aging report weekly and keep your Days Sales Outstanding (DSO) below 45 days to signal operational discipline to investors.
Key takeaways
- Default to upfront payment; you are a startup, not a bank.
- Create a formal credit policy to remove emotion from payment terms.
- Automate invoicing and payment reminders to eliminate manual errors and delays.
- Follow a persistent, escalating collections cadence for every overdue invoice.
- Review your AR Aging report weekly. Any invoice over 60 days is an emergency.
- A high Days Sales Outstanding (DSO) is a major red flag for investors.
''' Your Job Is to Get Paid
Cash is oxygen. But revenue on a spreadsheet isn't cash. Accounts Receivable (AR) is the money you've earned that sits in your customers' bank accounts instead of yours. It’s the gap between the value you delivered and the cash you have to make payroll.
When you offer a customer "Net 30" terms, you are giving them a zero-interest loan. You are financing their business at the expense of your own runway. For a venture-backed startup, this is insane. You are paying a high cost for your own capital, only to give it away for free.
Managing AR isn't a boring back-office task. It's a measure of your operational discipline and customer respect. This guide provides the playbook for managing AR, not as an accountant, but as a founder who needs to survive and scale.
The Proactive AR Playbook: Win Before You Invoice
The best way to collect an unpaid invoice is to never have a late one. This starts long before you send a PDF. It starts with your sales process and your contract.
Step 1: Build a Credit Policy That Removes Emotion
Your default position must be payment upfront. For SaaS, this means a credit card on file before the service begins. For a project, it means a deposit. Any deviation is a concession, not the norm. A written credit policy removes the sales team's ability to offer loose terms just to close a deal.
Your credit policy must answer four questions:
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