Accounts Receivable Guide for Startups

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.

Who gets credit? Create a simple decision matrix. For large, public companies (e.g., Google, GE), you can offer Net 30 as a fallback. For a small, unknown business, the answer is no; they must pre-pay just like everyone else. A middle ground for a promising but unproven customer could be a smaller credit limit (e.g., $10,000) until they establish a payment history. · What are the standard terms? Your default is Net 0 (payment upfront) or Due on Receipt. If you must offer terms, start at Net 15. Net 30 is a major concession you should fight to avoid, and anything over Net 45 requires founder approval, period. · What are the penalties? Your contract must specify a late fee. A 1.5% monthly penalty on overdue balances is standard. It shows you're serious and gives you leverage. More importantly, include a clause allowing you to pause service for non-payment after a specific period (e.g., 60 days). · How do we get paid? Make it frictionless. Your invoices must have a link to pay by credit card or ACH. Forcing customers to mail a physical check is adding a 1-2 week delay to your cash flow. Use Stripe, Chargebee, or Bill.com.

Bulletproof Contract Clause: "All invoices are due within fifteen (15) days of the invoice date (Net 15). A late fee of 1.5% per month will be applied to any outstanding balance not paid within this period. Client agrees that Company reserves the right to suspend all services if any invoice becomes more than sixty (60) days past due."

Step 2: Master the Invoicing Workflow

Speed and accuracy are everything. The clock on your payment terms doesn't start until the correct person receives an accurate invoice.

Invoice Immediately. Don't batch invoices. The moment a milestone is complete or a subscription period begins, send the invoice. Automation is your friend. · Confirm the Billing Contact. During sales handoff, don't just ask for a "contact." Ask for the full name and email address of the person in their Accounts Payable department who processes invoices. Sending it to your day-to-day user is a recipe for a 30-day delay. · The Anatomy of a "Pay-Me-Now" Invoice: · A unique Invoice Number · Invoice Date · Payment Due Date (in bold) · Your company details · The client's billing address and AP contact · A crystal-clear description of the services rendered · The total amount due · A clickable link for online payment via ACH or Credit Card · A restatement of your late fee policy

The Collections Cadence: Polite, Persistent, and Painful

Asking for money you are owed is not rude. It’s professional. This escalating cadence should be automated in your billing software as much as possible. The goal is to be a gentle, persistent squeaky wheel.

Day -5: The Gentle Nudge

A simple, friendly heads-up. This prevents most "I forgot" or "I never received it" excuses.

Day +1: The Matter-of-Fact Follow-Up

Hi [Billing Contact], This is an automated reminder that invoice [Invoice #] for [Amount] was due yesterday. You can view and pay the invoice online here: [Link] Thanks,

Day +7: The Human-to-Human Phone Call

This is the most critical, and most skipped, step. Get your operations person or sales lead on the phone with their AP contact. The goal is to diagnose the problem. Is the invoice lost? Is there a technical issue? Did the client not like the deliverable? You need to get a specific date for when the payment will be made. "We'll get to it next week" is not an answer. "I will personally process this for payment on Wednesday" is.

Day +15: The "Getting Serious" Email

Hi [Champion], Hope all is well. I'm getting a flag from my finance team on invoice [#] which is now about two weeks overdue. Just wanted to check in and make sure everything is okay with the service and there are no issues on your end. Can you give your AP department a nudge for me?

Day +30: Founder-to-Sponsor Escalation

Channel: Email from you (the founder) to your executive sponsor.

Hi [Exec Sponsor], Hope you're happy with the progress we're making on [Project/Goal]. I'm looking at our accounts and noticed we have a payment that's 30 days past due. This is unusual, so I wanted to reach out personally to make sure there aren't any larger issues with our partnership we should be discussing.

Day +60: The Final Notice (Service Suspension Warning)

This email formally states the invoice number, amount, and age. It clearly says: "If payment is not received by [Date, e.g., Day 75], we will be forced to suspend your service in accordance with our terms of service." This creates a hard deadline.

Day +90: Send to Collections

An invoice 90 days past due is bad debt. The odds of collecting it yourself are near zero. It's time to hire a collections agency. They will take a significant cut (20-50%), but 50% of something is better than 100% of nothing. Accept the loss, kiss the customer goodbye, and move on. This is a business decision, not a moral failure.

Metrics Investors Scrutinize

Investors use your AR metrics as a proxy for operational excellence. Messy AR tells them you're either undisciplined, your customers aren't happy, or both.

1. AR Aging Report

This report buckets your unpaid invoices by age: 1-30 days, 31-60, 61-90, and 90+. You and your leadership team must review this weekly . Any invoice in the 61-90 day bucket is a five-alarm fire requiring founder attention. A healthy AR Aging report has >90% of its total value in the 1-30 day bucket.

2. Days Sales Outstanding (DSO)

DSO is the average number of days it takes you to collect cash after a sale. A high DSO is a cash flow death sentence.

Formula: (Current Total AR / Total Credit Sales in Period) Number of Days in Period

If your payment terms are Net 30 but your DSO is 55, you don't have a Net 30 business. You have a Net 55 business, and you have a serious collections problem.

Common Founder Mistakes and How to Avoid Them

The "Fear of Conflict" Trap. You're afraid that asking for money will damage the client relationship. Reframe it: Professional companies have professional payment processes. Enforcing your terms is professional. Delaying payment is not. · Ignoring AR as a Product Signal. Slow payment can be the loudest signal of a weak product or poor service. If a customer isn't paying, are they quietly churning? Your collections call is often a final, desperate customer success call. · Letting Sales Dictate Terms. A salesperson, eager to hit quota, offers Net 90 terms to close a deal. This is why you need a written credit policy that sales cannot override without founder-level sign-off. The commission isn't paid until the cash is in the bank. · The "It's Just a Small Amount" Fallacy. You don't chase a $1,000 invoice because you're busy. This sets a precedent for both the customer and your own team. Every dollar and every day matters.

How to Apply This in the Next Hour

Pull Your AR Aging Report. Log into QuickBooks/Stripe/wherever. Who is your single oldest, largest overdue customer? Start the collections playbook with them now. · Calculate Your DSO. Run the formula. Know your number. Share it with your co-founders and set a goal to lower it by 10% next month. · Draft a 1-Page Credit Policy. Write down your rules: default to upfront payment, Net 15 is the exception, Net 30+ requires your sign-off. Email it to your team. · Fix Your Invoice Template. Is the due date bold? Is there a "Pay Now" link? If not, go into your billing software and fix the template for all future invoices. · Automate Two Reminders. Set up the Day -5 "gentle nudge" and the Day +1 "past due" emails in your system. This alone will solve the majority of your late payment problems.