How to Manage Account Receivable and Bad Debt?

In times of uncertainty you have to manage account receivable and bad debt very closely. You can do that by having systems in place that will alert you.

The best way to ensure you will collect your money is to do a background check and screen the companies before you offer credit.

But sometimes, that is easier said than done and companies go through financial trouble all the time.

An worse some will go bankrupt without you getting paid because your debt is unsecured.

In order to ensure that you are following up on your collections efficiently, you need to have a process that starts right from the time the booking comes in.

In this article we will look at the major reason the payment gets delayed and how to solve it.

Bills not going to companies on time

A good rule of thumb is to ensure all Bill to company invoices are sent to the companies within 24 hours electronically and within 48 hours by courier if they insist.

A rule to follow up on the receipt and confirmation or acknowledgement after 48 hours is also helpful

But lets wind up a little as to why the bills do not go out on time.

The process has to start right from the reservation agent. Many companies have requirements to send the bills to a particular address or have a different GST number.

Make sure that these requirements are clarified in advance before the guest checks in so that you can process the bills immediately after checkout.

During check out ensure the guest signature as many company will not pass the bills without the signature.

So the first step is to send the bills on time.

Communicate regularly

This is very critical. The person making the booking is busy with other task and can sometime forget to process your invoices.

Most of the time you can get paid faster by just communicating with the booker or finance person.

Email trail mails and phone calls are effective and efficient. But be courteous with the team on the other end.

After all you also need their business and it is best not to antagonize them.

Maintain bad debt reserves

Ensure you have 3% of the current outstanding less the credit card debt in a reserve for bad debts.

It is just a prudent practice and one that can help you in times of a crisis.

Some times the best strategy is to insure your collections. There are agencies who will collect your debts for a fee or purchase it for a discount from you.

If you do go down this route, make sure you have tried your best to collect as these agencies will take as much as 40% as fees.


Collections and getting paid is all about systems. Ensuring that you screen companies effectively and then followup immediately on sending the invoices will help you to keep track of your payments.

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