How to reduce outstanding receivables

First, measure where you stand

Before changing anything, take two numbers from your books.

• DSO (days sales outstanding) = closing debtors ÷ credit sales for the period × days in the period. If debtors are ₹36,00,000 and last quarter's credit sales were ₹90,00,000, DSO = 36 ÷ 90 × 90 = 36 days.
• Overdue share = bills past their due date ÷ total outstanding. If ₹14,40,000 of the ₹36,00,000 is past due, 40% of your receivables are overdue.

Track both every month. An ageing analysis shows exactly which parties and which bills make up the overdue amount.

Ten steps that work

1. Agree terms before the first sale. Credit days, credit limit and what happens if payment is late, in writing on the quotation or order.
2. Print the due date on every invoice. "Due on 15-12-2026" is clearer than "30 days".
3. Keep bill-wise records. Adjust each receipt against specific bills, not "on account". Otherwise you cannot tell which bills are old.
4. Review ageing every Monday. Sort by oldest first and pick the ten parties to call this week.
5. Send a courtesy reminder before the due date. Most late payments are forgetfulness, not refusal.
6. Send a monthly statement to every party. Disputed bills, missing credit notes and wrong rates come out early.
7. Call on the due date, then at 7 and 15 days past due. Use the same polite sequence every time; see our payment reminder templates.
8. Stop supply at a fixed point. For example, no new orders if any bill is more than 30 days overdue or the limit is crossed.
9. Give salespeople a collection target alongside the sales target. A sale is complete when it is paid.
10. Escalate the oldest cases. Owner-to-owner call, then a formal letter, then your CA or lawyer for very old dues.

Fix the reasons bills get stuck

Many bills are unpaid because of a problem on your side. Before pushing, check:

• Was the rate or scheme discount on the bill what the dealer expected?
• Has a credit note for a return or shortage been issued?
• Does the party have the invoice and the delivery proof?
• Was there a quality complaint nobody followed up?

Resolve these quickly. See handling disputed bills for a process.

Cash discount for early payment: do the maths

A 2% discount for payment in 10 days instead of 45 is expensive. You give up 2% to get money 35 days earlier, which works out to about 21% a year (2 ÷ 98 × 365 ÷ 35). It makes sense only if your borrowing costs more than that or you are badly short of cash. A smaller discount, such as 1% for payment within 7 days, costs less and still nudges good payers.

A weekly 30-minute collection routine

1. Monday, 10 minutes: open the ageing report. List every party with a bill more than 7 days overdue, biggest amount first.
2. Monday, 10 minutes: send statements to everyone on the list, with a short reminder.
3. Through the week: salespeople call or visit the top ten; each call ends with an amount and a date.
4. Friday, 10 minutes: check which promises were kept. Move missed promises to the owner's call list for Monday.

Keep a simple log of promises: party, amount, promised date, result. After a few months it shows clearly which customers keep their word, which is useful when you review credit limits.

Many businesses find that this routine alone, done every week without fail, brings down overdue amounts more than any discount or penalty, because customers learn that bills will be followed up.

Tracking receivables with Tally and Cashflow OS

Cashflow OS reads bill-wise outstanding from TallyPrime and shows it with ageing on your phone and the web, so the Monday review takes minutes. From any party you can send a statement on WhatsApp, as a PDF in Tally's format or a simple Hindi हिसाब page. Salespeople can see their own customers' dues on the staff app's Today screen and record what they collect. Read more on outstanding receivables and collections.