B2B Accounts Receivable Optimisation: Where to Start

This article is provided by Alt21 Limited, trading as Alt21, an FCA authorised payments and FX provider and is intended for UK businesses making or receiving international payments. Any example or figure provided is illustrative only. FX and international payment services carry risk, including the risk that exchange rates move against you, which could affect the value of the payments you send or receive and your cash flow. This article is general information and does not constitute advice. Services are subject to eligibility and are not suitable for every business. Please read the full disclaimer at the bottom of the page.

Your next cash flow improvement could come from sales you’ve already made.

When customers take longer to pay, your business still has bills to cover, suppliers to pay and plans to fund. And while chasing overdue invoices is part of the job, improving accounts receivable in B2B is about much more than sending reminders.

From agreeing payment terms to making it easier for customers to pay, small changes throughout the process can make a real difference to how quickly money reaches your account.

In this guide, we’ll explore how to measure your B2B accounts receivable performance, identify what’s slowing payments down and improve your processes, including the additional considerations that come with international customers.

Building your B2B accounts receivable management process

Every extra day you wait for payment is another day your business has to cover the cost of that sale.

Getting paid sooner can shorten your cash conversion cycle, the time between paying suppliers and receiving money from customers. This can reduce your reliance on borrowing and the interest you pay.

But effective accounts receivable management starts long before an invoice becomes overdue. From assessing customers and agreeing payment terms to tracking invoices and forecasting incoming payments, each stage plays a role in managing your working capital.

Here are six steps to building a more consistent process:

1. Check customers before offering credit

Before offering a customer credit, your finance team should assess their creditworthiness and set an appropriate credit limit.

Your credit control policy should also establish who can approve exceptions and when limits need reviewing, particularly if a customer’s payment behaviour changes.

2. Agree payment terms before the first order

Make sure your sales team clearly documents payment terms, including due dates and any deposits or instalments required.

For overseas customers, agree on the invoice currency and who will cover international transfer fees. Your business should also have a clear policy on which currencies it accepts for invoicing and who can approve exceptions.

3. Collect payment information during onboarding

Before issuing the first invoice, collect your customer’s accounts payable contact details and find out how their invoice approval process works.

Check whether they require purchase order numbers, specific invoice formats or submissions through a payment portal.

For overseas customers, confirm their preferred payment method and how they’ll identify which invoices they’re paying.

4. Issue accurate invoices and confirm receipt

Keep customer invoicing requirements in a shared record that your sales and finance teams can access.

Use this information to check invoices before they’re sent, making sure payment terms, purchase order numbers and other required details are correct.

For new B2B customers, it’s also worth confirming that the first invoice has been received and accepted, rather than waiting until the payment is overdue to discover a problem.

5. Follow up on outstanding payments

Your accounts receivable (AR) team should track outstanding invoices and follow up when payments become overdue.

If a customer disputes an invoice, sales can help clarify the agreed terms or coordinate with the relevant team to resolve delivery or service issues.

Keep responsibilities clear so everyone knows who’s handling payment queries, resolving disputes and approving any exceptions to your credit policy.

6. Reconcile payments and update your cash flow forecast

When payments arrive, match them to the correct invoices. This process is known as cash application.

If a payment can’t be matched, your AR team should investigate and request any missing information. For international FX payments, check whether discrepancies are caused by partial payments, bank fees or currency conversion.

It’s also important to distinguish between when a payment is due and when you realistically expect to receive it.

If a customer regularly pays late, reflect that pattern in your cash flow forecast while continuing to follow up on the agreed terms.

Your finance team should also track which currencies you’re expecting to receive and when, so they can plan upcoming payments and currency requirements accordingly.

B2B accounts receivable KPIs worth tracking

If you want to improve how quickly customers pay, it helps to understand what’s happening with your outstanding invoices first.

Accounts receivable KPIs can show you whether payments are taking longer, how much money is overdue and whether your collection efforts are making a difference.

But it’s important to look beyond the headline numbers. For example, an increase in days sales outstanding (DSO) doesn’t necessarily mean customers are paying late. You might simply be doing more business with customers who have longer payment terms.

Looking at these figures by customer group or market can help you understand what’s driving the changes.

Metric	What it tells you	What to watch for
Days sales outstanding (DSO), or debtor days	An estimate of how many days’ worth of credit sales remain unpaid.	Compare with agreed payment terms. Seasonal changes and sales growth can also affect the figure.
Ageing analysis	How much customers owe, including what’s overdue and by how many days.	Watch balances moving into older overdue groups. Flag disputed invoices and payments received but not yet matched to invoices.
Collection effectiveness index (CEI)	The percentage of money owed that you collected during the period, excluding unpaid invoices that were not yet due at the end of that period.	Check whether an improvement reflects payments received. Credit notes and write-offs can reduce balances without bringing in cash.
AR turnover	How often your average unpaid invoice balance turns into cash during a period. Higher turnover generally suggests faster collection.	A falling rate can signal slower collection or longer payment terms. Compare periods of the same length.
Bad debt ratio	Bad debt expense as a percentage of credit sales.	Keep the calculation consistent. Check whether a few customers account for most losses and whether their credit limits need review.

Exchange rate movements can also affect your accounts receivable KPIs when you invoice customers in foreign currencies.

For example, if a customer owes you €10,000, the value of that invoice in pounds may change as exchange rates move, even though the amount they owe remains the same.

To get a clearer picture of your outstanding payments, compare balances in their original invoice currency or use a consistent exchange rate when analysing different periods. This can help you understand whether changes in your accounts receivable balance are due to customer payments or currency movements.

How to improve your B2B accounts receivable process

If your accounts receivable KPIs suggest something isn’t working as well as it should, the next step is to understand what’s causing the problem.

Start by looking at a sample of invoices where payments have been delayed.

Are customers disputing charges?

Are invoices getting stuck in approval processes?

Or are certain customers simply taking longer to pay?

Once you’ve identified the most common reasons for delays, look at how much money is outstanding in each category. This will help you work out which issues are having the biggest impact on your cash flow and where your team could make the most difference without adding unnecessary work.

Here are a few practical ways to tackle those problems and improve your B2B accounts receivable process:

Get invoices accepted promptly

Send invoices as soon as you reach the agreed billing date or milestone. Check the customer’s legal name and purchase order reference, and include any proof of delivery needed for approval. Confirm that the invoice reaches the correct portal or accounts payable inbox.

Use structured eInvoicing¹ where required or supported. This sends invoice data in a format the customer’s system can process automatically. Check local requirements and the formats the customer accepts. Have AR monitor rejections and correct errors promptly.

Set a clear follow-up schedule

Chasing overdue invoices isn’t anyone’s favourite job, but having a consistent follow-up process can make it easier to stay on top of payments without damaging customer relationships.

For example, if you’ve agreed on 30-day payment terms, your follow-up schedule might look something like this:

Seven days before the due date: Check that the customer has received the invoice and has everything they need to process it.
On the due date: Send a friendly reminder with the invoice reference and payment details.
Seven days overdue: Contact the customer’s accounts payable team to find out what’s causing the delay and agree on a payment date.
Fourteen days overdue: Bring in the sales account manager and follow your credit policy’s escalation process.

It’s also worth understanding how your customers manage their payments. Some businesses only process payments on certain days, so timing your follow-ups around their payment runs could help avoid unnecessary delays.

For international payments, remember to factor in bank cut-off times and public holidays when agreeing on an expected arrival date. And if a payment hasn’t arrived when expected, asking for confirmation of the transfer can help you trace where it is.

You may also be interested in our blog on common international payment mistakes.

Prioritise overdue accounts and resolve disputes

When deciding which overdue invoices to follow up on first, consider both the amount owed and the customer’s payment history.

For example, a customer with a large outstanding balance who’s started paying later than usual may need more attention than someone who’s missed a payment for the first time. This can help your team prioritise collections and spend more time on accounts where delays could have the greatest impact on cash flow.

It’s also worth involving your sales account managers when following up with long-standing customers, particularly if there’s a dispute over a delivery or service.

In these cases, sales can work with the relevant team to resolve the issue and agree on a timeline, while accounts receivable pauses routine reminders for the disputed amount and continues collecting any undisputed balance.

If the same disputes keep cropping up, look at what’s causing them. Something as straightforward as checking delivery quantities before issuing an invoice could help prevent similar problems in future.

For customers who consistently pay late, you may also be entitled to charge interest or claim compensation under UK law² or relevant EU national laws³. Before applying any charges, check your contract and which country’s laws govern the agreement.

Investigate payment differences

Imagine your business invoices a customer €12,000, but only €11,975 arrives in your account. Before chasing the missing €25, it’s worth checking whether the difference is due to bank fees deducted during the transfer or whether the customer has paid less than the agreed amount.

If bank fees are responsible, record them separately and check your agreed payment terms to see whether the customer is responsible for covering the difference. If this keeps happening, it may be worth reviewing how you’re receiving international payments to see whether there’s a more suitable option.

Things can also get complicated when customers make a single payment to cover several invoices. Without a breakdown of which invoices they’re paying, or if the payment arrives under a different name, your accounts receivable team may struggle to match the funds correctly. This can leave invoices showing as unpaid even though the money has already arrived.

Making it easier for customers to pay you

Even when customers are ready to pay, missing invoice details, unclear instructions, or unsuitable payment methods can slow things down.

Making the process as straightforward as possible can help avoid unnecessary delays and reduce the time your finance team spends resolving payment queries.

Give customers the information they need to pay

Start with your invoices. Each one should include the payment currency, due date, bank details and a clear reference the customer can use when making the transfer.

If customers regularly make a single payment to cover several invoices, let them know where to send a breakdown of the invoice numbers and amounts. This makes it easier for your finance team to match incoming payments and keep outstanding balances up to date.

It’s also important to make sure your account details are accurate. Use the account name registered with your bank or payment provider, as services such as Confirmation of Payee⁴ in the UK and Verification of Payee⁵ in the EU can help customers check that they’re paying the intended recipient, where supported.

If your bank details change, encourage customers to verify the new information using a contact number they already know and trust.

Choose payment methods that work for your customers

The way customers pay can also affect how quickly money reaches your account, particularly when you’re dealing with businesses in different countries.

Depending on where your customers are based, which currency they’re paying in and how they approve payments, you might consider:

GBP payments within the UK. Faster Payments⁶ usually arrive almost immediately, while Bacs Direct Credit⁷ is commonly used for scheduled payments and follows a three-working-day cycle.
Euro payments. SEPA Credit Transfer⁸ allows payments between participating accounts in the Single Euro Payments Area, while SEPA Instant⁹ supports transfers within seconds, 24 hours a day, where available.
Open banking pay-by-bank. Customers can authorise payments directly through their banking app or online banking, provided the service supports their business account and approval process.

If you’re regularly receiving payments from overseas, local collection accounts may also be worth exploring. Depending on the currencies and countries supported, these can allow customers to pay through domestic payment systems rather than making an international transfer.

Funds held with an authorised payment institution are safeguarded in line with the Payment Services Regulations 2017 but are not covered by the Financial Services Compensation Scheme. Before choosing an account, compare the fees, eligibility requirements and available payment routes.

Before choosing an account, compare the fees, eligibility requirements and available payment routes. It’s also worth checking whether transfer fees are deducted from the amount received or charged separately, as unexpected deductions can make reconciling invoices more complicated.

The currency you invoice in matters too.

Imagine you’re a UK supplier selling to a customer in the Netherlands. If you invoice in GBP, your customer will need to arrange any currency conversion, and you’ll know the sterling amount they’re expected to pay.

If you invoice in EUR, your customer can pay from their euro account, but you’ll need to decide what to do with those euros once they arrive. It also means the sterling value of that invoice may change between the date you issue it and the date you’re paid.

This is where having a clear currency management policy becomes useful. If you have suppliers to pay in euros, you may be able to use those receipts directly rather than converting the money into sterling and back again.

If you need sterling to cover other expenses, you can plan your conversions around upcoming payment dates, keeping in mind that the sterling value of any euros you hold will change as exchange rates move and that this does not remove exchange rate risk. This is general information and not advice.

You may also be interested in our blog on exchange rate management.

B2B Accounts receivable automation: what to hand over and what to keep

As your business grows, keeping track of invoices, payments and overdue balances can become increasingly time-consuming. Accounts receivable automation can help take some of that administrative work off your team’s plate, giving them more time to focus on customers and payments that need attention.

However, automation works best when your processes are already running smoothly, and your payment records are accurate. Otherwise, you could end up sending automated reminders to customers who’ve already paid or chasing invoices that are being disputed.

Some of the tasks worth automating include:

Payment reminders. Rather than manually tracking every due date, you can set up reminders based on invoice status. These should stop once an invoice has been paid in full and pause for disputed amounts or agreed payment plans.
Payment matching. Automation can help match incoming payments to invoices using payment references, amounts and currencies. When the details don’t match, your AR team can review the transaction and identify where the payment belongs.
Reconciliation. Automatically comparing incoming payments with your accounting records can help identify discrepancies. For international payments, it’s important to distinguish between bank fees, exchange rate differences and genuine underpayments so your team can investigate before closing an invoice.
Ageing reports and cash flow forecasts. Keeping invoice balances and payment statuses up to date means your ageing reports and cash flow forecasts can reflect the latest information, helping finance teams see what’s outstanding and when payments are expected.

Of course, some decisions still need a human touch:

Credit decisions and approvals. Your finance team should remain responsible for approving credit limits, write-offs and changes to customer bank details, with a clear record of each decision.
Customer relationships and disputes. Automated reminders aren’t always appropriate, particularly when dealing with long-standing customers or unresolved disputes. Your AR and sales teams should work together to decide how best to approach these situations and resolve any underlying issues.
Cash flow forecasting assumptions. While automation can update figures, finance teams still need to review expected payment dates, especially when customers regularly pay late or miss agreed payment dates.

You don’t need to automate everything at once. Starting with one repetitive task gives you an opportunity to see how well it works before introducing automation elsewhere.

Over a few collection cycles, look at whether it’s reducing manual work, how much time your team spends handling exceptions and whether overdue balances are improving.

As your business grows, improving your accounts receivable process can help you spend less time chasing payments, gain a clearer picture of incoming cash and potentially reduce your reliance on borrowing to cover payment delays.

Better B2B accounts receivable starts with understanding where payments get held up

B2B accounts receivable optimisation doesn’t have to mean overhauling everything at once. Fixing recurring invoice errors, adjusting when you follow up with customers or giving your finance team a clearer view of expected payments can all help you manage incoming cash more effectively.

For businesses working across currencies, it’s also worth considering what happens when those payments arrive. Knowing which currencies you’re expecting, when you’ll receive them and whether you’ll need to convert them can help you plan for upcoming expenses.

Alt21 provides FX and international payment services for UK businesses, including currency conversion and cross-border payments. Whether a service is suitable will depend on your business’s needs and circumstances.

Explore Alt21’s FX and international payment solutions.

Alt21 Limited is authorised and regulated by the Financial Conduct Authority (FRN: 783837). Alt21 Limited is registered in England and Wales (10723112). Alt21 Limited is not a bank or an e-money institution; it is an Authorised Payment Institution under the Payment Services Regulations 2017. The registered address is 45 Eagle Street, London WC1R 4FS, United Kingdom. This article has been produced by Alt21 Limited for information purposes only. It does not constitute financial advice or an offer to sell or the solicitation of an offer to buy any products or services referenced. Before entering into any FX or international payment product or service, you should consider whether it is appropriate for your needs and circumstances. Alt21 Limited assumes no liability for errors, inaccuracies or omissions. Eligibility criteria and terms and conditions apply to all products and services offered by Alt21 Limited. Not all applications will be accepted.

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From Invoice to In the Bank: Improving B2B Accounts Receivable