08.29.2025 | Posted by Erik

Top KPIs to Improve Accounts Receivable Management

To effectively analyze your accounts receivable trends, we recommend tracking key metrics like days sales outstanding (DSO), aging percentage by bucket, total amount over 30 each month, and customer payment patterns while implementing systematic follow-up processes. Regular monitoring of these indicators in your AR management helps identify improvement areas and ensures healthy cash flow for your business.

Top KPIs to monitor in your AR management to help you identify improvement areas and ensures healthy cash flow.Key AR Metrics Every Business Should Track

When we work with clients on their AR management, we’ve found that focusing on the right AR metrics makes all the difference. Here’s what we monitor consistently:

Days Sales Outstanding (DSO)

Your DSO is the cornerstone metric for understanding collection efficiency. It tells you how long it takes, on average, to collect payment after a sale. A rising DSO signals potential collection issues that need immediate attention. DSO is particularly useful for tracking overall trends: the lower the number, the faster your invoices convert to cash. Keep in mind that DSO depends heavily on payment terms; companies selling on Net 60 will naturally have higher DSO without necessarily indicating slow payment.

Aging Analysis Benchmarks

While DSO tracks average payment time from invoice date, aging analysis focuses on past-due percentages from the due date, directly correlating with slow payment and showing immediate improvement opportunities. Here are the ranges we typically recommend aiming for:

  • Over 30 days past-due: Aim to keep this under 5% of total receivables
  • Over 60 days past-due: Target 1-2% maximum
  • Pre-due payments: Strive for 60% of customers paying before invoices come due

If you’re not hitting these benchmarks, your overall aging won’t look healthy. At that point, it’s time to dig deeper into your accounts receivable management services processes.

Granular AR Management Tracking for Better Insights

Monthly Activity Metrics

We’ve learned that tracking these detailed AR management activities indicates how efficient your process is and helps pinpoint areas for improvement:

  • Number of invoice copies sent each month
  • Number of phone calls made for collections
  • Number of email follow-ups on past-due accounts
  • Trends in each category (increasing or decreasing?)

Bad Debt Monitoring

Having zero bad debt isn’t always good. It might mean you’re not taking enough calculated risks for growth. We recommend:

  • Setting a bad debt target around 1-2% of AR (give or take based on your comfort level and how aggressive you are about growth)
  • Tracking write-offs consistently
  • Ensuring you’re not exceeding your target threshold

Two Main Paths to Improving Your AR Management

When our AR management analysis reveals issues, we focus on two primary improvement areas:

  1. Customer Quality (Limited Control)

While improving your customer base helps, it’s often dictated by your industry and market position. At minimum, you can:

  • Review your customer base’s payment history
  • Consider industry payment trends
  • Evaluate credit worthiness of new clients
  • Hold or leverage new orders when customers have past-due balances

  1. Billing Practices (Full Control)

This is where we see the most immediate impact. Your billing practices are completely within your control and typically provide the fastest improvements to collecting on outstanding invoices. Key areas include:

  • Invoice accuracy and clarity
  • Consistent billing schedules
  • Meeting customer-specific requirements
  • Timely invoice delivery

Creating Your Follow-Up System

A solid follow-up process is non-negotiable for effective accounts receivable management services. We recommend:

  • Implementing a tracking system (as long as the aging is manageable, less than 30 or so customers; even a simple spreadsheet works)
  • Documenting all collection activities
  • Noting customer responses and commitments
  • Scheduling systematic follow-ups
  • Staying consistent with your outreach timing

The Partnership Advantage: Accounts Receivable Management Services by Axim

At Axim, we’ve analyzed hundreds of AR processes across various industries. This experience allows us to quickly identify what’s working and what needs adjustment. When you partner with an outsourced AR team like ours, you benefit from insights gathered across multiple businesses and industries over several decades in the sector.

Beyond managing your invoice follow-ups, as an accounts receivable management services firm we analyze your entire AR process and provide actionable recommendations tailored to your business model. Whether it’s adjusting invoice delivery methods or restructuring payment terms, we help optimize your AR management for maximum efficiency.

Ready to improve your AR collections? Start by tracking these metrics consistently, then use the data to drive strategic improvements in your billing and invoice follow-up processes.

Not sure where to start? Let’s set up a call to discuss your AR management.