Accounts Receivable: How Growing Businesses Get Paid Faster

A business can be profitable on paper and still struggle to make payroll. The usual reason is accounts receivable: revenue that has been earned and recorded but not yet collected. For growing businesses in the Philippines, where B2B customers commonly pay on 30 to 60-day terms, the gap between closing a sale and receiving the cash can stretch long enough to strain operations.

This guide is for owners who sell on credit, whether to corporate clients, regular wholesale buyers or customers billed after a project is delivered. It covers what accounts receivable is, how to tell whether yours is under control, and which practices shorten the time it takes to get paid.

What is “accounts receivable”?

Accounts receivable (AR) is the money customers owe a business for goods or services already delivered but not yet paid for. It is recorded as a current asset on the balance sheet, since the business expects to collect it within the year.

A supplier that delivers 200 boxes to a grocery chain on the 5th, on terms that require payment by the 5th of the following month, carries that amount in AR for the full month. Any sale made on credit creates a receivable. A sale paid in full at the point of purchase does not.

Why accounts receivable gets harder to manage as you grow

In the early stages, most customers pay upfront and the few who buy on credit are easy to track. Growth changes that. Larger clients, particularly corporates and institutions, usually expect credit terms and process payments through their own accounts payable cycle, with fixed release dates and documentation requirements. Order values rise, so a single delayed payment has a bigger effect on cash flow. Meanwhile, the owner who once tracked every balance personally has less time to do it.

Regional data shows how common the problem is. In its 2026 survey of B2B payment practices in Asia, trade credit insurer Atradius found that about 43% of B2B sales in the markets it surveyed were made on credit, that overdue invoices accounted for nearly a third of B2B receivables, and that more than 80% of suppliers reported late payments. The Philippines was not among the markets covered, but the findings reflect conditions common across the region.

Delays can also run long. Credit insurer Coface's Asia Corporate Payment Survey 2025, which polled about 2,400 companies in nine Asia-Pacific markets, found that 49% of companies experienced payment delays in 2024, with the average delay at 65 days. 40% reported ultra-long delays, defined as more than 180 days overdue and worth over 2% of annual revenue, up from 23% the year before. Filipino small businesses feel this pressure as well. 

CPA Australia's 2024-25 Asia-Pacific Small Business Survey ranked cash flow difficulties among the four factors that most hurt small businesses in the Philippines in 2024.

How to measure the health of your receivables

Two measures give a reliable picture of how well a business is collecting.

Days sales outstanding (DSO)

DSO is the average number of days it takes to collect payment after a sale. It is calculated as:

For example, a business with ₱600,000 in receivables at the end of a 90-day quarter, and ₱1,800,000 in credit sales during that quarter, has a DSO of (600,000 ÷ 1,800,000) × 90, or 30 days.

DSO is most useful when compared against the payment terms you offer. A DSO of 30 days against 30-day terms means customers are paying on schedule. A DSO of 55 days against the same terms means customers are taking nearly a month longer than agreed, and your business is financing that difference out of its own working capital. Tracking DSO monthly or quarterly shows whether collection is improving or slipping.

The AR aging report

An aging report lists every unpaid invoice and groups it by how long it has been outstanding, usually in buckets of current, 1 to 30 days overdue, 31 to 60 days, 61 to 90 days, and more than 90 days. Most accounting software produces one automatically, and smaller businesses can keep one in a spreadsheet.

Reviewing the report weekly lets you address problems early. The longer an invoice stays unpaid, the less likely it is to be collected in full, so balances moving into the 61- to 90-day range deserve closer attention.

How to get paid faster

The practices below do not require a dedicated finance team. Most come down to process and consistency, and several are easier to sustain with the right invoicing tools.

1. Set payment terms before work begins

Many collection problems start at the beginning of the transaction, when terms were never put in writing. Payment terms should appear in the quotation, the contract and the invoice, covering the amount, due date, accepted payment methods and what happens if payment is late.

For new customers and large custom orders, a downpayment of 30% to 50% is standard practice. It covers material costs and confirms the buyer's commitment. The QuickBooks report found that 64% of small businesses with no overdue invoices required upfront payment, compared with 34% of businesses that had overdue invoices. The data shows a correlation rather than a direct cause, but the pattern is consistent with sound credit practice.

When selling to corporate clients, clarify their vendor accreditation requirements, purchase order process and payment release schedule at the outset. Many large companies release payments only on set dates each month, and an invoice that misses the cut-off waits for the next cycle.

2. Invoice on the day of delivery

The collection period starts when the customer receives the invoice, so any delay in billing extends it. Businesses that batch their billing at month-end can add two to three weeks to their collection time before the customer's payment terms even begin.

Invoices also need to be complete and accurate. Under the Ease of Paying Taxes Act, the BIR treats the invoice as the primary document for sales of both goods and services, replacing the official receipt for service providers effective April 27, 2024. 

An invoice with missing or incorrect details, such as the wrong buyer name or no PO number, is often returned by the client's accounts payable team and must be reissued, which delays payment further.

3. Reduce the steps required to pay

An invoice that lists only bank account details requires the customer to log in to online banking, enter the account information manually and send proof of payment. Your team then has to match each proof of payment to the correct invoice. Every step adds room for delay or error.

Filipino consumers and businesses have moved steadily toward digital payments. Accepting the methods customers already use, including GCash, Maya, cards and QR Ph, removes a common source of friction.

The most direct way to do this is to include a payment link in each invoice, so the customer can review the invoice, choose a payment method and settle the balance in one step. PayMongo Invoices supports this and matches each payment to its invoice automatically, which removes the need for manual reconciliation.

4. Follow up on a fixed schedule

Owners often put off following up on overdue invoices out of concern for the customer relationship. In practice, a consistent and professional reminder schedule tends to be received as standard procedure rather than pressure, and it removes the need to decide case by case when to follow up.

A typical schedule for an SME looks like this:

• 3 days before the due date: a reminder that the invoice is coming due, with the payment link.
• On the due date: a brief notice that payment is due.
• 7 days overdue: a direct follow-up asking for an expected payment date.
• 30 days overdue: a phone call, along with a hold on new orders until the account is settled.

Reminders should be brief and specific, for example: "Hi Ma'am Joy, this is a reminder that Invoice #1042 for ₱48,500 is due on Friday. You may settle it through the link below. Thank you." If your invoicing system supports automated reminders, the first two can be scheduled in advance, leaving your team to handle only the accounts that need a call.

5. Evaluate early payment discounts carefully

Early payment discounts are a common recommendation. A typical arrangement is "2/10, net 30," where the customer receives a 2% discount for paying within 10 days, with the full amount otherwise due in 30.

The cost is higher than it looks. Giving up 2% to receive payment 20 days early is equivalent to an annualized rate of roughly 37%, well above the cost of most business financing. A discount like this makes sense when you need cash urgently for a specific, time-sensitive purpose, or when your margins can comfortably absorb it. In most cases, clearer terms and easier payment options improve collections at far lower cost.

6. Define an escalation process

Some accounts will stay unpaid despite repeated follow-up. Decide in advance at what point an overdue account moves from routine follow-up to formal collection.

The first formal step is usually a demand letter stating the amount owed and setting a final deadline for payment. If the amount is ₱1,000,000 or less, you may file under the small claims procedure in first-level courts, which is designed to resolve money claims quickly and does not allow lawyers to appear on behalf of the parties. Consult a lawyer or accountant before filing so that your supporting documents, from invoices to delivery receipts, are complete.

Bank transfer invoices vs invoices with a payment link

The table below compares the two most common invoicing methods for SMEs.

Frequently asked questions