Getting Paid: A Practical Guide to Receivables, Aging, and Collection Discipline

A business reports growing sales while its bank account keeps shrinking. Customers have received the goods or services, but payment is still waiting in the receivables ledger.

A receivable is a claim to payment, not money already available for payroll. Good collection discipline begins before the invoice is overdue and continues until the payment is correctly applied.

I. Make the invoice collectible

Confirm the customer’s correct legal name, billing contact, agreed payment terms, purchase-order requirements, and delivery or service evidence. Send the invoice through the channel the customer actually uses and retain proof of delivery.

An invoice can remain unpaid because it went to the wrong person, omitted a required reference, or billed an amount the customer disputes. Separate these administrative problems from an inability or unwillingness to pay.

For advance collections and complex arrangements, ask your accountant when revenue should be recognized under the applicable reporting framework. Issuing an invoice or receiving cash does not resolve every revenue-recognition question.

II. Build aging around due dates

List each open invoice, original amount, credits, payments, remaining balance, and contractual due date. A useful collection report groups balances as not yet due, 1–30 days overdue, 31–60, 61–90, and more than 90 days overdue.

State the convention clearly. An aging based on invoice date can answer a different question from an aging based on how long payment has been overdue. Apply the same convention consistently.

Tie the report to the general ledger. Unapplied receipts, duplicate customers, and credit notes can make an aging misleading even when its totals look reasonable.

III. Assign an action to every material balance

1. Confirm receipt before the due date. Ask whether the customer has everything needed to process payment.

2. Follow up when overdue. Give the invoice reference, balance, due date, and payment instructions.

3. Record the response. Note disputes, promised dates, and the person responsible.

4. Resolve legitimate differences. Support credits and adjustments with approval and evidence.

5. Escalate missed commitments. Review further credit, repayment proposals, and legal options when appropriate.

Keep reminders accurate and professional. Payment terms, contract rights, and applicable law should guide escalation. Avoid public accusations or threats that create a new problem while trying to solve an old one.

IV. Use a weekly collection view

Suppose ₱300,000 is outstanding: ₱180,000 not yet due, ₱80,000 overdue by 1–30 days, and ₱40,000 more than 90 days overdue. The headline balance alone conceals the different risks.

Give the old balance a specific owner and investigation. Build the near-term cash forecast from realistic collection dates, not an assumption that all ₱300,000 will arrive next week. This example illustrates workflow, not a prescribed loss percentage.

V. Assess collectibility separately

Overdue does not always mean uncollectible, and current does not always mean safe. Consider the customer’s circumstances, disputes, subsequent payments, and available evidence. Where IFRS 9 applies, its expected-credit-loss requirements also require appropriate assessment; a tax write-off rule is not automatically the financial-reporting rule.

Do not remove a receivable merely because someone has stopped following up. Document the accounting decision and preserve relevant collection records.

VI. The practical takeaway

Better collections come from accurate billing, reliable records, and consistent follow-through. Every significant receivable should have a clear balance, a responsible person, and a next action.

Sources and further reading

• IFRS 9: financial instruments: https://www.ifrs.org/issued-standards/list-of-standards/ifrs-9-financial-instruments/
• IFRS 15: revenue from contracts with customers: https://www.ifrs.org/issued-standards/list-of-standards/ifrs-15-revenue-from-contracts-with-customers/

This article provides general accounting and financial management information. Examples are illustrative. The accounting treatment and compliance requirements depend on the entity’s applicable Philippine reporting framework and circumstances.

For help strengthening your reporting and financial management, contact MJM Law & Partners: https://www.mjmlawpartners.com/contact.

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