Accounts Receivable Collection Process Flow Chart

SOP-FIN-042: Accounts Receivable Collection Process

1. Document Control & Revision History

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2. Executive Summary & Scope

This document defines the systematic protocols for the collection of outstanding Accounts Receivable (AR). The scope encompasses all B2B credit accounts managed within the ERP. Compliance with GAAP revenue recognition standards and SOX internal controls regarding ledger integrity is mandatory. Operational boundary: From invoice issuance through final resolution (payment or write-off).

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3. Prerequisites & Tool Requirements

• ERP/Accounting Software: Active administrative access to NetSuite, SAP, or Sage Intacct.
• CRM Integration: Access to Salesforce or equivalent for historical client interaction logs.
• Security: Multi-Factor Authentication (MFA) enabled for all financial database access.
• Documentation: Up-to-date Master Service Agreement (MSA) or signed Purchase Order (PO) on file for every open invoice.

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4. Roles & Responsibilities (RACI Matrix)

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5. Step-by-Step Operational Procedure

Phase I: Pre-Dunning (Invoice Issuance + 5 Days)

• Verify invoice receipt via ERP delivery confirmation log.
• Confirm invoice data matches PO terms exactly.

Phase II: Early Collection (Invoice Due Date + 1-7 Days)

• Execute automated "Friendly Reminder" email sequence.
• Check ERP ledger for partial payments received in float.

Phase III: Delinquency Escalation (Due Date + 15-30 Days)

• Conduct outbound telephonic contact; log disposition in CRM.
• Escalate to Sales Account Manager for relationship-based intervention.
• Issue formal demand letter if non-responsive.

Phase IV: Legal/Write-Off (Due Date + 90+ Days)

• Review for potential bad debt reserve provision.
• Prepare account for external collection agency or legal counsel.
• Execute formal write-off in GL pending CFO signature.

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6. Quality Assurance & Verification Criteria

• Accuracy Benchmark: 100% of communications must be cross-referenced with current GL balance before sending.
• Tolerance Threshold: Aggregate Days Sales Outstanding (DSO) must not exceed 45 days.
• Audit Trail: Every interaction must contain: Date, Time, Contact Person, Disposition, and Promise-to-Pay (PTP) date.
• Verification: Monthly reconciliation of AR sub-ledger to the General Ledger required by the 3rd business day of the following month.

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7. Practical Troubleshooting Scenarios

Scenario A: Client Claims "Invoice Not Received"

• Correction Protocol:
  1. Immediately re-send invoice via secure portal.
  2. Confirm recipient's accounts payable contact email address.
  3. Document the conversation in CRM as "Billing Discrepancy - Initial Delay."
  4. Shorten the grace period by 5 days to compensate for administrative latency.

Scenario B: Payment Dispute (Service/Product Quality)

• Correction Protocol:
  1. Cease all automated dunning sequences immediately to prevent customer alienation.
  2. Escalate to the department head responsible for the delivery of goods/services.
  3. Issue a "Dispute Ticket" in the ERP to lock the invoice from further auto-collections until resolved.
  4. Define a resolution SLA of 48 hours for the internal department.

Scenario C: ERP/Ledger Reconciliation Mismatch

• Correction Protocol:
  1. Suspend all outbound communication to the client.
  2. Run a Trial Balance report and reconcile against the Cash Receipts Journal.
  3. If discrepancy > $100.00, trigger an immediate internal audit log to identify missing credit/debit memos.