What are collections?
Published
Collections is the organised process of converting receivables into cash: following invoices from issuance to payment on a scheduled escalation, not on month-end mood. Selling creates revenue; collecting creates cash - and the gap between them is what cut Al-Waha's cash by 9,000 in a profitable quarter.
A practical escalation ladder
| Timing | Action |
|---|---|
| 3 days before due | Friendly reminder with the amount and invoice copy |
| Due date | A polite due notice |
| +7 | Second reminder + a statement of account |
| +15 | A personal call - the goal is diagnosis, not just pressure |
| +30 | Escalate a level on both sides + hold further credit sales |
| +60 | Formal notice, consider the legal path, and revisit the provision |
Automate the ladder where possible - regularity beats intensity: customers pay first whoever they know will not forget.
Two rules that make the difference
Document the promise to pay. "We'll transfer Thursday" goes into the system with its date and is followed up Friday morning - undocumented promises evaporate; documented ones become social commitments before financial ones.
Diagnose before escalating. A cash-squeezed customer needs a schedule; a line-disputing customer needs the dispute resolved (perhaps a note); a professional staller needs a hold - the same lateness, three treatments.
The metric
Al-Waha's DSO = 18.9 days (derived on the accounts receivable page)Read with its trend: a good level + a worsening trend = act now, not at the crisis
Frequently asked questions
Is collection the accountant's job or sales'?
Shared, with roles: accounting owns the numbers and the ladder, sales owns the relationship - full separation makes each assume the other is following up.
Hand persistent defaulters to an external agency?
The ladder's last rung, not its first - after internal steps are exhausted and documented, weighing the relationship cost if the customer is ongoing.