For small businesses, cash flow isn’t just about making sales — it’s about ensuring money actually moves through your business at the right times. Two key levers in that process are accounts receivable (AR) and accounts payable (AP). When AR drags out or AP piles up, even profitable businesses can face cash flow crunches. This post walks through practical strategies to manage both, helping your business stay financially healthy and predictable.

“Happiness is positive cash flow.” — Fred Adler

What Are Accounts Receivable and Accounts Payable?

• Accounts Receivable (AR): Money customers owe you for goods or services provided.
• Accounts Payable (AP): Money your business owes to suppliers, vendors, or service providers.

Managing both well ensures cash comes in faster than it goes out — the foundation of positive cash flow.

Why This Matters for SMEs

• Too much AR = cash locked up
• Too much AP = potential late fees, credit damage

For example:
A small landscaping business may have $25,000 in receivables aging over 60 days. While that money is technically “earned,” it’s not available to pay staff, buy materials, or cover marketing costs.

7 Practical Strategies to Manage AR and AP Effectively

1. Set Clear Payment Terms

• Standardize payment terms (e.g., Net 15, Net 30)
• Communicate terms clearly on every invoice
• Avoid vague timelines like “due upon receipt” unless it fits your industry

Example: An electrical contractor switches from Net 45 to Net 30 payment terms, improving monthly cash flow.

2. Invoice Promptly and Accurately

• Send invoices as soon as work is completed
• Use accounting software to automate recurring invoices
• Double-check details to avoid delays from disputes

Example: A retail supplier automates invoicing through QuickBooks, reducing AR aging by 20%.

3. Offer Multiple Payment Options

• Accept ACH, credit cards, PayPal, or other digital payments
• Make it as easy as possible for clients to pay

Example: A painting company sees faster payments after adding credit card processing via Stripe.

4. Monitor Aging Reports Regularly

• Review AR and AP aging reports weekly or monthly
• Flag accounts that go beyond 30, 60, or 90 days overdue
• Set up reminders or collections processes as needed

Example: A service business reduces late payments by assigning someone to follow up on aging invoices every Friday.

5. Negotiate Favorable Payables Terms

• Build supplier relationships that allow flexible payment timelines
• Take advantage of early payment discounts
• Avoid paying too early if it strains cash flow

Example: A small retailer negotiates Net 45 terms with key suppliers, aligning outflows with incoming customer payments.

6. Automate Payments Where Appropriate

• Use tools like Bill.com or your bank’s autopay feature
• Schedule payments close to due dates to hold cash longer without risking late fees

Example: A plumbing company sets automatic payments for utilities and recurring vendor charges, reducing admin time.

7. Build a Cash Flow Buffer

• Maintain a cash reserve equal to 1–3 months of expenses
• Use savings or a line of credit to handle gaps between AR and AP

Example: A catering business uses a line of credit to cover supplier payments while waiting on large event invoices to clear.

Common Mistakes to Avoid

• Letting invoices pile up before sending
• Accepting vague or inconsistent payment terms from clients
• Paying bills too early without reviewing cash position
• Ignoring overdue accounts or late fees until they become serious

The Bottom-Line

Managing accounts receivable and payable isn’t about squeezing clients or suppliers — it’s about creating predictable, healthy cash flow. By tightening AR processes and negotiating smart AP terms, your SME can avoid cash crunches and operate with greater confidence.

We Can Help. Let’s Chat.

If your business struggles with late payments or cash flow gaps, Jogi Business Solutions can help set up the right systems and policies. Connect with us to learn more.