How Distributors Can Reduce Accounts Receivable

For a distributor, deferred payment is a standard sales tool. But when customer debt grows faster than revenue, the company is effectively lending money to its customers at its own expense. Let’s look at where the problem comes from and how to get it under control.

Why receivables get out of control

Most often, the cause isn’t dishonest customers. It’s the lack of data at the right moment:

• the sales rep doesn’t know how much the customer already owes and places a new order anyway;
• payments arrive through different channels and take a long time to match with shipments;
• management sees the total amount owed but not who is overdue and by how much.

Step 1. Show the balance to the person who sells

The first and most effective rule: the rep must see the customer’s outstanding balance before placing an order. A conversation about payment at the moment of a new order achieves more than a call from accounting a month later.

Step 2. Set terms for every customer

Customers differ in reliability. For each one, define:

1. The allowed payment deferral.
2. The maximum outstanding balance (credit limit).
3. What happens when it’s exceeded: manager approval, or shipping only after payment.

Step 3. Reconcile payments automatically

The faster a payment is matched to an order, the more accurate your picture of the debt. Connecting payment services (such as Payme or Click) and recording payments in the same system as your orders eliminates manual reconciliation.

Step 4. Review receivables regularly

Once a week, review the receivables report by customer and by rep:

• who has exceeded their payment terms;
• which reps have debt growing faster than sales;
• which payment agreements weren’t honored.

Step 5. Reward reps for collections, not just shipments

If a rep earns a bonus only on shipment volume, they have every reason to ship at any cost. Add collection rate to their KPIs, and the rep’s interests will line up with the company’s.

How it works in Mirasoft

Mirasoft’s finance module tracks accounts receivable for every customer and every rep, and the customer’s balance is visible to the rep right in the mobile app before a new order. Learn more about distribution in Mirasoft or request a demo.