Accounts receivable represents revenue you have earned but not yet collected. High AR means you have done the work and owe taxes on the income (if on accrual basis), but the cash is not in your account. For NJ businesses, managing AR effectively is the difference between healthy cash flow and constant stress over making payroll, tax payments, and vendor obligations. Greg Monaco, CPA includes AR aging review in every monthly bookkeeping engagement.

High AR means you’ve done the work but haven’t been paid. Managing AR effectively is the difference between healthy cash flow and constant stress.

What Payment Terms Should NJ Businesses Set on Invoices?

Net 30 is common, but Net 15 or due on receipt may be appropriate. Communicate clearly on every invoice.

How Quickly Should I Send Invoices After Completing Work?

Send invoices the day work is completed. Every day of delay adds to your collection timeline.

How Can I Make It Easier for Clients to Pay?

QBO allows Pay Now buttons on invoices accepting credit cards and ACH.

How Should I Follow Up on Unpaid Invoices Systematically?

Automate reminders: 3 days before due, on due date, 7 days past due, 30 days past due.

How Often Should I Review My Accounts Receivable Aging Report?

Run an aging report weekly. Anything over 60 days requires direct attention.

Key Takeaway

The most impactful AR improvement for most NJ businesses is reducing the time between completing work and sending the invoice. Invoice the same day, offer convenient payment methods (ACH, credit card through QuickBooks), and automate follow-up reminders at 3 days before due, on the due date, and at 7 and 30 days past due.

Related reading: Accounts Payable Management | Cash Flow Forecasting | Bookkeeping services

## Frequently Asked Questions

What is a healthy accounts receivable aging for NJ businesses?

A healthy AR aging has the majority of outstanding invoices (80% or more) in the 0 to 30 days bucket. Once invoices move past 60 days, the probability of collection drops significantly. If more than 20% of your AR is over 60 days old, you likely need to review your invoicing practices, payment terms, and collection procedures.

How can I get clients to pay faster?

Send invoices immediately upon completing work, offer multiple payment methods (ACH, credit card, online payment), set clear payment terms upfront (Net 15 or Net 30), send automated payment reminders before and after the due date, and consider offering a small discount for early payment. Consistent follow-up is the single most effective collection strategy.

Should I charge late fees on overdue invoices in NJ?

NJ allows businesses to charge late fees if the terms are disclosed in writing before the transaction. Include late payment terms in your contracts and on your invoices. Common rates are 1% to 1.5% per month on overdue balances. Even if you rarely enforce late fees, having them in your terms encourages timely payment.

How does AR affect my taxes if I use accrual accounting?

Under accrual accounting, revenue is recognized when earned, not when collected. This means you owe taxes on invoiced amounts even if the client has not paid yet. High AR on an accrual basis can create a cash flow squeeze where you owe taxes on income you have not received. This is one reason many small businesses prefer cash basis accounting.