What is accounts receivable and how do I manage it?

The mechanics that determine how much you carry are set before the invoice is sent. Payment terms, whether you require a deposit, how quickly you invoice after completing work, and whether the invoice contains everything needed for the customer to pay it without asking questions. A business invoicing weekly rather than monthly halves its average collection period without any change in customer behaviour, and that is the single cheapest improvement available.

Track it by age rather than by total. A report grouping outstanding invoices into current, over thirty days, over sixty, and over ninety tells you something the total cannot: whether the amount owed is normal timing or accumulating problems. Anything past ninety days is unlikely to be paid without intervention, and the probability of collection falls steeply with age, which is why speed of response matters more than persistence.

Follow up on a schedule rather than when you notice, because noticing is unreliable and delay is read as indifference. A reminder a few days before the due date, one on the day, one at a week overdue, and a phone call at two weeks covers nearly all of it. Most late payment in small business is administrative rather than deliberate, and a polite reminder resolves it, which is why the phone call should come before anything adversarial.

Prevent rather than chase where you can. A deposit before starting work removes the worst outcome. Automatic payment for recurring work removes the question entirely. And for a new customer taking a large order on terms, some check of who you are dealing with is proportionate, because the transaction most likely to become a bad debt is the one from somebody you had never worked with before.

Decide in advance what you do when an account stops responding, and put it in your terms. At what point you stop work, whether interest applies, and when it goes to collection. Having that written and stated at the outset makes the conversation routine rather than confrontational, and it means the decision is not being made while you are angry about it.