Every dollar sitting in accounts receivable is a dollar you’ve earned but can’t use. It can’t make
payroll, buy inventory, or earn interest. For many businesses, AR is the single largest asset on
the balance sheet—and the most neglected. This week we look at how to shrink it, and where AI
genuinely moves the needle.

Start with the metric that matters: Days Sales Outstanding (DSO), the average number of days
it takes to collect after a sale. If your terms are net 30 and your DSO is 52, you’re effectively
giving customers three extra weeks of free financing. Cutting DSO by even a week releases
meaningful cash—permanently.

The old collections playbook was reactive: wait until an invoice is overdue, then start calling.
The AI-era playbook is predictive and personalized.

Predictive prioritization. Machine learning models trained on your payment history can score
every open invoice by its likelihood of being paid late, before it’s late. That means your

collections effort goes where it matters—the $40,000 invoice showing risk signals—rather than
marching through an aging report alphabetically.

Personalized outreach. Not all late payers are alike. Some just need a reminder; some have a
broken approval process; a few are in genuine distress. AI-driven AR platforms tailor the
cadence and tone of reminders to each customer’s actual behavior, and generative AI now
drafts the awkward follow-up emails no one enjoys writing—firm, polite, and consistent.
Frictionless payment. A surprising share of late payment is simply friction. Every invoice
should carry a payment link. Every recurring customer should be offered autopay. AI helps here
too, by identifying which customers are good candidates for automatic payment plans based on
their history.

Smarter credit decisions. The best way to collect a bad debt is to never extend it. Before
onboarding a large customer on credit terms, modern tools can synthesize trade data, payment
history, and public signals into a credit score far faster than a manual review.

One human note: collections is a relationship function wearing a finance costume. Automation
should handle the routine 90% so your people can bring judgment and empathy to the difficult
10%. A customer going through a rough quarter will remember how you treated them.

Tighten your invoicing (send immediately, make terms explicit), automate your reminders, and
watch your DSO. Cash you’ve already earned is the cheapest financing you’ll ever get.

Next week: the fraud you can’t see—and the AI that can