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Accounts receivable collections: follow up with useful records
Collections work begins by confirming that the customer received an accurate invoice. An aging review becomes more useful when each unpaid balance has a reason, a contact history and an agreed next action.
This guide describes common bookkeeping practice, not a legal or regulatory requirement.
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General information, not legal or tax advice.
Separate billing problems from payment delays
As a practical review, check delivery evidence, invoice addresses, credits and disputed charges before sending another reminder. Assign responsibility for resolving each issue and note the customer’s response in the account record. A corrected invoice needs a clear history so the customer and bookkeeper are discussing the same balance.
Put a negotiated payment arrangement in writing
California Courts advises seeking voluntary payment even after a judgment, noting that collection can consume time and money without producing payment. It recommends a written payment plan signed by both parties. Keep the agreement with the receivable and record payments against the agreed balance so follow-up reflects what has actually happened.
Sources: California Courts Self-Help Guide, If you win your small claims case
Assess a small claims route with the right limits
California Courts lists a general small claims limit of $12,500 and a $6,250 limit for a business suing. Its guidance allows consulting a lawyer beforehand but not having that lawyer with you in court. Review the official court instructions for your circumstances before pursuing a claim; bookkeeping support does not decide the legal collection strategy.
Sources: California Courts Self-Help Guide, Small claims in California
Understand what happens after a judgment
The court does not collect the money for you. The Courts guide requires waiting at least 30 days after the Notice of Entry of Judgment was handed or mailed before collecting, while the other side has an opportunity to challenge it. When the debtor pays, the creditor must file form SC-290 acknowledging satisfaction. Keep the court record distinct from routine invoice reminders.
Sources: California Courts Self-Help Guide, If you win your small claims case
Discuss uncollectible balances with the CPA
For credit sales, a business bad-debt deduction depends on prior inclusion of the amount in gross income. IRS guidance also requires reasonable collection steps to establish worthlessness. Give the CPA your follow-up history and supporting invoices before approving a write-off, rather than deleting the balance because collection has become difficult.
Sources: IRS Publication 334 (2025), Tax Guide for Small Business, Bad Debts; IRS Topic no. 453, Bad debt deduction
Sources: separate billing problems from payment delays
When collection efforts are exhausted
Make open customer balances easier to act on
Tidwell helps reconcile receivables and organize collection histories for business decisions, with your CPA or attorney handling tax and legal judgments.