By: Gershon Morgulis (Founder & Partner) and Rik Katz (Portfolio CFO)
Revenue is only real when the money is in your bank account. You can close a deal, ship the product, and log the sale — but if you never collect, you have not actually sold anything. You have simply funded someone else’s business with your own cash, labor, and inventory.
Accounts receivable is one of the most dynamic and consequential areas of your finances, yet it is also one of the most overlooked; especially as companies grow. Here are five lessons every CEO should understand about protecting their credit sales, drawn from decades of CFO experience:
Lesson 1: A Written Credit Policy Is Not Optional
Many growing companies extend credit informally, relying on instinct or relationships instead of a process. That approach works; until it doesn’t. A standard written credit policy gives everyone on your team a clear playbook: who qualifies for credit, on what terms, up to what limit, and who has authority to approve exceptions.
Have your CFO draft and maintain this policy and make sure it governs every customer relationship consistently. The goal is not rigidity; it is predictability. When your staff know the rules, they can move faster and make better decisions without escalating everything to you.
Lesson 2: Screen Customers Before You Extend Terms
Before extending credit to a new customer, do the work upfront. Pull trade references, review payment history, confirm the legal entity you are actually doing business with, and run a credit report through a service like Dun & Bradstreet or CreditSafe.
This matters more than most CEOs realize. The company placing a purchase order may not be the entity legally responsible for paying you. Subsidiaries and parent companies are separate legal entities. A large conglomerate can force a subsidiary into bankruptcy while the parent walks away untouched. You should get the contracting entity on every significant new relationship verified before terms are agreed. Make sure every order is from the entity you approved
Screening customers also opens doors. When you have a process in place, you can confidently approve customers you might otherwise have turned away; because you have the data to support the decision.
Lesson 3: Invoice Accurately and Make It Easy to Get Paid
A surprising number of payment delays are self-inflicted. An invoice that does not match a customer’s purchase order gives them a built-in reason to delay. Large retailers and corporations are skilled at using those reasons to their advantage. A mismatched invoice can add 30 to 45 days to your collection timeline before a single conversation even happens.
Ask your CFO to audit your invoicing process end to end: Does every invoice align precisely with the corresponding purchase order? Is proof of delivery included where required? Are ACH payment instructions clear and current? Small details in this process compound into significant cash flow differences at scale.
Lesson 4: Watch for Early Warning Signs: Especially Unusual Order Spikes
Your accounts receivable data will tell you things about your customers that they will never tell you directly. Payments arriving later than usual, repeated requests for extensions, and sudden large orders without a clear business explanation are all signals worth investigating.
That last one deserves particular attention. A customer placing an unusually large order, two or three times their normal volume, can seem like great news. In some cases, it is a company preparing to file for bankruptcy, stocking up on inventory before suppliers cut them off. The excitement in your sales department should trigger caution in your finance department, not approval on autopilot.
Your finance team should be reviewing AR aging reports at least weekly, with concentration risk and sudden order spikes flagged before they become write-offs. Those situations should be escalated to the management team
Lesson 5: Act Early and Pick Up the Phone
The single most underused collections tool is a phone call. Email gets ignored, misread, and increasingly faked by fraudsters. Relationships built from person to person are harder to avoid and harder to exploit.
Consider this: one company’s accounts payable team received an email within an existing supplier thread asking to change the bank account for an upcoming ACH payment. It looked legitimate. The controller processed it. The funds went to a fraudulent account twice before anyone caught it. Nearly $29,000 was gone before the error was discovered, and only part of it was recovered.
The fix is not complicated: pick up the phone to confirm any change in payment instructions. Have your AR staff build real relationships with the AP contacts at your key customers. And when an account goes past due, act within days, not weeks. The squeaky wheel gets paid first.
When Discipline Alone Is Not Enough: A Word on Credit Insurance
Even the most disciplined AR process cannot fully eliminate the risk of a customer going bankrupt, taking you down with them. Trade credit insurance exists to cover exactly that scenario, including clawbacks, where a bankruptcy court recovers payments made to you in the months or years before a filing and redistributes them to other creditors. That is a risk most business owners do not know exists until it is too late. Insurers know early on if there are issues and will warn you and reduce or stop the credit cover.
If your company does significant B2B volume, carries large receivables, or is expanding into new markets or international customers, ask your CFO to evaluate whether trade credit insurance makes sense. It is not just a safety net; it can also give your sales or risk management team the confidence to approve customers they would otherwise decline, knowing the downside is covered.
The Bottom Line
Protecting your accounts receivable is not about being conservative or saying no to growth. It is about approving the right risk, with the right controls, so that the revenue you generate actually reaches your bank account. Strong processes, written policy, thorough screening, accurate invoicing, early monitoring, and disciplined follow-up compound over time into meaningfully stronger cash flow and fewer write-offs.
And remember: if your net profit is 10%, it costs $100 in new sales to recover a $10 bad debt. The math is unforgiving. Getting paid is not an afterthought to the sale; it is the sale.
About the Authors
Gershon Morgulis is the founder and principal of Imperial Advisory. He has provided CFO services for companies across a wide range of industries, acting as an advisor to CEOs and CFOs on issues relating to both day-to-day profitability and long-term strategic growth planning. He has a BA with concentration in Business from Fairleigh Dickinson University and an MBA in Finance with distinction from Hofstra University.
Rik Katz is an Imperial Advisory Portfolio CFO with extensive experience in financial leadership and general management within the manufacturing and distribution sectors. Known as a trusted advisor, he is recognized for his work in strategic planning, operations management, mergers and acquisitions, banking relationships, and international trade.