If you run a trading company in Jeddah and have just closed a big deal worth SAR 100,000. You’ve delivered the goods, issued the invoice, and now you’re waiting for payment. For the next 30 days (or sometimes longer), that money isn’t in your bank account; it’s sitting as accounts receivable (AR). If the client pays late, your cash flow gets disrupted, making it harder to cover salaries, supplier bills, or invest back into your business.
This is not a rare situation. According to recent reports, over 60% of SMEs in the Middle East face delayed payments from clients, with average payment terms stretching beyond 60 days. In Saudi Arabia, where SMEs' contribution to GDP is expected to increase by 20-35% under Vision 2030, managing receivables efficiently has become critical for growth and survival.
That’s why accounts receivable isn’t just an accounting formality; it’s the lifeline of your business. When managed well, AR ensures steady cash flow, smooth operations, and long-term stability. But when neglected, it can lead to mounting debts, cash shortages, and stalled business growth.
In this guide, we’ll break it all down in simple, real-world terms, showing you exactly how to manage your receivables like a pro.
Accounts receivable refers to the money your business is owed by customers who bought goods or services on credit. For example, if you delivered construction materials to a client but they will pay you after 30 days, that amount is recorded under accounts receivable.
In the Saudi market, it's common for B2B clients, especially in sectors like construction, healthcare, wholesale trading, and government contracts, to request credit terms rather than paying upfront. Having clear visibility into your AR helps you avoid surprises and stay in control of your business finances.
Accounts receivable directly affects your business’s cash flow and liquidity. If too much money is tied up in unpaid invoices, you may struggle to pay your employees, suppliers, or rent, even if you’ve made a lot of sales.7
Think of AR as the middle point between making a sale and receiving the cash. Managing this process properly helps you:
Understanding how credit sales work helps you:
Whether you're a large company or a small family-run store in Saudi Arabia, handling credit sales properly can make a big difference in how smoothly your business runs.
In many Saudi businesses, especially those involved in construction, wholesale trading, medical supply, or working with government agencies, it's common to sell goods or services on credit. This means you allow the customer to receive the product or service today but give them some time, often 30, 60, or even 90 days, to pay for it.
Let’s walk through how this process usually works, step by step:
First, your business provides the product or completes a service for the customer. This could be anything from delivering building materials to installing equipment or offering consultancy services.
Once the sale is complete, you send the customer an invoice. This is an official document that shows:
Since e-invoicing is now required by ZATCA (Zakat, Tax and Customs Authority), all invoices must follow the new digital format. This helps both you and the customer track payments more efficiently.
After sending the invoice, you now wait for the customer to pay. During this time, the unpaid amount is recorded as accounts receivable in your company’s financial records. It means your business is expecting to receive this money soon.
If your payment terms are “Net 30”, this means the customer must pay you within 30 days from the invoice date. In Saudi Arabia, especially in government or large corporate projects, payments can sometimes take longer, so it’s important to clearly mention your payment terms upfront.
Once the customer pays, the money is added to your cash or bank account, and the accounts receivable are reduced. This step is important to update in your accounting records, so you always have a clear picture of how much money has been collected and how much is still pending.
Imagine you run a mid-sized furniture business in Riyadh that specializes in supplying office furniture to corporate clients. One of your clients places a bulk order for office chairs worth SAR 25,000. You agree to give them 30 days to make the payment after delivery.
Whether you're a large company or a small family-run store in Saudi Arabia, handling credit sales properly can make a big difference in how smoothly your business runs.
Properly managing your accounts receivable helps your business stay financially healthy and avoid cash flow problems. Here are some practical and effective ways to manage your receivables better.
Before offering credit to customers, you need a simple set of rules that define how your credit system works. These rules should cover:
Having written credit policies ensures fair treatment and consistency across all customers.
Before giving credit, always assess whether a customer is financially reliable. Look at their past payment behavior, ask for references, or request a bank guarantee, especially for large orders or new clients.
Monitor your outstanding payments regularly. Use tools like:
This helps catch issues early before they become serious problems.
Relying on manual spreadsheets increases the chances of errors and missed follow-ups. Instead, use reliable software like Zoho Books, Xero, QuickBooks, or a Saudi-compliant ERP system that supports ZATCA e-invoicing. These tools make it easier to issue invoices, track payments, and send automatic reminders.
Make it easy for customers to pay you. Offer bank transfers, SADAD, Mada, or even mobile payment links. The easier the process, the faster your customers are likely to settle their invoices.
Your sales and finance teams should understand how credit policies work and how to communicate with customers professionally. A well-trained team will know how to handle follow-ups, explain payment terms, and deal with difficult conversations when needed.
Managing accounts receivable isn't just about sending invoices; it's also about knowing how long your money has been unpaid. That’s where aging analysis comes in. This section answers common questions to help you grasp this important concept and use it to improve your business’s cash flow.
An aging report is a financial tool that helps you track how long your invoices have been unpaid. It groups all your receivables into categories based on the number of days since the invoice was issued.
Typically, the categories are:
In Saudi Arabia, where credit terms can stretch (especially with government or large private clients), it's easy for businesses to lose track of unpaid invoices. An aging report gives you a clear picture of who owes you money, how much, and for how long, so you can follow up more effectively.
By analyzing your aging report, you can:
For example, if 60% of your receivables are in the 60–90 day category, your business may face cash flow problems soon. That’s a red flag to act fast.
Every unpaid invoice delays the cash your business needs to:
Late collections are one of the biggest reasons small and mid-sized businesses in Saudi Arabia experience cash shortages, even when they’re making strong sales.
If your business is sending out e-invoices but waiting too long to get paid, you’re not alone. Many companies in Saudi Arabia, especially in construction, trading, and services, deal with late payments. The good news? There are simple techniques that can help you collect payments faster and keep your cash flow healthy.
Here’s how to improve your accounts receivable collections step-by-step:
Don’t wait until a payment is overdue to follow up. Start by:
Customers often forget or misplace invoices. A quick reminder can speed up the process without damaging the relationship.
Manual tracking can lead to missed follow-ups. Instead, use software like:
These tools can automatically send invoices and reminders, helping you stay organized without extra effort.
Offer multiple payment methods to your customers. This might include:
The easier it is for a customer to pay, the faster they’ll do it.
Encourage customers to pay early by offering a small discount, for example:
“Pay within 10 days and get 2% off.”
This works well, especially when customers are managing their own cash flow and want to save money.
If a customer is having trouble paying in full, offer a simple payment plan. For instance:
This helps you recover the amount over time rather than risking a complete loss.
Sometimes, all it takes is a well-timed, respectful conversation. If a payment is very late:
Even with the best systems in place, many businesses across Saudi Arabia struggle to manage their accounts receivable (AR) effectively. Whether you're an SME in Khobar or a large contracting firm in Riyadh, AR problems can affect your cash flow, growth, and relationships with customers.
Let’s break down the most common AR challenges, what they are, how they impact your business, and what you can do to solve them.
The Problem:
Customers don’t always pay on time, especially in B2B or government projects where payment approvals go through multiple levels. This is common across industries like construction, manufacturing, and wholesale distribution in Saudi Arabia.
The Impact:
Late payments slow down your cash flow, making it harder to pay your suppliers, employees, or take on new work. You might even have to rely on credit or loans to keep your operations running.
The Solution:
The Problem:
Some customers may never pay their dues, either due to poor financial health or dishonest practices. This is a risk, especially when you’re working with new clients without proper background checks.
The Impact:
When invoices remain unpaid for too long, you may have to write off the amount as bad debt, which directly affects your profits and balance sheet.
The Solution:
The Problem:
As your business grows and you deal with more clients, managing hundreds of invoices manually becomes time-consuming and confusing.
The Impact:
You could miss follow-ups, send duplicate reminders, or forget to record payments properly, leading to poor customer service and financial errors.
The Solution:
The Problem:
Sometimes, clients don’t pay simply because they didn’t receive the invoice, misunderstood the payment terms, or have a dispute about the amount.
The Impact:
Delays that could’ve been avoided end up creating unnecessary stress, damaged relationships, or even lost business.
The Solution:
The Problem:
If you don’t have visibility into when payments are coming in, it’s hard to plan your expenses, make investments, or prepare for lean periods.
The Impact:
You may run into cash shortages even during high sales periods, especially if many receivables are overdue.
The Solution:
Managing accounts receivable doesn’t have to be stressful. With Hal’s smart accounting and e-invoicing solutions, you can:
Whether you’re running a trading company in Jeddah, a contracting firm in Riyadh, or a growing SME in Dammam, Hal helps you get paid faster, stay organized, and focus on growth.
Here’s what makes HAL ERP your perfect AR partner:
Book a demo and see how HAL ERP can transform your AR process.
Get started now, streamline your invoicing, follow-ups, and collections.
1. What is the difference between accounts receivable and accounts payable?
Accounts receivable is the money your customers owe you for goods or services you provided on credit.
Accounts payable is the money your business owes to vendors or suppliers for goods or services you purchased on credit.
2. How long should I wait before following up on an unpaid invoice?
It’s a good practice to send a reminder a few days before the invoice due date. If the payment is not received by the due date, follow up immediately. A second reminder can be sent after 7–10 days if the invoice is still unpaid.
3. What is a good accounts receivable turnover ratio?
A good AR turnover ratio varies by industry, but in general, a ratio between 7 to 12 is considered healthy. This indicates that your business is collecting payments efficiently and not allowing receivables to remain outstanding for too long.
4. Are businesses in Saudi Arabia required to use e-invoicing?
Yes. The Zakat, Tax and Customs Authority (ZATCA) has made e-invoicing mandatory for all businesses in Saudi Arabia. This includes generating invoices in a digital format that complies with specific regulatory standards.
5. What is an aging report in accounts receivable?
An aging report is a financial document that categorizes accounts receivable based on how long each invoice has been outstanding. Common time brackets include 0–30 days, 31–60 days, 61–90 days, and over 90 days. It helps businesses monitor late payments and take timely action.
6. How can I reduce the risk of bad debts in my business?
You can reduce bad debt risk by checking a customer’s credit history, setting credit limits, using written payment agreements, following up on overdue invoices promptly, and having clear payment policies in place.
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