Invoice Prioritisation and Net Terms Experiments: Using Working Capital Metrics to Decide Who to Call First

🎯 Overview / What This Guide Covers

• How to turn static AR aging into a dynamic, prioritised call list.
• Which working capital metrics matter most for deciding who to call first?
• How to design net terms experiments that support both sales and working capital management.
• Ways to connect invoice prioritisation with AR aging from Xero and QuickBooks.
• How to loop results back into your 13-week cash forecast and net working capital view.

How a modern working capital optimisation solution supports continuous testing of terms, discounts, and collections plays.

🧱 Before You Begin: Data, Segmentation & Guardrails

Before reprioritising who to call, you need confidence in three things:

1. Clean AR data. Invoices should be correctly aged, tied back to revenue, and linked to unique customer records. If you’ve followed the Xero/QuickBooks AR aging guides, you’re already in a strong position.
2. Consistent cash application. You want disputes, refunds, and unapplied cash handled cleanly so you’re not chasing customers who have already paid.
3. Agreed guardrails. Sales, finance, and leadership should sign off on minimum and maximum net terms, discount limits, and escalation paths.

With those foundations, invoice prioritisation becomes a disciplined management of working capital task, not a weekly firefight. You can then embed rules into your working capital management software so the system, not a spreadsheet, generates the call list.

📌 Step-by-Step: Building a Prioritised Collections Playbook

Step 1: Define a Priority Score for Each Invoice

Create a simple score that ranks each open invoice using factors like:

• Days past due.
• Invoice value.
• Customer risk or strategic importance.
• Payment history (on-time vs chronic late payer).

Combine these into a numeric score that your team can sort on. The aim is not perfection; it’s a consistent, explainable approach. Link this score directly to your working capital metrics: elevating invoices with high cash impact and high lateness drives the largest shifts in working capital and DSO with the least effort.

Step 2: Link Priority Scores to Working Capital & Cash Forecasts

Next, connect invoice scores to your 13-week cash model. For example:

• High priority invoices: assume faster collection if called this week.
• Medium: standard behavior.
• Low: conservative assumptions or minimal effort.

By switching collection efforts between these buckets, you can run “what-if” scenarios on net working capital and near-term cash. This is where working capital formulas and DSO logic built in earlier articles become powerful levers, letting you quantify the cash impact of moving just a handful of invoices up the queue.

Step 3: Design Net Terms Experiments by Segment

Now layer in net terms experiments:

• Offer shorter terms with early-payment incentives to certain cohorts.
• Offer extended terms to strategically important customers with strong payment histories.
• Test different combinations of terms and discounts to see which improves both revenue and working capital.

Each experiment should be framed as a hypothesis (“If we move this cohort from 30 to 21 days and offer a 1% discount, we expect X impact on working capital metrics and churn”). Run for a fixed period, measure, then either roll out or revert.

Link results to your collections dashboard and subscription timing logic so you can see how net terms affect billing cycles and cash collection patterns.

Step 4: Turn Scores into a Daily Call & Action Plan

Once scores and experiments are live, you need a simple front-line execution plan:

• Generate a daily or weekly prioritised list from your working capital management software.
• Assign owner, contact channel, and next action for each high-priority invoice.
• Use templates that reflect where the customer sits in your experiments (e.g., “trial shorter terms” vs “standard follow-up”).

As calls are made and promises-to-pay are logged, update your collections dashboard so the team can see how actions translate into cash. That live feedback loop is what turns management working capital theory into a muscle your team builds every week.

Step 5: Close the Loop Into Strategy, Budgets & Product Decisions

Finally, roll the results of your invoice prioritisation and net terms experiments into a broader strategy:

• Update the working assumptions in your 13-week cash and annual budgets.
• Feed high-refund or high-dispute cohorts into product and ops so they can reduce friction.
• Use insights to reshape your customer contract templates, pricing tiers, and discount policies.

Because these decisions are grounded in actual working capital metrics-not anecdotes-you can defend them with boards, investors, and lenders. Over time, invoice prioritisation becomes a core pillar under Working Capital Management for Operators, supported by a robust working capital optimisation solution.

💡 Tips, Edge Cases & Gotchas

• Don’t only chase the biggest invoices. A cluster of smaller, chronically late invoices can drain working capital just as badly as one large debtor. Your priority score should balance size with behavior.
• Align experiments with sales incentives. If sales are rewarded only on bookings, not cash, they’ll push for looser terms regardless of working capital management impact. Align comp so that cash and risk are part of the conversation.
• Watch the second-order effects. Shorter terms and harder collections can improve net working capital but hurt NRR if customers feel squeezed. Use customer success and product feedback alongside working capital metrics to judge success, not just DSO.
• Keep cross‑topic links alive. Some experiments, like vendor financing or capex-related terms, sit at the intersection of collections and investment decisions. Make sure your invoice playbook stays in sync with financing and capex strategies, not just AR.

📊 Example: Reordering the Call List to Release Hidden Cash

Picture a finance team with $2.5m in overdue AR. Historically, they’ve chased the top 20 invoices by value. DSO is stuck at 62 days, and working capital is under pressure.

After implementing a simple scoring model, they discover:

• A set of mid-sized customers consistently pays 10-15 days late.
• A long tail of smaller invoices is 60+ days overdue, but never contacted.
• Several strategically important accounts respond well to structured discounts for early payment.

By reordering the call list and launching targeted net terms experiments, they:

• Reduce DSO by 7 days over a quarter.
• Improve net working capital without adding collections headcount.
• Gain clear evidence on which customer segments can handle shorter terms and which need flexibility.

Those insights feed straight into new contract templates, budgeting assumptions, and the working capital management pillar strategy.

❓ FAQs

🚀 Turn Collections from “Chasing” into Strategic Working Capital Design

Invoice prioritisation and net terms experiments turn collections from a reactive task into a strategic lever. When your team acts from live working capital metrics, aligned with clear experiments and guardrails, every call and every contract renewal becomes an opportunity to strengthen working capital rather than just close a gap. The next step is to embed these behaviours into your working capital management platform so they run every week, not just during quarter‑end crunch.