Stop Chasing Payments: Automated Collections That Don't Damage Client Relationships

I need to tell you about Marcus. Marcus ran a twelve-person accounting firm in Melbourne. Solid practice. Good clients. Competent team. And for six years, Marcus personally reviewed every invoice before it went out, personally decided when to follow up on overdue accounts, and personally made every difficult phone call when a client was sixty or ninety days past due.

Marcus hated it. Every single part of it. He hated reviewing invoices because it reminded him how much time his team spent on work that was never going to be billed. He hated the follow-up decision because it felt petty — calling a client who owed $2,000 when that client was paying $15,000 a year in annual fees seemed like a way to damage a good relationship over a small amount. And he hated the difficult phone calls because he was an accountant, not a debt collector, and every conversation about money felt like it was eroding the trust he had spent years building.

So Marcus did what most firm owners do. He let things slide. He gave clients the benefit of the doubt. He wrote off invoices that were more than 90 days old because chasing them felt worse than losing the money. And he told himself the problem was not that bad.

Then Marcus sat down with his bookkeeper and actually calculated the numbers. In the prior twelve months, his firm had written off $67,000 in uncollected fees. Not unbilled work — invoiced work that clients never paid for and Marcus never chased hard enough to collect.

Sixty-seven thousand dollars. That was more than a full-time salary. It was the equivalent of hiring a senior bookkeeper and paying them entirely out of money the firm had already earned but failed to collect.

Marcus is not unusual. He is the norm.

The Profession’s Dirty Secret

That last statistic is the one that firm owners consistently underestimate. If your firm operates on a 30% profit margin — which is healthy for a small practice — then a $10,000 write-off does not cost you $10,000. It costs you the revenue you would need to generate to produce $10,000 in profit, which at a 30% margin is approximately $33,000. You need to bill and collect $33,000 in new work to offset the margin impact of $10,000 you already earned but never collected.

This is why write-offs are so destructive. They do not just reduce revenue. They destroy margin at a multiplied rate. And firms that track their write-offs honestly — most don’t — discover that the annual total is far higher than they assumed.

For a firm billing $500,000 annually, a 92.5% realization rate means $37,500 in billings that never convert to cash. That is the benchmark, meaning half of firms are losing more than that. Firms with collection problems — and 86% report having them — may be realizing as little as 85%, which on $500,000 is $75,000 in annual leakage.

Why Firm Owners Resist Automating Collections

Marcus’s resistance was not about technology. It was about identity. He saw himself as a trusted advisor, not a bill collector. Sending automated payment reminders felt transactional. It felt like it would reduce the professional relationship to a vendor-customer dynamic.

This is the single most common objection I hear from firm owners when I suggest automating their AR process. “Our clients are relationships, not transactions.” “I don’t want to feel like a utility company sending late notices.” “If I automate this, clients will think I only care about money.”

I understand the instinct. And it is completely wrong.

Here is what actually happens when you do not follow up on invoices: the client assumes one of two things. Either they assume the firm does not care about the money, which devalues the work in the client’s mind. Or they assume the firm is too disorganised to notice, which erodes confidence in the firm’s competence. Neither assumption strengthens the relationship.

And here is what happens when you send a polite, system-generated reminder seven days after an invoice is due: the client pays. In most cases, the client simply forgot. The invoice was in an email they meant to deal with and didn’t. A friendly reminder resolves 60-70% of overdue invoices within 48 hours of being sent.

The clients who damage the relationship are not the ones who receive a reminder. They are the ones who owe you $5,000 and have heard nothing from you for three months, and now face an uncomfortable conversation that could have been avoided with a $0 automated email on day seven.

The Collection Timeline That Works

Through working with dozens of firms on their AR processes, I have settled on a collection timeline that balances firmness with professionalism. It works because it removes decision-making from the process — the system runs, and the partner only gets involved when a genuine human conversation is needed.

The Critical First Step: Invoice Promptly

Before the collection process even begins, there is a problem that undermines everything that follows: slow invoicing.

I have seen firms that complete tax returns in November and invoice in January. Firms that finish monthly bookkeeping by the 5th but don’t send the invoice until the 20th. Firms where the partner has to personally review every invoice before it goes out, and the partner is too busy to review them for two weeks.

Every day between work completion and invoice delivery is a day that weakens your collection position. The client’s perception of value is highest at the moment the deliverable is received. A week later, it has faded. A month later, they barely remember the work. The invoice feels like an afterthought, and afterthoughts don’t get paid urgently.

The single highest-impact change most firms can make is not automating collection. It is automating invoicing. When a task is marked complete in Karbon, an invoice is generated in Xero or QuickBooks and sent to the client within 24 hours. No partner review bottleneck. No two-week delay. The invoice arrives while the client still remembers — and values — the work.

The Engagement Scoping Problem

Marcus’s $67,000 write-off was not entirely a collection problem. Roughly half of it — about $30,000 — was work that was invoiced at full rate but then discounted or written down before the invoice was sent. His team did the work, the time was recorded, but when Marcus reviewed the invoice, he reduced the amount because “the client won’t pay that much” or “we took longer than we should have.”

This is the scope creep problem masquerading as a collection problem. If your engagement letters don’t clearly define what is included in the fee, every additional task your team performs becomes a gift that the client never asked for and you never billed for.

Ignition solves the front end of this problem. When a client accepts an Ignition proposal, they agree to a defined scope at a defined price, and they provide a payment method. The engagement has commercial clarity from day one. When additional work arises, it can be scoped and priced as a change order rather than silently absorbed.

The connection between scoping and collection is direct. Clients who agreed to a clear scope and price before work began are significantly easier to collect from than clients who receive an invoice that is higher than they expected for reasons they don’t understand. Automation at the engagement acceptance stage — clear proposals, defined scope, upfront payment method capture — eliminates the most common source of disputed invoices.

What Marcus Actually Did

Marcus did not automate his collections overnight. He was too resistant for that. So we started with the least confrontational step: automated invoicing.

When a Karbon task was marked complete, an invoice was generated in Xero and emailed to the client automatically. Marcus no longer reviewed every invoice before it went out. The fee had already been agreed in the Ignition proposal. The work had been completed. The invoice was a formality, not a negotiation. Sending it promptly was simply professional practice.

The immediate effect was that the average time between work completion and invoicing dropped from 18 days to 1 day. Client payment speed improved by nearly two weeks, because clients were paying promptly after receiving invoices — they had always been willing to pay. They just hadn’t been asked.

After two months of successful automated invoicing, Marcus agreed to add the day-7 reminder. “Just try it for one quarter,” I told him. “If a single client complains, we’ll turn it off.”

Not one client complained. Several thanked his team for the reminder. One client said, “I’m glad you’re on top of this — my last accountant used to let invoices pile up and then send them all at once. It was a nightmare for my cash flow.”

That comment changed Marcus’s perspective entirely. His clients did not want him to be passive about billing. They wanted predictability. They wanted to know what they owed and when it was due. The professional, structured approach to billing made them more confident in the firm, not less.

After one quarter, Marcus’s write-offs dropped from roughly $17,000 per quarter to under $4,000. His realization rate went from 87% to 96%. And he stopped having difficult phone calls about overdue invoices, because by the time an invoice reached day 30, nearly everything had already been paid.

The Xero vs QuickBooks Comparison for AR

Both platforms have invoicing and payment tracking. The differences matter for automation.

The End State: Direct Debit

The firms with the best realization rates — 97% and above — have largely eliminated the AR problem by collecting fees at the point of engagement acceptance. Ignition facilitates this by capturing the client’s payment method when they accept the proposal. The fee is charged automatically, either in full or on a payment schedule.

This is the end state that every firm should be working toward. Not better collection of overdue invoices. Elimination of overdue invoices entirely by collecting before or at the time of work delivery.

It takes time to transition existing clients to direct debit. Most firm owners introduce it at the next engagement renewal: “We’re updating our billing process. All new engagements will include automatic payment collection on agreed dates.” Clients who have been paying their invoices on time will not object. Clients who have been paying late will either accept the change or reveal themselves as clients you should be charging more — or declining to serve.

What Changed for Marcus

Twelve months after implementing automated invoicing, payment reminders, and Ignition for new engagements, Marcus’s firm looked different in ways he had not expected.

His annual write-offs dropped from $67,000 to under $11,000. His realization rate climbed from 87% to 96.5%. His cash flow became predictable enough that he could forecast three months ahead with confidence — something he had never been able to do.

But the change Marcus talks about most is not the money. It is the relationship he has with his clients. “I used to dread the money conversations,” he told me. “Now there are no money conversations. The system handles it. And paradoxically, my clients respect me more, not less, because the billing is professional and predictable. Nobody wonders what they owe me. Nobody gets a surprise. It just works.”

Marcus was a reluctant adopter. He resisted every step. He predicted that automation would damage his relationships. He was wrong about every prediction. The firms that treat billing as a professional process — transparent, timely, and systematic — build stronger client relationships than the firms that treat billing as an afterthought they are embarrassed about.

The money you have already earned is not a favour you are asking for. It is compensation for professional services rendered. Collecting it promptly and systematically is not aggressive. It is the minimum standard of professional practice. And the sooner your systems reflect that, the sooner your cash flow, your margins, and your client relationships will improve in ways that compound year over year.