Accounts Receivable Management Case Studies
Finance5 Case StudiesUpdated Sep 2026
Accounts receivable work looks simple from a distance: invoices go out, cash comes in, and what remains is a short list of exceptions. The five cases below come from finance teams that sell on commercial credit. Each begins with a symptom someone noticed, such as a statement that did not tie to the ledger, a forecast that drifted, a request for a larger credit line, a run of unexplained remittances, or an audit sample with gaps. Each case shows how the people involved traced the problem, decided what to do, and kept it from returning.
Case Study 1
Unexplained variance between subledger and ledger at close
Pennick Fluid Components, a distributor of pump and valve parts with 340 commercial accounts and four regional warehouses
The situation
Pennick Fluid Components closes its books on the fourth business day after month-end. In the first close after the billing system change, the controller found that the accounts receivable subledger totaled $2,184,300 while the general ledger control account carried $2,171,650. The gap of $12,650 was small enough that a previous controller had written off similar differences as timing, but this time the customer statements for the northern region did not tie to either figure. Two warehouse managers had posted credit memos from a shared spreadsheet, and the billing system had a batch that ran after the cutoff. Nobody could say with confidence which record was correct.
The challenge
The task fell to Dana, the senior accounts receivable analyst, who had to find the variance before the reporting package went to the chief financial officer. The close deadline was two working days away. She had access to the subledger export, the general ledger detail, the cash application log, and a folder of scanned credit memos. The question was not only where the $12,650 came from, but why the controls had let two balances coexist for most of a quarter.
Analysis
Practitioners grounded in Accounts Receivable Management tend to start with the transaction records rather than the totals, since a total can only say that something is wrong. Dana matched each subledger invoice and credit memo to a ledger posting by document number, then sorted the unmatched items by posting date. Forty-one credit memos existed in the subledger with no journal entry in the ledger, and together they accounted for $9,380 of the gap. The remaining $3,270 traced to a batch of cash receipts that the subledger had applied on the last day of the period while the ledger booked them to the next. Two failures were hiding inside one number.
The control gap was more instructive than the arithmetic. Credit memos above $500 required approval by the regional sales manager, but the approval lived in a shared spreadsheet, not in the billing system, and the ledger interface only pulled rows marked as approved. Two memos had been approved in the spreadsheet and then keyed in by hand, which created a window where the subledger showed a credit the ledger never saw. The batch cutoff compounded the problem: the billing job ran at 11 pm on the last day of the period, and any receipt keyed after the run moved into the next period without warning anyone reviewing the close.
Actions taken
- Dana rebuilt the match by document number across all 41 open credit memos and cleared each one with a posting reference, leaving no item that existed in only one record.
- The controller moved all credit memos into the billing system and blocked manual keying into the ledger, so the interface became the only path for adjustments.
- The billing batch cutoff was moved to two business days before close, and a daily unposted-receipts report went to both the controller and the regional managers.
- Any manual adjustment above $500 requires a second approver recorded in the system, and the controller reviews the adjustment log before each close is signed off.
Results
The variance cleared to zero before the package went out, and the cause was split into the $9,380 credit memo gap and the $3,270 cutoff timing difference, both documented with posting references. In the two closes that followed, the subledger and ledger agreed on the first attempt, and the unposted-receipts report surfaced eleven late receipts that would otherwise have moved periods unseen. The approval spreadsheet was retired after the second close. The report reached the chief financial officer a day late, and the close calendar now carries a slack day for reconciliations.
Questions for discussion
- Which of the three reconciling items would a daily tie-out have caught first, and what should that tie-out compare?
- Why might a control that looks adequate on paper still allow two balances to coexist for a full quarter?
- How would you decide whether a small, recurring timing difference deserves a systems fix rather than a monthly write-off?
Case Study 2
Cash forecast slipping as collections stretch
Ridgeline Packaging Works, a folding carton manufacturer with two plants and 46 commercial customers
The situation
Ridgeline Packaging Works runs two plants that make folding cartons for 46 commercial customers, most on net-45 or net-60 terms. In the third week of the quarter, the treasury forecast showed operating cash $1,460,000 below plan, and the gap was widening each week. Revenue was close to budget, so the sales team saw no problem. Collections were the problem. Average days sales outstanding had moved from 41 to 53, and the two largest customers, together about 38 percent of billings, had quietly stretched their payment runs without telling anyone. Nobody had raised it at the weekly review.
The challenge
Hollis, the finance director, had to decide whether to send a revised cash forecast to the lender before the covenant test later in the quarter. He needed to separate timing from real change in customer behavior, and to find a response that would not damage the relationships that produced most of the orders. The model still assumed every large customer paid on terms, and nobody had tested that assumption against the aging detail.
Analysis
The forecast ran on one collection curve, which assumed each invoice cleared on its stated terms plus a fixed lag. Hollis rebuilt it as three scenarios driven by the aging report. In the base case, the two large customers returned to their usual pattern within six weeks. In the stressed case, they held the extended pattern through the covenant test. In the severe case, one of them slowed further and a third customer disputed freight. The team pulled each open invoice past 30 days, matched it to remittance history, and flagged any account whose payment dates had moved over three cycles. That left 17 accounts with traceable patterns.
The forecast also had to tie to the ledger, or the lender would find the gap on their own. Several large receipts had been posted to the wrong period because cash application closed before remittances from one bank lockbox arrived. That error flattered the first half of the quarter by about $210,000 and would reverse at the next close. Before any scenario went out, the team reconciled forecast receipts to bank deposits and corrected the cutoff. The approval step mattered too. Any change to a customer's credit terms needed sign-off from the finance director and the sales vice president, so no one could quietly grant extensions to win volume.
Actions taken
- Hollis asked the two large customers for written payment schedules and set a weekly call with each payables team, so timing changes would reach the forecast within a week.
- The forecast was rebuilt on the aging report, and the team reconciled forecast receipts to bank deposits, correcting the lockbox cutoff, before the lender package was released.
- Sales was asked to bring the 17 flagged accounts to the weekly review with a reason for each slowdown, and any credit term extension now needs written sign-off from two executives.
- Hollis set a cash floor that triggers a drawdown review when forecast cash falls below $900,000, and the finance team tests that trigger against each scenario every week.
Results
The severe case was never reached. The two large customers returned to their usual pattern by the end of the next quarter. The lockbox correction reduced the reported first-half figure as expected, and the lender accepted the revised forecast without requesting a waiver. Days sales outstanding came down to 46 from its peak of 53, and the cash gap closed in stages rather than in a single recovery. The most useful outcome was the habit: the weekly review now compares the aging report against the forecast before anyone discusses revenue.
Questions for discussion
- Which assumption in the existing model would have been easiest to test in the first week, and what data would that test have required?
- How should a finance director weigh the cost of a tighter credit policy against the risk of losing volume from the largest customers?
- What evidence would convince a lender that a revised forecast reflects customer behavior rather than a convenient reclassification of receipts?
Case Study 3
Third-party payments from one bank account
Corvane Plastics Distribution, a regional distributor of industrial resin with 212 trade customers
The situation
Corvane Plastics Distribution sells industrial resin to 212 trade customers on credit terms, and a shared collections center applies every incoming payment. In the sixth week of the quarter, an analyst reviewing unapplied cash noticed a pattern. Over six weeks, 26 payments totaling $486,000 had arrived from one operating bank account, but the remitter names on those payments belonged to fourteen different customers, and most of them had no history of paying through that account. Several amounts were round figures. Within days, some of the same customers had received credit memos refunded to a bank account held in a different name.
The challenge
Leticia, the collections manager, had to decide whether the pattern was a processing error, such as a shared bank portal, or a risk indicator that needed escalation under the company's anti-money-laundering and customer due diligence policy. The shared center had been applying third-party payments without asking for remitter documentation, and the policy's review thresholds had not been revisited in a long time. Escalating too early would delay legitimate customers. Waiting too long could leave the company holding funds it could not explain.
Analysis
Leticia started by sorting the payments into groups the records could explain and groups they could not. Thirteen of the fourteen customers had signed remittance authorizations on file, and their payments matched open invoices within tolerance. The fourteenth, Brightwater Trading, had no authorization on file, a credit application more than a year old, and a refund request that skipped the standard approval path. Its payments totaled $141,000 across the window, which set the exposure. The documentation gap set the priority. Under the policy, third-party payments without an authorization were a hold condition, not a routine follow-up item, and the file needed to show that the hold had been applied.
The control failure sat upstream. The shared center applied payments by amount and invoice number, and its procedure let a collector override a remitter mismatch with no second review. Refund approval was set at $25,000, so two $12,000 refunds could pass without review. Leticia escalated to the compliance officer with the transaction list and a proposed hold on refunds. The escalation followed the written path and was logged with owner and time. The company did not conclude that the customer was acting in bad faith. It concluded that the funds could not be explained from its own records, and that was enough to act on.
- 1Unapplied cash spikePayments from one bank account rose sharply within six weeks.
- 2Remitter mismatch reviewFourteen payer names checked against authorizations on file.
- 3Refund path testedCredit memos refunded to a bank account in a different name.
- 4Compliance hold placedRefunds frozen for the account pending documentation and review.
- 5Escalation and file recordDecision, owner, and timing logged for audit and examiner review.
Actions taken
- Leticia suspended refunds to the flagged account and required a written release from the compliance officer before any further payment could be returned to it.
- The shared service center was told to stop applying third-party payments without a matching authorization on file, and every override now needs a second reviewer's name in the log.
- Refund approval thresholds were lowered and a rule was added that flags any series of refunds within the same two weeks that together exceed the single threshold.
- The compliance officer reviewed the full twelve-month payment history for all 14 remitters and documented the outcome, including the account decision and any reporting obligation identified.
Results
The account was placed on hold in the same week the pattern was identified, and $141,000 of pending refunds were stopped before release. Compliance found that thirteen remitters were explained by authorizations on file, and those records were updated. The fourteenth account stayed under review for the rest of the quarter, and the reporting decision was documented with its reasons. About two weeks after the new refund rule went live, the system flagged a smaller series of refunds from a different customer. A single call confirmed a legitimate split payment, and the case closed without further action.
Questions for discussion
- At what point should a collector's override of a remitter mismatch be treated as a control event rather than a processing exception?
- How should a compliance officer document a decision to take no reporting action when a pattern remains partly unexplained?
- What change to the refund approval thresholds would have caught this pattern without slowing routine refunds for legitimate customers?
Case Study 4
Staged credit limit for a large trade customer
Tidewell Metal Fabrication, a precision sheet metal supplier with 180 trade accounts
The situation
Tidewell Metal Fabrication makes precision sheet metal parts for 180 trade accounts and holds a credit policy that caps any single customer at 15 percent of total receivables. Total receivables stood at $6,420,000 at quarter-end. Westgate Builders Supply, a regional distributor with nine branches, had bought on a $600,000 limit for several years and paid mostly on time. Now it wanted that limit raised to $1,500,000 and its terms moved from net-30 to net-60 to support a tenth branch. Its current balance was $412,000, and the account accounted for about 9 percent of annual revenue.
The challenge
Ruth, the credit manager, had to bring a recommendation to the finance committee within ten business days. Westgate's payment record was good but not spotless, its audited statements were the most recent available, and the policy ceiling would be breached by the full request. Rejecting outright risked losing a customer that accounted for a meaningful share of revenue. Approving everything would concentrate risk in one account and require an exception the committee had never granted.
Analysis
Ruth started with the financial statements, then moved to how Westgate actually paid. The latest annual statements showed revenue of $38,200,000 and a current ratio of 1.3. Over the past year, Westgate had paid about 84 percent of invoices within terms and most of the rest within 15 days late. Its bank reference answered slowly, and two other trade suppliers reported average payment at 52 days. She built three downside cases: branch sales slow enough to stretch payment to 75 days, loss of the largest project customer, and a 20 percent drop in gross margin. The worst case put peak exposure near $1,100,000 before collections recovered.
Suitability was a policy question as much as a credit question. A $1,500,000 limit would take Westgate to about 23 percent of receivables, well above the 15 percent ceiling, so the committee could not approve the full amount without an exception. Ruth proposed a staged increase: $900,000 now, with the remaining $600,000 available only after two consecutive quarters of on-time payment and updated audited statements. Terms would start at net-45. Approval required personal guarantees from the two majority owners and credit insurance on any balance above $600,000. The billing system would hold the second tranche as a conditional field, so the higher limit could not open on its own.
- Week oneAudited statements, bank reference, and two supplier confirmations requested.
- Day tenDownside cases run against the ledger and the aging history.
- Week threeCommittee approves staged limit inside the concentration ceiling.
- Two quarters laterSecond tranche released only if both payment tests are recorded as passed.
- Ongoing monthlyAging review with an automatic hold once any invoice passes 60 days.
Actions taken
- Ruth asked for audited statements, a current accounts payable aging from Westgate, and direct confirmation from two other trade suppliers before she would model any new exposure.
- The committee approved a $900,000 limit, which keeps Westgate under the 15 percent concentration ceiling, with terms set at net-45 for the first two quarters.
- The two majority owners signed personal guarantees covering the full $1,500,000 exposure, and credit insurance was bound for any balance above $600,000 before the limit went live.
- The billing system was set to hold the second tranche as a conditional field, and the limit releases automatically only when the two quarterly payment tests are recorded as passed.
Results
Westgate accepted the staged terms, and the first tranche supported the opening orders for its new branch. Payment held through the first two quarters, with most invoices paid within terms. The second tranche released through the billing condition once both tests were recorded as passed. The downside cases never materialized, but the guarantees and insurance were the reason the committee could accept a peak exposure that would otherwise have sat above policy. Ruth noted that the committee would have struggled to defend a flat rejection, since the payment record supported at least a partial increase.
Questions for discussion
- Which downside scenario should carry the most weight when a customer's own financial statements look stronger than its payment record?
- When is a policy exception justified, and who should be required to sign it?
- What would make you reject the request outright rather than approve a staged limit?
Case Study 5
Audit findings ranked for remediation and closure
Sable Harbor Foodservice Distributors, a wholesale supplier with 600 restaurant accounts across four centers
The situation
Sable Harbor Foodservice Distributors supplies 600 restaurant accounts from four distribution centers and carried $9,870,000 in gross receivables at quarter-end. Internal audit reviewed the receivables cycle after the audit committee asked for a closer look at earlier minor exceptions. The sample covered 85 invoices, 40 credit memos, and every manual journal posted to the receivable control accounts over the quarter, which totaled 9 entries. The review produced seven findings. Three were rated high, two were rated medium, and two were rated low. The committee wanted a remediation plan it could verify, not one it had to take on trust.
The challenge
Imani, the controller, had to rank the findings by what they could do to reported numbers rather than by how uncomfortable they were to explain. Several findings touched the same control, and the owners sat in three different departments. The committee wanted each finding closed with evidence an auditor could retest, and fieldwork for the next review would begin before the full plan was complete.
Analysis
Imani ranked the findings by amount at risk, then by how likely each error was to reach the reported balance. The largest item was an allowance for doubtful accounts that had not been revised for two quarters, leaving a possible understatement of about $211,600 against balances past 120 days. Second came nine manual journals that cleared unapplied cash against open invoices without a remittance reference, totaling $207,400. Third was a cutoff problem: 14 invoices for shipments after quarter-end had been recorded in the period they were billed. Those three each touched reported receivables directly. The remaining items, including credit limit changes made without review, mattered less directly.
Each finding had to end in a test someone else could run. For the allowance, the closure test was a recalculated reserve using the written aging policy, approved by the controller. For the manual journals, every entry over $5,000 would need a remittance reference and a second approver, and auditors would sample two cycles. For the cutoff issue, the test was a shipment-to-billing match on the first ten business days after each close. Imani owned the allowance, Mateo in distribution operations owned the shipment match, and Priya in treasury owned the unapplied cash rules. Each owner signed the closure test before the audit team would retest.
Actions taken
- Imani recalculated the allowance using the written aging policy, booked the required adjustment of $211,600, and documented the variance against the prior figure.
- Priya required a remittance reference and second approval on every manual journal touching unapplied cash, and she reviewed the nine existing entries to confirm the supporting documents existed.
- Mateo changed the billing release so invoices cannot post until a shipping confirmation is matched, and he ran the cutoff test on all 14 invoices before the next close.
- The master data changes were moved behind a dual approval step, and the team pulled every change to customer credit limits made in the last two quarters for retrospective review.
Results
The allowance adjustment was booked in the close that followed the audit, and the auditor's independent recalculation matched the revised reserve. Of the nine manual journals, seven had remittance support on file, and the other two were reversed once the reviewer could not locate evidence. The cutoff test ran clean for two cycles. The committee closed six of the seven findings within the quarter after the review. The seventh, covering credit limit changes, stayed open one more cycle because the retrospective pull found four increases without approval, which were then either approved or reversed.
Questions for discussion
- Why rank findings by amount at risk rather than by how visible they are to the audit committee, and when might that ranking mislead?
- How much independence should an owner have in signing off a closure test on a control they operate?
- What sample size would you require before accepting that a manual journal control works across a full quarter?
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