What You’ll Learn
- Why accounts receivable (AR) can be a powerful, untapped lever for funding growth
- Common pitfalls that reduce AR’s reliability as a growth asset
- How to prepare your AR processes to better support long-term scaling
Growing your agency requires one key resource: capital. But what if the capital you need is already sitting in your business? For many, the answer lies in their accounts receivable.
Yes, your accounts receivable growth can absolutely support your company’s growth goals—if you treat AR like the strategic asset it is, not just an accounting function. This post explores when it makes sense to link your growth strategy to AR, and when it might be time to get your AR house in order first.
Possible reasons your business might not be ready to base growth on AR
Before turning your AR into a source of growth capital, it’s essential to understand the risks that can undermine its reliability.
1. You look good on paper, but cash flow is unreliable
A healthy AR total doesn’t always mean the money is flowing in fast enough. If your clients are slow to pay, the gap between invoicing and cash collection can cause turbulence, especially when you’re investing in new hires, tools, or client acquisition.
Cash flow volatility is a red flag that your AR isn’t yet working for you.
Tip: Start with our AR Health Checklist to get a realistic view of how fast and consistently
your invoices are converting to actual cash.
One useful metric here is your AR turnover ratio. If you’ve wondered what a good AR turnover is, the answer depends on your industry. But in general, a higher turnover rate means you’re collecting quickly and freeing up cash faster. If that number is low, it may be time to tighten collections or reassess credit terms.
2. Your AR is concentrated among a few big clients
Landing a big fish feels great—until that fish stops paying. If a large percentage of your receivables come from one or two clients, your growth capital can disappear overnight.
Diversification isn’t just a sales strategy; it’s a financial risk management necessity.
3. Your collections team is struggling to keep up
AR growth often mirrors business growth, but that means your team is chasing down more payments, managing more follow-ups, and handling more friction. If collections are under-resourced, Days Sales Outstanding (DSO) goes up, and your cash flow slows down.
4. Future growth rides on yesterday’s invoices
If your growth funding is tied to accounts receivable, your ability to invest in the future hinges on how successfully you convert past invoices into cash. That means today’s growth is literally only possible because of yesterday’s discipline. Your AR processes need to be tight, not just “good enough.”
Metrics like the accounts receivable to sales ratio can offer early warning signs. If your AR is growing faster than your revenue, you may be selling more but collecting less. That imbalance can quietly drag down your cash position and stall momentum.
5. You’re vulnerable to economic downturns
When the economy contracts, your clients may prioritize their own liquidity. This often means slower payments to vendors like you. If your AR is your main growth lever, an economic blip can become a major barrier.
AR as a reliable growth lever
When handled strategically, AR isn’t just a trailing indicator—it’s a predictive asset. Here’s how it can become a driver for sustainable growth:
AR is a proxy for future cash inflow
Your accounts receivable essentially represent future income. If you’re confident in your collection practices and client reliability, AR becomes one of your strongest indicators of near-term cash position. This is vital for smart planning.
It’s a key metric for financial health
Financial institutions and investors view AR as a sign of operational maturity. Strong, consistent AR performance reflects well on your overall business discipline, reducing risk in the eyes of outsiders. And when you’re trying to scale, perception matters.
AR insights = better forecasting
Analyzing AR data gives you a clear window into client behavior, average payment timelines, and potential slowdowns. That data helps you refine your growth models and avoid cash shortfalls before they hit.
You can put your AR to work
With tools like Hopscotch Flow, your entire AR pool can become a flexible, always-on line of credit. There are no hard credit checks, and no need to collateralize individual invoices. It’s designed for agencies and service-based businesses ready to turn predictable invoicing into accessible capital—without the wait.
Flow is especially powerful for businesses that already have clean, high-quality invoicing habits in place through Hopscotch. Once approved, you can access funding tied to your monthly receivables volume, helping you move faster without stretching thin.
Make AR work for your growth, not against it
Tapping into your accounts receivable for growth capital isn’t just possible—it can be a smart, strategic move. But it requires strong fundamentals: steady collections, diverse clients, and the infrastructure to scale without introducing risk.
If your AR processes are dialed in, you don’t need to wait for slow payers to invest in what’s next. You just need the right tools to unlock the value of your existing work.
Ready to turn your AR into growth capital?
Get approved for Flow and put your receivables to work, on your terms.
Bret Lawrence
Writer
Bret Lawrence writes about invoicing and cash flow management at Hopscotch. Her previous roles include senior financial writer at Better Mortgage, where she covered lending and the home buying process. Her writing is not financial advice.
