Accounts receivable
Accounts receivable (AR) is the money customers owe your business for goods or services already delivered but not yet paid for. It appears as an asset on your balance sheet and represents cash you expect to collect, usually within your payment terms of 15 to 60 days.
Why accounts receivable matters
Accounts receivable is future cash, but only if you collect it. A business can be profitable on paper and still run out of money if its receivables pile up unpaid. Managing AR well, through consistent invoicing and follow-up, is what turns booked revenue into money in the bank. See accounts receivable automation for how to do it without hiring.
Frequently asked questions
What is accounts receivable in simple terms?
Accounts receivable is money your customers owe you for work you have already done but they have not yet paid for. It is listed as an asset because you expect to collect it, usually within your invoice terms. The faster you collect it, the healthier your cash flow.
Is accounts receivable an asset or income?
Accounts receivable is an asset on your balance sheet, not income. The income was recognised when you delivered the work and issued the invoice. Accounts receivable simply tracks the portion of that income you are still waiting to be paid for, until the customer settles the invoice.
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