Definition
Accounts receivable is the total amount of money owed to a business by its clients for invoices that have been issued but not yet paid. It is recorded as a current asset on the balance sheet. Managing receivables means tracking open invoices, following up on overdue ones, and keeping the collection period short.
Also called: AR, Receivables, Trade receivables
Accounts receivable in practice
Every unpaid invoice increases accounts receivable; every payment reduces it. An aging report breaks receivables into buckets by how long they have been outstanding so you can prioritize follow-up.
High receivables relative to revenue indicate slow collection and strain cash flow even when the business is profitable on paper.
Frequently Asked Questions
Is accounts receivable revenue?
Receivables arise from revenue that has been earned and invoiced but not yet collected. On an accrual basis the revenue is already recognized; the receivable is the asset waiting to become cash.