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Accounts Receivable

Accounts Receivable (Definition)​

Accounts receivable (AR) refers to the outstanding invoices a company has or the money the company is owed by its clients. It is an asset on a companys balance sheet.

Key points about accounts receivable include:

  1. Represents money owed to a company for goods or services delivered but not yet paid for
  2. Usually collected within a short time frame (e.g., 30, 60, or 90 days)
  3. Impacts a companys cash flow and working capital
  4. Can be used as collateral for loans or sold to factoring companies
  5. Requires effective management to ensure timely collection and minimize bad debts
  6. Often managed through an accounts receivable process, which may include invoicing, follow-ups, and collections Proper management of accounts receivable is essential for maintaining healthy cash flow and financial stability.