Accounts Receivable

Money owed to a business by its customers for goods or services delivered on credit.

Accounts receivable (AR) is the total amount customers owe a business for sales made on credit. It is recorded as a current asset because it is expected to be collected, usually within a short period.

Managing AR well — invoicing promptly, tracking due dates and following up on overdue payments — is essential for healthy cash flow. Ageing reports group receivables by how overdue they are.

• A current asset: money customers owe you.
• Tracked with ageing reports and payment reminders.
• Faster collection improves cash flow.