Browsing: Accounts Receivable

Accounts Receivable (AR) represents the outstanding payments a business is owed by its customers for products or services already delivered. When a company sells goods on credit, it issues an invoice with a due date, and the amount owed becomes part of its accounts receivable. This is considered a current asset on the balance sheet because it reflects cash that is expected to be collected within a short period, typically 30 to 90 days.

Managing AR effectively is essential for maintaining a healthy cash flow. Delays in collecting payments can impact a company’s ability to cover operating expenses, invest in growth, or meet financial obligations. Businesses often use strategies like offering early payment discounts, setting clear credit policies, and sending timely reminders to ensure customers pay on time and reduce the risk of bad debt.