Accounts Receivable
Accounts receivable is money owed to your business by customers.
Accounts receivable (AR) is the total of all unpaid customer invoices — an asset on the balance sheet representing cash you expect to collect. Managing AR means invoicing promptly, following up on overdue accounts, and watching the average days to collect. Growing AR without growing collections is a classic cash flow trap.
Example
A design agency's accounts receivable stands at $48,000 across 12 unpaid invoices.
Related terms
Frequently asked questions
Is accounts receivable an asset?
Yes — it represents money customers owe you, so it sits on the asset side of the balance sheet. But it only becomes cash when collected, which is why AR management matters.
How do I reduce days sales outstanding?
Invoice immediately on delivery, use clear payment terms, offer early payment discounts, automate reminders, and follow up the day an invoice goes overdue. Each of these shaves days off collection time.
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