Accounts Receivable (AR)
Also known as: AR, A/R, Receivables
Accounts receivable is money customers owe you for work already delivered but not yet paid for.
What it actually means
Receivables are revenue you have earned and have not collected. On an accrual basis they appear as an asset on the balance sheet and as revenue on the P&L, which is why a strong profit month can coincide with a thin bank balance. The number that matters is aging — how long invoices have been outstanding, grouped into current, 30, 60, and 90-plus days. Invoices past sixty days collect at steadily worse rates, so the practical work is follow-up rather than accounting: invoicing promptly, stating terms clearly, chasing consistently. Bookkeeping's job is making the aging report accurate enough to act on.
You invoice $6,500 on net-30 terms; until it is paid, that $6,500 is accounts receivable, not cash.
For a service business billing on terms, the aging report is a to-do list. Two invoices sitting at ninety days often explain an entire cash squeeze, and nobody notices until somebody runs the report.
Related terms
Accounts payable is money your business owes suppliers and vendors for goods or services already received but not yet paid for.
A cash flow statement tracks the actual money moving in and out of your business over a period, separate from profit on paper.
A balance sheet is a snapshot of what your business owns, what it owes, and what is left over for the owners on a specific date.
Cash accounting records money when it moves; accrual accounting records it when it is earned or owed, regardless of when it is paid.
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