Glossary · Finance
What is Accounts Receivable?
Definition
Accounts receivable is the money customers owe your business for goods or services you have already delivered but have not yet been paid for.
Why it matters
Accounts receivable is an asset on paper, but it does not pay your bills until it turns into cash. The longer invoices sit unpaid, the greater the risk they never will be.
A photographer has three unpaid invoices totaling $5,200: $2,000 current, $1,700 which is 20 days late, and $1,500 which is 70 days late. The oldest one is a collection risk. Following up weekly and pausing new work for that client helps recover it.
Review an aging report each month that groups invoices by how overdue they are. Deposits, clear terms, and prompt reminders all reduce what is outstanding.
Common mistakes
- !Waiting months to follow up on overdue invoices out of awkwardness.
- !Continuing to work for a client with a large unpaid balance.
Frequently asked questions
What is Accounts Receivable?
Accounts receivable is the money customers owe your business for goods or services you have already delivered but have not yet been paid for.
What mistakes do beginners make with Accounts Receivable?
Waiting months to follow up on overdue invoices out of awkwardness. Continuing to work for a client with a large unpaid balance.
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