Accounts receivable
Accounts receivable is the total money customers owe your business for goods or services already invoiced but not yet paid.
Accounts receivable, often shortened to AR, is the money your customers still owe you. Every time you send an invoice and wait to get paid, that amount sits in accounts receivable. It's a core measure of your business's short-term financial health, because money you're owed isn't money in the bank until it's collected.
What it means
Accounts receivable represents sales you've made on credit, where the customer agreed to pay later. On a balance sheet, AR is an asset, since it's value the business expects to receive.
Managing AR well means getting invoices out promptly, setting clear payment terms, and following up on overdue balances. The longer money stays in receivables, the more it can strain your cash flow, even if your business is technically profitable on paper.
Why it matters
AR directly affects whether you have cash to run the business day to day.
- It shows how much revenue is tied up waiting to be collected
- High or aging receivables can signal cash-flow problems
- Tracking AR by due date ("aging") highlights which invoices need chasing
- Faster collection means more working capital available now
Example
You've sent three invoices this month totaling $4,000 and none are paid yet. Your accounts receivable is $4,000. As clients pay, that balance drops and the cash moves into your bank.
Platybooks's dashboard surfaces this at a glance, showing your outstanding total, what's overdue, and what was paid this month, so you always know how much is still owed.
Frequently asked questions
What is the difference between accounts receivable and accounts payable?
Accounts receivable is money owed to you by customers, while accounts payable is money you owe to suppliers and vendors. Receivable is an asset; payable is a liability.
Is accounts receivable an asset?
Yes. Because it represents money the business expects to collect, accounts receivable is recorded as a current asset on the balance sheet.
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