What are accounts receivable?
Accounts receivable refers to money owed to a business by customers for goods or services delivered but not yet paid. It also refers to the function responsible for collecting these payments.
Why are accounts receivable important?
Receivables directly affect cash flow. Delayed payments reduce available cash, which impacts operations. Effective receivables management ensures timely collection.
How do accounts receivable work?
After a sale, a business issues an invoice with payment terms. The amount is recorded as receivable until payment is received and the balance is cleared.
What does an accounts receivable team do?
The team issues invoices, tracks outstanding balances, follows up on late payments, and reconciles incoming funds with invoices.
What is the difference between accounts receivable and revenue?
Revenue represents earned income. Accounts receivable represents unpaid revenue which has not yet been collected.