In short
- Accounts receivable (AR) is money customers owe for delivered goods or services.
- It’s recorded as a current asset on the balance sheet.
- AR is created when you invoice on credit terms (e.g. Net 30) rather than collecting upfront.
- Managing AR well means collecting it quickly — measured by DSO.
Accounts receivable, defined
Accounts receivable (AR) represents the unpaid invoices a business is owed by its customers. Because the company expects to collect that money, AR is recorded as a current asset on the balance sheet.
AR exists whenever you sell on credit — delivering goods or services first and invoicing the customer to pay later on terms such as Net 30.
How accounts receivable works
The cycle is straightforward: you deliver, you invoice, the invoice becomes a receivable, and the receivable is cleared when the customer pays and the payment is applied. Until then it sits as an open balance.
The health of AR is judged by how quickly it converts to cash — tracked with DSO and an aging report.
Why accounts receivable matters
Receivables are often one of the largest assets on a company’s balance sheet, and slow collection ties up cash that could fund operations. Disciplined collections and fast cash application keep that asset liquid.
Read more on accounts receivable automation and where to start.
Frequently asked questions
What's the difference between accounts receivable and accounts payable?
Accounts receivable is money owed to you by customers (an asset). Accounts payable is money you owe to suppliers (a liability).
See Welldun work on your ledger
Welldun chases overdue invoices across email, WhatsApp, and voice, and applies incoming cash to the right invoices automatically — so your DSO falls without the manual chase.
Book a demoRelated terms
DSO · AR aging · Cash application · Order-to-cash · Browse the full glossary →