Accounts receivable
Also called: AR
Accounts receivable is the money customers owe a business for goods or services already delivered but not yet paid for.
Accounts receivable, often shortened to AR, is the total a business is owed by customers who have bought on credit. When you deliver a product or finish a job and send an invoice with payment terms such as net 30, that amount becomes a receivable until the customer pays. AR appears as a current asset on the balance sheet because the business expects to collect it within a year, usually much sooner. Watching the age of your receivables shows how promptly customers pay and how much cash is waiting to come in.
Lenders view accounts receivable as both a sign of demand and a usable asset. A large, healthy AR balance from reliable customers can support financing, since those invoices represent near certain future cash. Some products lend directly against receivables: invoice factoring and accounts receivable financing turn unpaid invoices into cash now rather than waiting weeks or months. An underwriter will study the age and concentration of your AR, because invoices that are months overdue or owed by a single shaky customer carry more risk than a spread of current, dependable accounts.
Common questions
Can I use my unpaid invoices to get financing?
Yes. Invoice factoring and accounts receivable financing let you draw cash against invoices customers have not paid yet. The amount you can access usually depends on the size, age, and reliability of those receivables, so a clean AR ledger from steady customers works in your favor.
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