Accounts Receivable Management

Accounts receivable (AR) refers to the balance of money a business owes its customers for goods or services delivered but not yet paid for. Here are some key points about accounts receivable:

Definition:

• AR represents the amount of credit sales not collected in cash.
• When a business sells on credit, it issues an invoice to the customer but does not receive immediate payment at the point of sale.
• Accounts receivable are listed as current assets on the balance sheet.

Importance:

• Managing accounts receivable is crucial for maintaining healthy cash flow.
• Late payments from customers can lead to liquidity problems.
• Calculating the accounts receivable turnover ratio helps monitor late payments and ensures they don’t become problematic.

Remember, effective accounts receivable management ensures timely payments and contributes to the financial health of your business!