Accounting
Accounts Receivable (AR)
Money owed to your business by customers for goods or services already delivered.
Definition
AR sits on the balance sheet as an asset. Aging schedules (how long invoices have been outstanding) and the AR turnover ratio (how fast you collect) are two of the most informative numbers in a small business — and the easiest to ignore until cash gets tight.
When It Matters
Whenever cash flow tightens, when a customer's balance starts aging, or when financing decisions depend on the strength of your receivables.
Common Questions
What's a healthy AR aging?
Industry-dependent, but generally you want very little in the 60-plus-day buckets. Each day a receivable ages, the probability of collection drops.