Accounts Receivable

By Entrepreneur Staff

Accounts Receivable Definition:

The money due from all customers for merchandise or services delivered on credit. The total figure would be shown on the balance sheet as an asset

If you plan to sell goods or services on account in your business, you'll need a method of tracking who owes you how much and when it's due.

Here are five key components of a good accounts receivable system:

1. Verify accounts receivable balances. Use source documents such as invoices to keep balances accurate.

2. Send accurate and timely invoices. You won't get paid until you send an accurate invoice.

3. Generate accounts receivable reports. This will help determine which customers are past due and help you track credit limits.

4. Post the paid invoices. It's important to track who pays you when.

5. Match your records. Your customer records totals must match your general ledger and sub ledgers.

More From Accounting

Cash Flow

The difference between the available cash at the beginning of an accounting period and that at the end of the period. Cash comes in from sales, loan proceeds, investments and the sale of assets and goes out to pay for operating and direct expenses, principal debt service, and the purchase of asset

Cash Flow Statement

A financial statement that reflects the inflow of revenue vs. the outflow of expenses resulting from operating, investing and financing activities during a specific time period

Cash-Basis Accounting

An accounting system that doesn't record accruals but instead recognizes income (or revenue) only when payment is received and expenses only when payment is made. There's no match of revenue against expenses in a fixed accounting period, so comparisons of previous periods aren't possible.

Accountant

A person whose work it is to inspect, keep or adjust accounts