Accounts receivable are amounts customers owe your business for products or services they have already received but have not yet paid for.
If your business allows a customer to pay after the sale or service is completed, the unpaid amount becomes part of your accounts receivable until payment is received.
For a small business owner, accounts receivable represent money the business expects to collect from customers.
What Creates Accounts Receivable?
Accounts receivable are created when a business makes a sale or provides a service without collecting payment immediately.
For example, suppose you complete $1,500 of work for a customer and send an invoice giving them 30 days to pay.
Until the customer pays, the $1,500 is accounts receivable.
Once the payment is received, that amount is no longer outstanding.
What Can Be Included in Accounts Receivable?
Accounts receivable may include:
unpaid customer invoices
amounts billed for completed services
balances due from customers
other customer charges that have not yet been paid
The exact type of receivable depends on how the business bills its customers.
A retail business that collects payment at the time of every sale may have very little accounts receivable. A service business that regularly invoices customers may carry accounts receivable throughout the month.
Are Accounts Receivable the Same as Cash?
Accounts receivable represent money customers owe the business.
Cash is money the business has already received.
If a customer owes your business $2,000, that amount may appear in accounts receivable while the payment is still outstanding. The business receives the cash when the customer actually pays.
The timing between creating the receivable and receiving the payment can vary depending on the payment terms and the customer's payment behavior.
Why Do Accounts Receivable Change?
Accounts receivable change as customers are billed and payments are received.
A new invoice increases the amount customers owe the business.
A customer payment reduces the amount that remains outstanding.
Accounts receivable may also change if an invoice is adjusted, credited, or canceled.
The balance at any point in time reflects the amounts customers still owe the business.
What Does an Accounts Receivable Balance Tell You?
Your accounts receivable balance shows how much money customers currently owe your business.
For example, if you have three unpaid invoices for $500, $1,000, and $2,000, your total accounts receivable balance is $3,500.
That amount represents customer payments the business is still waiting to receive.
Looking at the individual receivables can also show which customers owe money and how much remains unpaid.
How Business Cash Manager Tracks Expected Customer Payments
Business Cash Manager allows you to record money you expect to receive from customers and keep those expected payments visible alongside your other cash information.
As payments are received, they can be updated to reflect what has actually come into the business.
Accounts receivable represent money customers still owe. Tracking those amounts gives you a clear record of the customer payments that remain outstanding.
