What is an Accounts Receivable?

Accounts receivable, or A/R, is an accounting term that means the detailing of transactions with the billing of customers who owe money to an organization after the purchase of goods and services. With most businesses, customers will typically get an invoice that details the transaction and the time frame in which the invoice must be paid. The invoice is usually mailed through the post office or sent via electronic mail.

One of the typical time frames for payment is called Net 30. Net 30 means that the payment for the invoice is due 30 days from the date printed on the document. There are other common payment terms which are Net 45 or Net 60. These are just examples but any time period could be used if both the business and customer agree on the time frame.

Marking the transaction of a particular customer or client can be a simple task but the process of maintaining the records of all transactions and payments received can actually be a full time position. A typical practice among many industries is the receipt of payments up to 10-15 days after the due date has been reached. These standards are established due to particular industry standards or a policy within a type of corporation or it could be because of the financial position of the client.

When detailing a company’s balance sheet, the account receivable number is the amount that customers owe the company. This is a good way to know what your projected revenue will be.

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Read more on Accounts receivable, Invoice, Abc Communications at Wikinvest
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