What Is Accounts Receivable (AR)?
Accounts receivable (AR) is the money customers owe a business for goods or services delivered on credit but not yet paid for. It's recorded as a current asset on the balance sheet, since it represents cash the company expects to collect, usually within 30 to 90 days.
What accounts receivable is and why it matters
Accounts receivable is the mirror image of accounts payable: it tracks what you're owed rather than what you owe. Whenever a business invoices a customer with payment terms instead of collecting cash upfront, the amount sits in AR until paid. It's one of the largest current assets on many balance sheets and a direct driver of cash flow — a company can be profitable on paper yet cash-starved if receivables pile up uncollected. Managing AR well means invoicing promptly, tracking due dates, and following up before balances age out. For an accounting firm, AR is a recurring client task tied closely to aging reports and days sales outstanding.
A worked example
A consulting firm invoices a client $12,000 on May 1 with Net 30 terms. It records: debit *Accounts Receivable* $12,000, credit *Revenue* $12,000. The $12,000 is now an asset. When the client pays on May 28, the firm records: debit *Cash* $12,000, credit *Accounts Receivable* $12,000 — the receivable clears and cash rises. If several invoices remain unpaid at month-end, their total is the firm's accounts receivable balance.
How firms handle it today
Most teams track receivables in their accounting software and a spreadsheet, manually generating aging reports and sending follow-up emails as invoices pass due. Collections often slip because the chasing is manual and easy to deprioritize.
How OCTA Flow relates to accounts receivable
OCTA Flow can run AR follow-up as a repeatable procedure — generating the aging view, drafting reminders by bucket, and logging every action for the audit trail while your team approves what goes out. It turns collections from ad-hoc chasing into a consistent workflow.
Related terms
- Accounts payable
- Aging report
- DSO
- Bad debt
- Revenue
FAQ
Is accounts receivable an asset?
Yes — it's a current asset representing cash the business expects to collect, typically within a year.
What's the difference between AR and revenue?
Revenue is income earned from a sale; accounts receivable is the portion of that revenue not yet collected in cash.
What happens if a receivable is never paid?
If collection becomes unlikely, it's written off as bad debt, reducing both accounts receivable and net income.
See how firms automate AR follow-up → start an OCTA Flow trial.