Accounts Receivable
Money owed to a company by its customers — a current asset that directly affects cash flow.
Accounts receivable (AR) represents amounts owed to a company by customers for goods or services delivered but not yet paid for. It appears as a current asset on the balance sheet.
AR management directly impacts cash flow. Revenue is recognised when an invoice is issued (under accrual accounting), but cash doesn't arrive until the customer pays. The gap between invoicing and collection — measured by Days Sales Outstanding (DSO) — determines how much working capital is tied up in receivables.
Effective AR management includes clear payment terms (net 30, net 60), timely and accurate invoicing, systematic follow-up on overdue accounts, credit assessment for new customers, and escalation procedures for delinquent accounts.
An aging analysis — categorising receivables by how overdue they are (current, 30 days, 60 days, 90+ days) — is the primary tool for monitoring AR health. A growing proportion of overdue receivables signals collection problems that will eventually hit cash flow.
Related Terms
Money a company owes to suppliers and vendors — a current liability on the balance sheet.
Current assets minus current liabilities — a measure of short-term liquidity and operational efficiency.
A report showing how cash moves in and out of a business across operating, investing, and financing activities.
Further Reading
Revenue looks good but cash is always tight? Learn why Malaysian SMEs face cash flow problems and 5 proven strategies to fix them for good.
A practical guide to the financial KPIs that give CFOs real-time visibility into business health across global operations.