Accounts Receivable

What is accounts receivable?

Accounts receivable (often abbreviated as AR) represents the money your clients owe you. Every time you send an invoice for work you've completed, that unpaid amount becomes part of your accounts receivable until the client pays.

For contractors and service providers, accounts receivable is essentially your list of outstanding invoices—money you've earned but haven't collected yet.

Why accounts receivable matters

Tracking accounts receivable helps you:

• Manage cash flow — Know how much money to expect and when
• Follow up on late payments — Identify overdue invoices quickly
• Understand your financial position — AR is an asset on your balance sheet
• Spot problem clients — See patterns of late or missed payments
• Plan ahead — Make informed decisions about taking on new work

Managing accounts receivable effectively

The faster you convert accounts receivable into actual cash, the healthier your business. Send invoices promptly, set clear payment terms, and follow up on overdue payments consistently. Many businesses use invoicing software to automate reminders and track payment status.