Accounts Receivable (AR)
Cash you've earned but not yet collected - real revenue that ties up working capital until customers actually pay.
- Term
- Accounts Receivable (AR)
- Is
- Money owed to you for delivered goods/services
- On the
- Balance sheet, as a current asset
- Watch
- DSO — how long customers take to pay
Forms & parts of speech
Definition in plain terms
Accounts receivable (AR) is the money customers owe a business for products or services it has already delivered but not yet been paid for.
When a company makes a sale on credit terms - deliver now, pay in 30 or 60 days - it records the revenue and an account receivable, an asset representing cash it has earned but not yet collected.
AR sits on the balance sheet as a current asset, and the speed at which it converts to cash (measured by days sales outstanding, DSO) directly affects the company's cash position.
Why it matters to growth
Accounts receivable is where revenue and cash diverge, and growth makes the gap bigger. Under accrual accounting, a sale is booked as revenue immediately, but the cash arrives only when the customer pays
so rising AR means revenue on paper that is stuck as cash owed, tying up working capital. Fast growth amplifies this: more sales on credit terms means more cash locked in receivables, which can strain a growing company's cash even as its income statement looks healthy.
Days sales outstanding (DSO) measures how long customers take to pay; a rising DSO is a warning that cash is being consumed by the receivables book.
The discipline is watching AR and DSO as part of the cash picture - because growth that piles up uncollected receivables can drain runway even while profit looks strong.
Each sale was booked as revenue immediately under accrual accounting, but the cash only arrived sixty days later when customers actually paid, so the rapid growth piled up a large and rising accounts-receivable balance: real revenue earned, but stuck as cash owed rather than cash in the bank.
Days sales outstanding crept up, a warning that more and more cash was being tied up in the receivables book. The company recognizes that its growth was consuming working capital - the faster it sold on credit, the more cash was locked in AR, straining runway even as profit looked healthy.
It manages the receivables deliberately: tracking DSO as part of the cash picture, tightening collections, and considering terms and incentives that pull cash in faster.
The lesson is the gap accounts receivable embodies: revenue on the income statement isn't cash in the bank until the customer pays, and fast growth on credit terms can drain cash even while the P&L celebrates.
and reading the income statement without watching the working capital that growth consumes.
Formula
Benchmarks
Acceptable DSO depends on industry and terms; the signal is the trend - rising DSO ties up more cash.
Ranges are illustrative; every published figure is cited from a named public source or labelled “RGM analysis.”
Synonyms & antonyms
Synonyms
Antonyms
Origin & history
Accounts receivable is a core working-capital account in accrual accounting, recording revenue earned but not yet collected; its conversion speed (days sales outstanding) is a classic cash-flow lever, and rising AR is a perennial way fast growth ties up cash even as profit looks healthy.
Etymology: source.
Usage trends
Search interest for this term over the last five years:
Common questions
- What is accounts receivable?
- The money customers owe a business for goods or services already delivered but not yet paid for — an asset representing cash earned but not yet collected.
- Why does AR matter for cash flow?
- Because under accrual accounting a sale is booked as revenue immediately, but the cash arrives only when the customer pays — rising AR means revenue on paper tied up as cash owed.
- What is days sales outstanding (DSO)?
- A measure of how long customers take to pay; a rising DSO warns that cash is being tied up in the receivables book and can strain runway.
Related tools & calculators
Resources & people to follow
- referenceWikipedia — accounts receivable
- referenceWorking-capital and SaaS-finance practice
- referenceRGM analysis — booked revenue isn't cash until collected; watch AR and DSO as growth consumes working capital
Curated, non-competitor resources verified per term.
Related training
Disciplines
Areas of marketing where accounts receivable (ar) is a core concern: