Accounts receivable (AR) is an accounting term describing money a business is owed for goods or services delivered. Accounts receivable are listed on balance sheets as current assets, even though customers who purchased goods or services on credit haven’t yet paid for them.
If you want to brush up on your business accounting knowledge, including alternative names for accounts receivable, the following information may prove helpful.
What Is Another Name for Accounts Receivable?
If you’ve been curious about whether there is another name for accounts receivable, you might be interested to know that businesses use several words to describe them.
They might call them an outstanding invoice, which means they are an invoice that has been sent to a client but remains unpaid. Some business owners might simply call them debts, receivables for short, or a line of credit.
What Does Accounts Receivable Mean?
Accounts receivable is a technical term, and it might not make sense to all business owners. It describes a business’s right to receive since they have delivered products or services.
They also represent a line of credit with payment terms, which are unique to each company. Once an invoice is sent to a customer, the business will record their accounts receivable as an asset since that customer is legally obliged to pay their debt.
Is Accounts Receivable the Same As Accounts Payable?
Accounts receivable and accounts payable are two relevant terms used in business accounting. However, they are not the same thing. Accounts payable refers to the debts owed by a business to a third party, such as a supplier. They owe money rather than being owed money.
In contrast, accounts receivable describes a business sending an invoice to a client or customer. In this situation, they are owed money rather than owing it themselves.
Why Do Businesses Have Accounts Receivable?
Many businesses utilize systems like AiViden’s AI-based receivables management solution to track their accounts receivable, but you might wonder why it’s so important that they do.
As accounts receivable are seen as current assets, analysts would refer to them as a business’s liquidity and part of its annual turnover. This would also be viewed concerning an accounts receivable turnover ratio, describing how often a company collects on its AR balance during an accountancy period.
What Happens If an Accounts Receivable Isn’t Paid?
When businesses provide products or services on credit, there is an element of risk. They are offering a line of credit with the idea that the customer will pay for what they received within a specific period.
However, that doesn’t always happen. If enough time passes, a business might choose to write the AR off as a bad debt expense. Fortunately, when you use receivables management solutions, you may be able to identify your high-risk clients and potentially reduce unpaid invoices.
Accounts receivable is a straightforward concept for any business, but it can be even more so when you rely on technology to take care of it. Now might be the right time to book a demo with AiVidens and explore the many potential benefits.