Accounts receivable is a financial term used to describe the amount of money that is owed to a company for products or services that have been sold on credit. This money is typically owed by customers who have not yet paid their bills.
When a company has accounts receivable, it means that it is owed money by its customers. The company will often track this money using a special accounts receivable ledger. This ledger will list all of the customers who owe money to the company, as well as the amount that they owe.
There are a few different ways that a company can collect on its accounts receivable. One common way is to send a bill to the customer and ask them to pay. The company may also use a collections agency to try and get the money back. If the company is unsuccessful in collecting the money, it may have to write off the account as a loss.
Accounts receivable can be a very important part of a company’s financial health. In some cases, the amount of money that is owed to a company can be more than its total assets. This means that the company would not be able to pay its bills if it tried to sell all of its products and services immediately.
However, if a company can collect on its accounts receivable, it will have more money available to use for other purposes. This money can be used to invest in new products or to pay down debts.
It is important for companies to keep track of their accounts receivable and to make sure that they are collecting on as much money as possible. The team at Bookkeeping for Contractors will improve your financial health and ensure that it is able to continue operating successfully.
The accounts receivable process is the financial procedure that a company uses to track and manage its outstanding invoices. This process begins when a customer orders goods or services from a company and ends when the company receives payment from the customer. In between, the company must track which invoices are outstanding, assess late fees and interest charges, and work to collect on the invoices.
The accounts receivable process is important for a company because it helps ensure that it receives payment for the goods or services that it sells. It also allows the company to assess late fees and interest charges on overdue invoices, which can help it recover some of the money that is owed to it. Finally, the process helps the company to keep track of its accounts receivable balance, which is the total amount of money that it is owed by customers. This information can help the company make better decisions about its finances and cash flow.