Accounts receivable
Also known as: trade receivables, AR, debtors
Accounts receivable is the amount owed to a company by its customers for goods delivered or services rendered that have been recognised as but not yet paid for in cash. It sits in the section of the , expected to be collected within twelve months. It arises because most business to business commerce runs on credit terms, typically 30 to 90 days, so a company can recognise on the well before the corresponding cash arrives, creating a timing gap that shows up as a receivable.
The figure reported is almost always net of an allowance for doubtful accounts, management's estimate of the portion of outstanding receivables that won't ultimately be collected. That makes the net receivables figure a blend of fact and judgment worth scrutiny, particularly when the allowance looks thin relative to the age and composition of the receivable book.
, accounts receivable divided by average daily , is the primary metric analysts use to assess the quality and efficiency of a company's receivables. A rising signals that customers are taking longer to pay, which can point to deteriorating customer financial health, overly aggressive , or simply poor collections discipline.
The relationship between and receivables growth is one of the most watched signals in analysis. A company booking faster than it's collecting cash may be pulling forward recognition, offering extended terms to close deals, or in more serious cases recording that aren't yet earned, all of which eventually unwind and create pressure on both the and the .
Financial data sites often add accounts receivable and , such as tax refunds due, into a single total receivables line.