---
title: "What Is Accounts Receivable?"
term: "Accounts Receivable"
description: "Accounts receivable (AR) is money customers owe your company for goods or services already delivered but not yet paid—recorded as an asset on the balance sheet until cash arrives."
date: 2026-07-25T00:00:00.000Z
updated: 2026-07-25T00:00:00.000Z
topics: ["venture-capital"]
source: https://venturecapitaltracker.com/glossary/accounts-receivable
---

# What Is Accounts Receivable?

> Accounts receivable (AR) is money customers owe your company for goods or services already delivered but not yet paid—recorded as an asset on the balance sheet until cash arrives.

**Accounts receivable** is the total outstanding amount customers owe you for work already performed or products already shipped.

## How it works

Enterprise SaaS and services businesses invoice on net-30, net-60, or longer terms. When finance recognizes revenue, the matching entry often increases AR until payment clears. A company with $1 million in monthly billings and sixty-day terms can carry roughly two months of sales in AR—cash lags the income statement.

Collections, credit policies, and bad-debt reserves determine how much of AR converts to cash. Startups sometimes offer annual prepay discounts to shrink AR and fund operations without debt. Venture lenders may advance against eligible receivables in asset-based facilities, though that is more common beyond early stage.

## Why it matters

- **Founders:** Rising AR without rising cash can mask a burn problem. Watch days sales outstanding (DSO)—average days to collect—and chase overdue accounts before they become write-offs.
- **Investors:** Due diligence compares revenue growth to AR and deferred revenue. A spike in AR with flat cash may signal aggressive booking or channel stuffing.
- **Operators:** Billing accuracy and dunning emails directly affect runway. Broken invoicing is a silent killer.

## Common mistake

Celebrating record revenue while AR balloons and collections slip. You are financing customers for free; eventually churn or disputes turn paper revenue into bad debt.

## Related ideas

Deferred revenue, cash conversion cycle, DSO, and working capital management.

## FAQ

### What is accounts receivable in simple terms?

It is unpaid customer invoices. You shipped the product or delivered the service and booked revenue, but the cash has not hit your bank account yet. AR sits on the balance sheet until customers pay.

### Why does accounts receivable matter?

Fast AR growth can mean strong sales—or that you are giving longer payment terms to close deals. Investors compare AR to revenue and cash burn to see if the company is effectively lending money to customers.


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Source: https://venturecapitaltracker.com/glossary/accounts-receivable