accounting
Accounts Receivable (AR)
Accounts receivable are amounts owed to a business by its customers for goods delivered or services rendered but not yet paid for.
Definition
What it means.
AR represents revenue that has been earned but not yet collected. For businesses on net-30 or longer payment terms, staffing, trucking, construction, wholesale, AR can represent weeks or months of operating output sitting uncollected.
AR is a fundable asset: both invoice financing and invoice factoring use outstanding invoices as the basis for advancing capital. The quality of AR depends on customer credit risk, invoice age (current vs. 60+ days), and concentration, a business with 80% of AR from one customer carries more risk than one with 50 diversified customers.
Example
A staffing agency places workers this week and invoices $90K to clients on net-30 terms. The $90K is accounts receivable, cash that will arrive in 30 days but is needed today for payroll. Invoice factoring converts that $90K into same-week cash.
Now what?
Get an offer that accounts for accounts receivable (ar).
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