Accounts receivable (AR) is the amount customers owe your business for goods or services provided on credit. Managing it means keeping accurate balances, resolving payment questions, and following up what is due.
An invoice and a cash receipt are different events. A business may record revenue before collecting payment. Its cash planning still needs to account for when customers are expected to pay and what could delay collection.
Accounts receivable and accounts payable
Accounts receivable is money customers owe your business. Accounts payable is money your business owes suppliers. Keeping the two clear helps teams understand which balances need collecting and which bills need paying.
For example, imagine a business issues an invoice for services already delivered, with payment due in 30 days. The invoice remains open until payment or an agreed adjustment is recorded against it. The amount is an illustrative balance, not cash already available to spend.
Revenue recognition follows the accounting requirements that apply to the business. Under IFRS 15, recognition is tied to satisfying performance obligations. Collection timing is a separate question, so an unpaid invoice does not by itself mean a sale has no financial significance.
What the receivables process includes
Start with agreed terms. Confirm the customer’s billing details, purchase-order requirements, payment deadline, and accepted payment methods. Missing information can create avoidable delays before anyone starts a collections conversation.
Issue an accurate invoice at the agreed billing point. Check amounts, dates, references, and where the customer needs it sent. Record the invoice so the team can see its current status.
Track what is due. An ageing report groups open balances by how long they have been outstanding. Use it alongside payment history, disputes, and recent customer conversations to decide which accounts need attention.
Match receipts to invoices. Payment references may be incomplete, one receipt may cover several invoices, or a customer may deduct an amount. Review uncertain matches before updating the ledger.
Resolve exceptions. A short payment could reflect a discount, a dispute, a missing credit, or an error. Gather the supporting records and confirm the reason before deciding how to respond.
Why it matters for cash planning
Sales growth can increase the amount waiting to be collected. A business needs a realistic view of expected receipts alongside its upcoming payments, especially when large customers pay on different schedules.
Late payment deserves investigation. It may indicate credit risk, but it may also reflect a billing error, an unresolved dispute, or an administrative delay. The response should fit the cause and the customer relationship.
Days sales outstanding (DSO) is one way to track how long collection takes on average. Review it alongside payment terms, the age of overdue balances, and changes in sales. One average cannot explain every account or every period.
Habits that make the work easier
Keep one current record of each account’s invoices, receipts, disputes, and follow-ups. Give open questions an owner so customers receive a coordinated response.
Use reminders that are accurate and appropriate to the relationship. Check whether payment has arrived or a dispute is active before sending another request. A clear invoice reference and a useful question make the exchange easier for both teams.
Review uncertain payment matches promptly. A receipt already in the bank may still be unapplied in the records. Resolving that difference helps prevent unnecessary chasing and keeps the open balance accurate.
Set a regular review cadence based on invoice volume and the business’s needs. Track which actions resolved an issue and which accounts still need a decision. This creates a practical worklist for the next review.
Where automation can help
Software can organize records, propose matches, and prepare reminders. Evaluate how it handles missing information, exceptions, permissions, and human review. A useful workflow makes uncertain cases visible to the people who can resolve them.
Alfred for Finance starts with a consultation. The team reviews your receivables process and accounting tools, then discusses support for payment matching, collections, disputes, and cash outlooks. Begin with the part of the process that is slowing your team down.