Accounts Receivable

Money on paper, not in your bank — until your customers actually pay.

Definition

Accounts receivable (AR) represents money owed to your business by customers for goods or services delivered but not yet paid for. It appears as a current asset on your balance sheet.

Why It Matters

The average SMB has 25% of its revenue tied up in accounts receivable at any time. For a $5M business, that's $1.25M sitting in other people's bank accounts. High AR means your P&L looks healthy but your bank account doesn't.

Key metrics to track:

  • Days Sales Outstanding (DSO): Average number of days to collect payment. Lower is better.
  • AR Aging: How much is current, 30 days, 60 days, 90+ days past due.
  • Collection rate: Percentage of invoiced revenue actually collected.

How to Improve AR

  • Shorten payment terms from Net 60 to Net 30
  • Offer 2% early payment discounts (2/10 Net 30)
  • Automate invoice reminders at 7, 14, and 21 days
  • Require deposits for large projects

How CentSight Helps

CentSight tracks your AR in real time, shows aging breakdowns by customer, and alerts you when receivables are trending late. Ask: “Who owes us the most right now?” or “Which customers consistently pay late?”

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