What is Accounts Receivable (AR)?

Accounts Receivable (AR), or "Receivables," is the money owed to a company by its customers for goods or services that have been delivered but not yet paid for. It is recorded as a current asset on the company's balance sheet.

For Startups: Managing Accounts Receivable is vital for cash flow. For B2B startups that sell to large enterprises, payment cycles can be long (60-90 days), tying up significant amounts of cash. A high AR balance means the startup has revenue on paper but not cash in the bank, which can lead to a working capital crisis. Efficiently collecting receivables is a key finance function.

Example: A software development agency completes a project for a client and sends an invoice for ₹5 Lakhs with a 30-day payment term. This ₹5 Lakhs is recorded as Accounts Receivable until the client pays the invoice.