Glossary

What is accounts receivable?

Accounts receivable is money customers owe you for work already delivered. Learn how it works, how to track it and what a healthy balance looks like.

Updated Nov 5, 2026 · By PayToMe Editorial

Accounts receivable is the money your customers owe you for goods or services you have already delivered and invoiced but not yet been paid for. Every unpaid invoice is part of your accounts receivable. It counts as an asset until the customer pays.

How it works

When you finish a job and send an invoice, you have earned the money but you do not have it. That gap is accounts receivable. It stays on your books until the customer pays, you write it off, or you issue a credit.

Businesses track receivables in three ways:

A running total. Add up every unpaid invoice. This is your receivables balance.
An aging report. It sorts unpaid invoices by how overdue they are, so you can see which ones need a call.
A speed measure. Days sales outstanding shows how long, on average, it takes you to collect.

The mirror image is accounts payable, which is money you owe your own suppliers. Cash flow gets tight when receivables are slow and payables are due.

A high receivables balance is not always a problem. If every invoice is current and customers pay on time, it is just work in progress turning into cash. The risk is a balance that keeps growing while old invoices sit unpaid. Some of those may become bad debt.

Example

A web designer sends three invoices in October.

October receivables

Invoice	Amount	Due date	Status on Nov 10
INV-101	$1,200.00	Oct 15	Paid
INV-102	$2,500.00	Oct 31	Unpaid, 10 days late
INV-103	$800.00	Nov 20	Unpaid, not yet due

Accounts receivable on Nov 10 = $2,500.00 + $800.00 = $3,300.00. Only $2,500.00 of that is overdue.

If INV-102 is 10 days late with a 1.5 percent monthly late fee in your terms, you can estimate the charge with the late fee calculator.

Keeping receivables healthy

Send invoices the same day the work is finished.
State the due date and payment terms clearly on every invoice.
Offer an online payment option so paying takes one click.
Review your aging report weekly.
Follow up on a schedule instead of waiting until you are worried.

You can create a clear invoice with the free invoice generator. PayToMe is in public beta: you can create invoices, send them by email and track what is unpaid in the app. Smart reminders and a cash-flow forecast are in development. To start, sign in to PayToMe.

Aging report: receivables sorted by how late they are.
Days sales outstanding: the average time it takes to collect.
Accounts payable: what you owe your suppliers.
Bad debt: receivables you do not expect to collect.

Frequently asked questions

Is accounts receivable an asset or a liability?

It is an asset. Accounts receivable is money you expect to collect, so it appears under current assets on the balance sheet until the customer pays.

What is the difference between accounts receivable and revenue?

Revenue is what you earn by delivering work. Accounts receivable is the part of that revenue you have not been paid for yet. Cash arrives only when the receivable is collected.

How can a small business reduce accounts receivable?

Invoice the day the work is done, use short payment terms, take deposits on large jobs, make paying easy with a link, and follow up on late invoices on a set schedule.