Accounts receivable is money that is owed to a business for products or services it provides for its customers on credit and is treated as a credit on a businesses budget. Regardless of the type of industry a business is in it will have accounts receivable.
Anytime that customers buy a service or product from a business but do not pay for that good or service at the time of the transaction it is considered accounts receivable and has an accounts receivable attached to it. Despite how the accounts receivable invoice is sent to a customer whether it is included in the purchase or mailed at a later time it is recorded by the business as bookkeeping process to ensure that the owed amount does not get overlooked.
Larger businesses may have entire departments dedicated to accounts receivable while smaller ones can have just one employee responsible for the task. Despite the size of the business establishing an accounts receivable system is usually fairly easy to do and can be done on either a ledger book or on a computer software program. The most important aspect of any accounts receivable system is accurate data entry. This data should be recorded at the time the sale is made and again when the customer pays and businesses should evaluate both on a daily basis.
Each month the accounts receivable ledger should be reconciled and is done so by taking the beginning accounts receivable total for the month, adding any charged sales to that number, then subtracting any payments made that month from the final accounts receivable total, and the balanced amount becomes the new posted accounts receivable total for the next month.
Accounts receivable are considered assets rather than liabilities due to the fact that will be placed in the business. In some cases businesses will charge interest and late fees to those who do not pay their bill in a timely manner.