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Accounts receivable

What is accounts receivable?

Accounts receivable (AR) refers to the money owed to a company by its customers for goods or services sold on credit. It's an asset for the company and represents a legally enforceable claim for payment.

After a sale on credit, the company records an accounts receivable, which appears on the balance sheet as a current asset. Companies need to manage AR effectively as it affects cash flow and profitability. Strategies like timely and accurate invoicing, offering early payment discounts, and consistent follow-ups can help in efficient AR management and reduce the risk of bad debts.

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