What is accounts receivable and how do I manage it?
Accounts receivable is the money your customers owe you for work you’ve already completed or products you’ve already delivered. When you send an invoice and the client hasn’t paid yet, that amount is accounts receivable. It sits on your books as an asset until the payment arrives.
This matters because AR represents revenue you’ve earned but can’t spend. You finished the project, you sent the bill, but the cash isn’t in your bank account yet. A business can be profitable on paper and still have cash flow problems if too much money is tied up in unpaid invoices.
Managing accounts receivable starts with timely invoicing. Send invoices as soon as the work is done. Every day you wait to bill is a day added to when you get paid. Make invoices clear about what the charge covers, when payment is due, and how to pay. Unclear invoices create questions, and questions create delays. If creating and tracking invoices takes time away from your actual work, an invoicing service can handle the process so you stay focused on serving clients.
Use an aging report to track what’s outstanding. This report groups unpaid invoices by how long they’ve been open. Current, 1-30 days past due, 31-60 days, and so on. Review it weekly. An invoice that’s two weeks old needs a gentle reminder. One that’s 60 days old needs a direct conversation. The aging report shows you exactly where to focus so nothing slips through.
Follow up consistently. Most late payments happen because people get busy, not because they’re avoiding you. A friendly email at 7 days past due catches most of these. A phone call at 30 days handles the rest. Build a system for these reminders so they happen automatically rather than relying on memory.
You can also shorten the cycle by adjusting payment terms. Net 15 gets you paid faster than Net 30. Accepting credit cards and ACH payments removes friction that might slow down a check. Some businesses offer a small discount for early payment, which can make sense when cash flow is tight.
Keeping your books organized makes all of this easier. When your small business bookkeeping Long Island is up to date, your aging reports are accurate, invoices are tracked, and you can see at a glance who owes what. Without that foundation, managing receivables becomes guesswork.
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