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Accounts receivable A/R
Also called AR, receivables, trade receivables.
Money customers already owe for work delivered but not yet paid for; the asset that factoring, A/R financing and asset-based lines are built on.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
A receivable exists from the moment you invoice a customer who buys on terms. Until payment arrives it sits on the balance sheet as a current asset with two properties a funder cares about: its age, measured from invoice date, and its debtor, meaning who actually owes the money.
Receivables are the most financeable asset a small business owns because they are self-liquidating. The collateral pays itself off, and it does so on the credit of your customer rather than yours. That is why a small subcontractor billing a national retailer can raise money against those invoices on better terms than its own balance sheet would support.
Funders measure a ledger three ways: aging (how much sits in each 30-day bucket), dilution (how much of what you bill never converts to cash, because of credits, returns, short pays and disputes), and concentration (how much of the ledger sits with one debtor). All three affect how much of the face value you can borrow against.
Receivables are not the same thing as revenue. Revenue is recognized when earned; a receivable is the unpaid remainder. A business can be profitable on paper and unable to make payroll because its receivables are all sitting in the 60-day bucket.
Where this one catches people
Not all receivables are financeable. Funders routinely exclude invoices past a stated age, invoices to affiliates or related parties, progress bills for work not yet completed, consignment and guaranteed-sale arrangements, COD sales, and anything with a contra account, offset or open dispute. A 400,000 ledger can produce far less than 400,000 of eligible collateral, and the ineligibility rules sit in the schedule, not the headline term sheet.
Worked through
A ledger shows 400,000 outstanding: 250,000 under 30 days, 90,000 at 31-60, 40,000 at 61-90 and 20,000 over 90. If the agreement makes anything over 90 days ineligible and caps a single debtor at 25 percent of the ledger, the over-90 bucket plus the excess concentration comes out before any advance rate is applied to what remains.
Figures in the example are illustrative. They show the arithmetic, not a quote — what any one lender would charge is on that lender's page, where it is published at all.
Where you will meet this term
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Accounts receivable — common questions
What does accounts receivable mean?
Money customers already owe for work delivered but not yet paid for; the asset that factoring, A/R financing and asset-based lines are built on.
Where does accounts receivable catch people out?
Not all receivables are financeable. Funders routinely exclude invoices past a stated age, invoices to affiliates or related parties, progress bills for work not yet completed, consignment and guaranteed-sale arrangements, COD sales, and anything with a contra account, offset or open dispute. A 400,000 ledger can produce far less than 400,000 of eligible collateral, and the ineligibility rules sit in the schedule, not the headline term sheet.
Is accounts receivable the same as an interest rate?
Accounts receivable is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does accounts receivable apply to?
Working Capital, Invoice Financing, Asset-Based Lending.
Is there a worked example of accounts receivable?
Yes, on this page, and it is labelled illustrative. It shows the arithmetic, not a quote from any lender.
What else should I read alongside accounts receivable?
Accounts receivable financing, Advance rate, Aging report, Borrowing base, Concentration.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.