Accounts receivable represent convertible assets owed to the company. That is, they describe a financial resource that can be converted to cash in the near future, once the customer has paid. An asset is any resource that provides monetary value to a business. It can help the business produce economic value and can be converted to cash.
Assets are usually classified into one of two categories—current and non-current. Current assets refer to those that are liquid, meaning they can be easily converted to cash in less than a year.
Accounts receivable are typically collected in two months or less. For this reason, they are considered a current asset or a “short-term asset.”
Accounts receivable assets will be recorded in the balance sheet for the business along with other assets.
Information in the balance sheet represents the three fundamental accounting measures: assets, liabilities, and equity. Accounts receivable will be recorded in the balance sheet along with other short-term or current assets, such as cash, cash equivalents, stock inventory, marketable securities, and prepaid expenses.
Typically, assets are listed first on the balance sheet, followed by liabilities and equity. Sometimes assets are listed in the left column, and liabilities and equity are listed on the right. In either case, the balance sheet is organized around the fundamental accounting equation, which is represented as: Assets = Liabilities + Equity. All data in the balance sheet is arranged according to these three categories.
In simple terms, it is the money that your customers owe to the business.
Generally, the IOU transactions go smoothly with the customers, and the amount due for services provided is received in time.
But there are a few tested tips that you must follow for optimizing your Account Receivables Process in the year 2020.
These tips can make the process faster that will help you to grow your business.
Record all receipts, revenue, orders, and service requests in your books as soon as they arrive.
If you distribute the invoicing work to certain staff, they will be able to organize and prioritize the tasks which need completion.
