Accounts Receivable (AR)

Accounts receivable (AR) is the total amount of money clients owe you for work you've completed but haven't been paid for yet. On a balance sheet, AR sits under current assets because it's expected to convert to cash within a billing cycle — usually 15 to 60 days depending on your payment terms.

For freelancers and agencies, AR is one of the most important numbers to watch. High AR relative to revenue means you're doing work but not collecting money fast enough. This creates cash flow gaps where you might struggle to cover operating costs even though you're technically profitable on paper.

The age of your receivables matters as much as the total. An invoice that's 7 days old is normal. One that's 90 days old is a problem. Most accounting systems break AR into aging buckets: current, 1-30 days overdue, 31-60, 61-90, and 90+. The longer an invoice stays unpaid, the less likely you are to collect it.

To keep AR healthy: set shorter payment terms (Net 15 instead of Net 30), request deposits before starting work, send invoices immediately upon delivery, and automate payment reminders. Tools like PropCraft send automatic reminders before and after due dates, which measurably reduces overdue invoices.

Related terms: accounts payable (the opposite — what you owe vendors), net terms (the payment window), and invoice discounting (borrowing against your AR).