FinTech Glossary

Meaning

Accounts receivable (AR) represents the money owed to a business by its customers for goods or services already delivered but not yet paid for. It is recorded as a current asset on the balance sheet.

Business Context

AR is a key indicator of a company's liquidity and credit management practices. In India, businesses track AR ageing closely to manage GST liability on invoiced amounts and to assess customer creditworthiness before extending further credit.

Key Metrics

Common AR metrics include Days Sales Outstanding (DSO), AR turnover ratio, and ageing buckets (0-30, 31-60, 61-90, 90+ days). These help finance teams identify slow-paying customers and forecast collections.

Why It Matters

Poorly managed receivables can create cash flow gaps even when a business is profitable on paper. Strong AR discipline, timely follow-ups, and clear credit policies help maintain healthy working capital.