Simple Tips by SASA

Accounts Receivable: Definition, examples and tips for beginners ⚖️

Simple accounts receivable definition:

For a self-employed person, "accounts receivable" is the money clients owe you for work you’ve done but haven’t been paid for yet. It’s just unpaid invoices that you’re waiting to receive, and it’s good to keep track so you know what money is coming in soon.

They are the opposite of Accounts Payable

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Key Take Aways about accounts receivable & Invoices

Accounts receivable (AR) is money you're waiting to receive for products or services that you have already provided
AR is an asset because it represents incoming cash for the company.
The opposite of AR is Accounts Payable, which is money the company owes but hasn’t paid yet.

Yes, so when you send an invoice to a client, it becomes part of your accounts receivable. It represents money you’re owed for the work or services you’ve provided, and you’ll keep it as accounts receivable until the client pays.

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Tips: Managing Accounts Receivable

Organize Invoices Carefully: Keep track of all client invoices in one place with digital tools to monitor unpaid invoices and due dates.
Set Clear Payment Terms: Define specific payment terms (like 30 days) on each invoice so clients know when payment is expected.
Send Friendly Reminders: Remind clients of upcoming or overdue payments politely to keep payments on track without straining relationships.

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Improving Cash Flow with Accounts Receivable

Request Deposits for Large Projects: Asking for an upfront deposit on big jobs helps cover initial costs and ensures a steady cash flow.
Offer Early Payment Discounts: Small discounts for early payments can motivate clients to pay faster, giving you more immediate cash.
Follow Up Promptly on Overdue Payments: Reach out as soon as payments are overdue to prevent long delays and improve your chances of getting paid on time.