Accounts receivable is the flipside of accounts payable. You've done the work, sent the invoice, and now you're waiting to get paid. That outstanding amount is AR — an asset on your balance sheet because it represents real money coming in.
Why AR days outstanding matters
One of the most useful AR metrics is DSO — Days Sales Outstanding. It tells you, on average, how long it takes customers to pay after you invoice them. A DSO of 22 days means you're collecting fast. A DSO of 60+ days means cash is sitting in invoices instead of your bank account, which creates real cash flow problems even if your revenue looks healthy.
Greg Crabtree's Simple Numbers framework targets a DSO of 30 days or under for most small businesses. If you're consistently above that, your invoicing, follow-up process, or payment terms need attention.
AR in cash-basis bookkeeping
On cash-basis accounting, income is recorded when you receive payment — not when you send the invoice. So AR doesn't appear as a formal line item in your P&L. But tracking what's outstanding is still essential for cash flow planning, even if it doesn't hit your books until the check clears.
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