How to Calculate Accounts Receivable
What is Accounts Receivable?
Accounts receivable (AR) represents money owed to a company by customers for goods or services already delivered but not yet paid for. Managing AR efficiently is critical for cash flow — slow-paying customers create working capital pressure.
Step-by-Step Guide
- 1When a sale is made on credit, AR increases by the invoice amount
- 2When the customer pays, AR decreases and cash increases
- 3Ageing analysis: bucket AR by how overdue each invoice is (30, 60, 90+ days)
- 4The older a receivable, the less likely it is to be collected
Worked Examples
Input
Invoice £5,000 · 30-day terms · Customer pays on day 45
Result
15 days overdue — flag for follow-up
DSO = 45 days for this customer
Ready to calculate? Try the free Accounts Receivable Calculator
Try it yourself →