If you’ve ever wondered about what an Accounts Receivable department does, it is helpful to understand some of the terminology used in the A/R function. To that end, we’ve included a list of just a few of them here, along with their definitions:
Accounts receivable: A collection of a company’s outstanding invoices that have yet to be paid by the company’s customers.
Accounts receivable aging report: A financial report showing how long invoices from each customer have been outstanding.
Bad debt: Any debt that is delinquent and has been written off as being uncollectible.
Balance sheet: A financial statement that shows a business’s current financial condition, with assets on the left side and liabilities and net worth on the right side.
Debt instrument: Future payment or series of payments, or a debt that one party owes to another party. Also known as income streams or cash flow instruments.
Income stream: A future payment or series of payments, or a debt that one party owes to another party. Also known as a debt instrument or cash flow instrument.
Invoice: An itemized statement furnished to a purchaser by a seller. It typically details the price of goods or services and the terms of sale.
Payee: A person or business that has the right to receive a payment or series of payments. Also called the seller or client.
Payor: A person, company, or government responsible for making payments on an income stream.
Trial balance: A debit and credit worksheet showing the financial condition of the business at the period stated.
Verification: The process of verifying the truthfulness of the invoice value from the customer.
While these are just a few of the more common Accounts Receivable terms, knowing how to properly use them when discussing this aspect of an organization’s accounting function will also help you better understand the A/R process.
There is no question that Accounts Receivable is an essential part of any business. If you are looking for someone to help you with your company’s Accounts Receivable, please contact us at Techeon. Our experience and skill in all areas of accounting can keep your business in balance.