Here’s a basic accounts receivable definition: it’s the business function that deals with tracking and collecting all the money your company is owed. Ever sold a product or provided a service for which you weren’t paid in full at the time of the transaction? That’s accounts receivable.
Strictly speaking, any product or service for which you invoice a client would match our accounts receivable definition. This function sounds simple, but don’t underestimate it; accounts receivable offers ample opportunities for improved performance and enhanced cash flow.
Some background on our accounts receivable definition
Let’s define accounts receivable in a little more detail. It encompasses all the processes and activities that take place between the creation of an invoice for goods or services sold, and the collection of the funds from that invoice. But it’s difficult to define accounts receivable without acknowledging the dependence upon and relationship with customer order management on the front end, fulfillment or delivery services, and accounting, collections, and cash management on the back end. And don’t forget customer relationship management, which oversees all interactions with customers.
