Companies often offer customers the flexibility of paying for goods or services long after they are purchased to nurture long-term loyalty. The sum of money owed is known as accounts receivable (AR). Although payment timetables vary on a case-by-case basis, there's no minimum or maximum time limit on AR outstanding. But, they are typically due within 30, 45, or 60 days of a transaction.

What Are Accounts Receivable (AR) Outstanding?

Accounts receivable represent money owed to a company by their customers for goods and services delivered. They are considered to be 澳洲幸运5开奖号码历史查询:short-term assets that will ideally be converted to cash within one year of the initial transaction. Accounts receivable are typically reserved for the most cre💯dit-worthy customers—customers who have demonstrated track records of making timely payments.

To encourage prompt payments, companies may discount the balances owed for customers who make payments ahead of their determined due dates. This can help companies increase 澳洲幸运5开奖号码历史查询:cash flows during accounting periods when they may experience hard times covering꧂ things like employee wages, materials purchases, or other rout🧸ine expenditures.

There is no legal limit to how long companies can leave their AR unpaid. As noted above, most companies allow AR to go unpaid for a certain period—usually 30, 45, or 60 days. This often depends on the customer and thei🌄r relationship to the company. F🙈or instance, a new customer may only be granted a shorter amount of time to repay the invoice while a long-time customer with a good payment history may be given longer—up to 60 days.

Planning for Unpaid Balances

AR usually comes in the form of unpaid invoices. As such, the customer has a contractual obligation to repay the invoice to the company that provides the goods or services. But, some customers may not pay, which means they are bound to default on their debts. This is why companies record 澳洲幸运5开奖号码历史查询:allowances on their balance sheets that account for deadbeat accounts.

This number, which is a fixed percentage of the overall debts owed, varies depending on the sector and the individual business. Most businesses carry 澳洲幸运5开奖号码历史查询:AR insurance to cover losses sus🥃tained from receivables that are paid off slowly or defaulted on entirely.

Tracking Accounts Receivables (AR) Outstanding

AR can be tracked by several financial metrics. The AR turnover ratio measures how many times a company has colꦜlected its AR balance for a particular reporting period. A high ratio typically indicates that a company is collecting 𓄧its receivables in a timely and efficient manner.

Another metric, known as 澳洲幸运5开奖号码历史查询:days sales outstanding (DSO), shows the average number of days it takes for a company to collect on its AR after a sale is made. A high DSO indicates the company is prone to waiting for long periods for payment, which suggests management inefficiencies. This may concern investors because the🔯se companies are probably struggling to generate enough cash to pay for their short-term financial obligations.

The Bottom Line

Accounts receivable are a very valuable asset for businesses. They represent unpaid invoices for goods and services delivered to customers. Some companies may ask their custome⛦rs for payment upfront while others may allow them to pay invoices after a certain time. These invoices are called accounts receivable outstanding. How long they remain outstanding, though, depends o🍌n the company and the relationship with the customer. In most cases, companies generally expect payment within 60 days of delivering their goods.