Accounts Receivable Glossary for Small Businesses

When receivables are hard to keep in view

Manual or disorganized invoicing

If your team keeps invoice details in spreadsheets, drafts follow-ups in email, or relies on memory for the next step, invoice numbers, due dates, and customer conversations can become hard to see together. A clear invoice record makes it easier to check what was supplied, how much is due, and the agreed payment details.

Late or unpaid invoices, inconsistent follow-up, and cash flow

An invoice is late when the customer has not paid by its agreed due date. Until it is paid or otherwise resolved, the seller generally continues to track the amount as receivable under its accounting method.[1] Because an unpaid receivable is not cash in the bank, its timing can matter when a business plans payroll, supplier bills, and other outflows.[5] A repeatable review and follow-up routine can help a small team avoid leaving an open balance unnoticed; it cannot guarantee when a customer will pay.

What does it mean when an invoice is more than 60 days past due?

“More than 60 days past due” describes an invoice whose due date passed over 60 days ago. A report may group it in a 60+ day bucket so an owner can review it, confirm the balance and payment history, and choose an appropriate next step. The bucket is a reporting choice, not a universal legal deadline or proof that the amount is uncollectible. Check whether a report counts from the invoice date or the due date; those are different measures.[6]

Core accounts-receivable terms

These basics describe money a business expects to receive, the documents behind it, and how it appears in everyday bookkeeping.

Accounts Receivable (A/R)

Money customers owe a business for goods or services already provided on credit. A/R is an asset on the seller’s books, but it is not cash until the customer pays. For example, if a small design studio finishes work and gives a client 30 days to pay, the unpaid balance is part of the studio’s A/R.[1][2]

Invoice (sales invoice and supplier invoice)

A document that records a sale and requests payment, usually identifying the seller and buyer, what was supplied, the amount, and the agreed payment details. The seller’s copy is commonly called a sales invoice. From the buyer’s side, the bill received from a supplier is a supplier invoice (also called a purchase or vendor invoice). A/R is the seller’s accounting balance for what is still owed; an invoice is one document that supports that balance. The A/R balance is the amount still owed after the seller accounts for unpaid invoices, credits, and recorded payments.[1][3]

Notes Receivable

A formal written promise that another party will pay a stated amount, often by a specified date and sometimes with interest. It is more formal than an ordinary open A/R balance, which is generally supported by an invoice and customary credit terms. A promissory note is a common form of evidence for a note receivable.[1]

Net terms

A shorthand for when the full invoice amount is due. “Net 30” commonly means the full amount is due 30 days after the date named in the agreement or invoice; the reference date should be stated clearly. Net terms set a due period, while “2/10, net 30” adds a separate early-payment discount.[4][8]

Accounts Payable (A/P)

Amounts a business owes suppliers for purchases made on credit. A/P is a liability for the buyer. The same supplier invoice may therefore be A/P for the buyer and A/R for the seller.[2][3]

Reconciliation

Comparing related records and explaining differences so the business can see whether its books agree with supporting information. An A/R reconciliation might compare customer balances with invoices, credits, and recorded payments. A bank reconciliation is a specific process that compares the company’s cash records with the bank statement.[7]

Revenue

Income a business earns from its ordinary sales of goods or services. Revenue is not the same as cash collected: under accrual accounting, a business may record earned revenue before payment arrives, with the unpaid amount recorded separately as A/R. The accounting basis and applicable reporting rules matter.[2][4]

Payment, collection, and reporting terms

These terms describe how a small team sets expectations, monitors open balances, records incoming money, and accounts for amounts that may not be collected.

Payment terms

The agreed instructions for paying an invoice. They can state when payment is due, accepted payment methods, any early-payment discount, and any applicable late-payment charge. Write the terms so both customer and supplier can tell how the due date is calculated.[8]

Credit terms

The conditions under which a seller lets a customer receive goods or services before paying. They can include a credit limit, payment period, discount, and other conditions. Payment terms are one part of the broader credit arrangement; the terms offered should reflect the seller’s policy and applicable law.[8]

Days Sales Outstanding (DSO)

A measure of the average time it takes a business to collect cash from credit sales. One common calculation uses average A/R divided by credit sales for the same period, multiplied by the number of days in that period. DSO is a summary measure: sales mix, seasonality, and the calculation method affect how it should be interpreted.[5]

A/R aging report

A list of unpaid customer balances grouped by how long they have been outstanding or past due. A business might use buckets such as current, 1–30, 31–60, and over 60 days; the chosen buckets are a reporting convention, not a universal legal deadline. An aging report helps a small team spot old balances and decide which records need review or follow-up.[6]

Early-payment discount

A reduction offered when a customer pays within a stated early window. In the illustrative terms “2/10, net 30,” the buyer may take 2% off by paying within 10 days; otherwise, the full amount is due within 30 days. The actual offer must be agreed and recorded in the invoice or contract.[4]

Dunning or collections sequence

A collections sequence is a planned series of communications about an unpaid balance. A dunning process specifically organizes reminders or notices for overdue receivables, sometimes using levels with different timing or wording. A broader follow-up routine may also include a courtesy reminder before the due date. Neither term is the same as a legal collections process; review customer terms and applicable rules before sending notices.[21]

Cash application

The bookkeeping work of matching incoming customer payments to the right customer account and open invoice or invoices, then recording the payment. A payment that covers several invoices, arrives without clear details, or differs from the invoice amount may need investigation before the A/R balance is updated.[9]

Remittance advice

Information sent by a payer to explain a payment—for example, which invoices the payment covers and how any short payment or adjustment should be understood. It helps the supplier match the payment to open items; it is not itself proof that funds have arrived.[10]

Bad debt

An amount owed by a customer that the business determines it is unlikely to collect. In accounting, “bad-debt expense” can also mean the expense recognized for expected or identified uncollectible balances. Financial-reporting and tax treatments can differ, so a business should follow the rules that apply to its records and tax filing.[6][13]

Write-off

An accounting entry that removes an amount judged uncollectible from the A/R records, usually by applying an existing allowance under the business’s accounting method. A write-off changes the books; by itself, it does not necessarily forgive the debt or decide whether further collection is lawful or appropriate.[6]

Allowance for doubtful accounts (bad-debt reserve)

An estimate of the portion of A/R that may not be collected. It is commonly shown as a contra-asset that reduces reported receivables to an estimated collectible amount. The allowance is an estimate across balances; a write-off is the later accounting action for a specific balance. They are related but not interchangeable.[6]

Revenue recognition

The accounting process for deciding when earned revenue is recorded. Sending an invoice and receiving cash are events that can happen at different times from earning the revenue. Under accrual accounting, the applicable accounting framework and the facts of the sale determine when revenue is recognized; a bookkeeper should not assume the invoice date alone decides it.[4]

Automation and invoice data entry

These are general industry terms for work that software may assist with. They do not describe current PaidOnTime features.

These definitions explain common industry workflows only. PaidOnTime does not currently write or send reminders, process payments, or extract invoice details with OCR.

A/R automation

Software-assisted steps in receivables work, such as preparing or sending bills, organizing collection follow-up, applying payments, and reconciling account records. “Automation” can refer to different combinations of tasks, so a business should check exactly which actions a particular tool performs and which still need human review.[9]

Optical Character Recognition (OCR)

Technology that converts text visible in an image or scan into machine-readable text. In an invoice workflow, OCR may help extract fields such as an invoice number, date, or amount for data entry. Recognition can contain errors, so extracted invoice details should be checked before they are used.[19]

Compliance and international collections

Rules depend on where the parties are, whether the debt is consumer or commercial, the type of transaction, the data involved, and the business’s role. These short definitions are educational context, not legal advice.

The examples below identify the jurisdiction or type of activity described by each source. They do not determine which law applies to a particular business or customer; get qualified advice for a specific collection or data practice.

Fair Debt Collection Practices Act (FDCPA)

A U.S. federal law governing certain debt-collection conduct. Its core coverage is tied to third-party debt collectors and covered consumer debts for personal, family, or household purposes; an ordinary business invoice is not automatically a consumer debt just because it is overdue. Who is covered can depend on the collector’s role and the facts.[11][12]

California Consumer Privacy Act (CCPA)

California privacy legislation that gives rights to California residents and imposes obligations on businesses that meet the law’s applicability tests. It does not automatically apply to every small business. A/R records can include personal information about individual customers or business contacts, so check the business’s size, activities, role, and current statutory criteria.[15]

Anti-Money Laundering (AML) and Know Your Customer (KYC)

AML refers to legal and operational controls intended to detect and prevent money laundering and related financial crime. KYC is a common label for identifying and understanding customers as part of those controls. In the United States, customer-identification and due-diligence duties apply to specified regulated institutions and activities; keeping an A/R ledger alone does not make every seller subject to bank KYC rules.[16]

Statute of limitations

A law that sets the period in which a party may bring a lawsuit. There is no single worldwide deadline for an unpaid invoice: the period can depend on jurisdiction, the kind of claim, the contract, and when the claim accrued. For example, U.S. UCC § 2-725 addresses contracts for the sale of goods where that version of the Code is enacted; it is not a universal rule for every invoice or service contract.[11][17]

Fair Credit Reporting Act (FCRA)

A U.S. federal law governing consumer reporting agencies and the use or furnishing of consumer-report information. It may matter if a business reports a person’s consumer account or uses a consumer report; it is not a general rule for every business-to-business invoice ledger.[18]

Localization of collection communications

Adapting a collection message for the customer and market, beyond translating the words. A business may need to check language preference, degree of formality, date and number formats, currency, time zone, payment options, names, tone, and notice rules that apply locally. For example, EU Directive 2011/7/EU addresses late payment in commercial transactions and is implemented through national law. Do not assume that one English message or one translated template satisfies every country’s rules or payment practices.[20]

PaidOnTime today and where it is heading

Available today: PaidOnTime is an English-only, private workspace that imports invoice rows from CSV, lets the account holder review rows, and shows a due-date register. Manual invoice entry and imports from non-CSV sources are not available.

Not live today: PaidOnTime does not write, translate, let users select a language for, schedule, or send reminders. It does not create payment links, collect payments, or offer Stripe integration or checkout.

Planned: Multilingual reminders, payment links, approval controls, and Stripe are planned, not available features. The product vision is a simple international A/R workflow that combines invoice imports and due-date tracking with professional multilingual reminders and payment links, intended to reduce manual chasing. This is a goal, not a claim of achieved results.

Later plans that may change: Accounting-system integrations, reporting, team roles, and shared workflows are later product plans.

Sources and scope

The supplied search-intent snapshot is truncated and has no bibliography. Its qualitative query themes informed the topics on this page, but its numbered references and vendor claims were not treated as verified sources. No reported dollar example, language-count claim, or quantified outcome from that snapshot is repeated here. Definitions are linked below to the cited accounting texts, regulators, legal sources, and standards materials. Legal requirements depend on jurisdiction and circumstance; this glossary is educational information, not legal or accounting advice.

[1] 19.4 Receivables Management — OpenStax, Principles of Finance 2e
[2] 2.2 Define, Explain, and Provide Examples of Current and Noncurrent Assets, Current and Noncurrent Liabilities, Equity, Revenues, and Expenses — OpenStax, Principles of Accounting, Volume 1: Financial Accounting
[3] 7.2 Describe and Explain the Purpose of Special Journals and Their Importance to Stakeholders — OpenStax, Principles of Accounting, Volume 1: Financial Accounting
[4] 9.1 Explain the Revenue Recognition Principle and How It Relates to Current and Future Sales and Purchase Transactions — OpenStax, Principles of Accounting, Volume 1: Financial Accounting
[5] 19.1 What Is Working Capital? — OpenStax, Principles of Finance 2e
[6] 9.2 Account for Uncollectible Accounts Using the Balance Sheet and Income Statement Approaches — OpenStax, Principles of Accounting, Volume 1: Financial Accounting
[7] 8.6 Define the Purpose of a Bank Reconciliation, and Prepare a Bank Reconciliation and Its Associated Journal Entries — OpenStax, Principles of Accounting, Volume 1: Financial Accounting
[8] Ch. 19 Key Terms — OpenStax, Principles of Finance
[9] What Is SAP Cash Application? — SAP Help Portal
[10] Business Requirements Specification Cross Industry Remittance Advice Process — United Nations Economic Commission for Europe (UNECE)
[11] Debt collection key terms — Consumer Financial Protection Bureau (CFPB)
[12] § 1006.2 Definitions — Consumer Financial Protection Bureau (CFPB)
[13] Publication 334 (2025), Tax Guide for Small Business — Internal Revenue Service (IRS)
[14] Application of the GDPR — European Commission
[15] Frequently Asked Questions (FAQs) — California Privacy Protection Agency (CPPA)
[16] CDD Rule FAQs — Financial Crimes Enforcement Network (FinCEN)
[17] § 2-725. Statute of Limitations in Contracts for Sale — Uniform Commercial Code, Legal Information Institute at Cornell Law School
[18] Fair Credit Reporting Act — Federal Trade Commission (FTC)
[19] Technical Information | About this Collection | Chronicling America | Digital Collections — Library of Congress
[20] Directive 2011/7/EU on combating late payment in commercial transactions — EUR-Lex, Publications Office of the European Union
[21] Dunning Levels — SAP Help Portal