Accounts Receivable
Accounts receivable is a financial claim by a business against a customer as a result of a sale of the business’ product to the customer on credit.
Accounts receivable turnover is one way to assess the financial health of a business. It measures how quickly customers pay their bills. In other words, it measures how quickly the business collects payment from its customers.
As a rule of thumb, bills paid off within 30 days is good; 30 to 60 days is average; over 60 days is not good. However, these numbers differ from industry to industry. In some industries, accounts receivable over 60 days is considered standard.
Accounts receivable are the opposite of accounts payable which is money the business owes to its vendors and creditors.
Author: Kris Tabetando
Kris Tabetando provides mergers & acquisitions (M&A) advisory and brokerage services to Internet companies. He also partners with investors to acquire & manage Internet businesses.
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