Ecommerce Accounts Receivable

Ecommerce AR (Accounts receivable)

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Accounts Receivable (AR)

Accounts Receivable (AR) refers to the money owed to a business by its customers for goods or services delivered but not yet paid for. It represents sales made on credit and is recorded as a current asset on the balance sheet. AR is a critical part of cash flow management, particularly in ecommerce and wholesale businesses that offer payment terms to B2B customers.

Accounts Receivable Process and Procedures

The accounts receivable process and procedures help ensure timely collection of outstanding invoices and accurate revenue recognition. Efficient AR management reduces cash flow gaps and minimizes bad debt risk.

A typical AR process includes:

  1. Customer Onboarding & Credit Approval – Set credit limits and payment terms (e.g., Net 30).
  2. Invoice Creation – Generated when goods/services are delivered.
  3. Revenue Recognition – Recorded in the books even if cash hasn’t been received (under accrual accounting).
  4. Payment Collection – Customers pay via bank transfer, credit card, or other methods.
  5. Reconciliation & Follow-Up – Matching payments to invoices and chasing overdue balances.

AR Journal Entry Example:

When you issue an invoice:

When you receive payment:

These entries are essential for maintaining clean, GAAP-compliant books and understanding customer payment trends.

Proper AR & AP tracking ensures you know how much cash is coming in and going out, helping you avoid cash crunches and make better financial decisions.

Why AR Matters in Ecommerce and Wholesale

For ecommerce brands selling wholesale or on terms, having a clean AR process helps: