A–Z guide to accounts receivable terminology

A

• Accounts receivable (AR) is money owed to a business by its customers for goods or services already delivered but not yet paid for. It sits on the balance sheet as a current asset. 
  
  
• Accounts receivable aging groups unpaid invoices by how long they have been overdue, typically in 30 day bands. The accounts receivable aging report is the standard tool for showing where risk is concentrated, rather than only the total amount owed. 
  
  
• Accounts receivable management is the process of controlling how much a business is owed, by whom, and for how long. The accounts receivable process is often called the AR process which runs from an order being agreed through to the invoice being issued, followed up, and cleared. 
  
  
• Accounts receivable services refers to outsourcing some or all of this process to a specialist, from invoice generation and dispatch through to structured, data led payment reminders.

B

• Bad debt is a receivable a business has concluded it will not collect and writes off as a loss. A doubtful accounts provision is the reserve set aside for receivables unlikely to be paid in full, calculated before any individual invoice is formally written off.

C

• Credit control decides how much credit a business extends to a customer, monitors that exposure, and acts when payment terms are not met. 
  
  
• Credit limit is the maximum amount of credit a business is willing to extend to a single customer at any one time, reviewed as the relationship or the customer's payment behaviour changes. 
  
  
• Credit management is the wider discipline that credit control sits within, including creditworthiness assessment and payment terms policy. Intrum's credit optimisation service applies payment behaviour data to this decision. 
  
  
• Credit note is a document issued to reduce the amount a customer owes, used for returns, billing errors, or agreed discounts, without a cash payment being made.

D

• Days sales outstanding (DSO) measures the average number of days it takes a business to collect payment after a sale, calculated as accounts receivable divided by credit sales, multiplied by the period in days. Intrum's European Payment Report 2026 found that the gap between agreed payment terms and actual payment time for business customers has widened from 16 days to 20 days year on year, a trend that shows up first in a business's own DSO.
  
  
• Dispute is a formal disagreement raised by a customer over an invoice, typically concerning price, quantity, or quality, that pauses payment until resolved. Unresolved disputes are one of the most common reasons an invoice ages further into a later aging report band.

E

• Electronic invoicing, or e-invoicing, is the issuing and exchange of invoices in a structured digital format rather than as a PDF or paper document. Across the EU, the VAT in the Digital Age (ViDA) initiative is extending mandatory e-invoicing requirements for B2B transactions, making structured formats a growing compliance requirement.

F

• Factoring is the sale of a business's accounts receivable to a third party at a discount, for immediate cash rather than waiting for invoices to be paid. It is a financing decision, distinct from receivables management, which is an operational process rather than a sale of the asset.

G

• General ledger (GL) is the core accounting record where accounts receivable balances are posted and reconciled against customer payments. Errors in AR reporting usually trace back to a mismatch between the GL and the aging report.

H

• Holdback, also known as a reserve, is the portion of an invoice's value that a factoring company retains rather than paying out immediately, typically 10–30 percent. It protects the factor against disputes, deductions, or non-payment, and is released to the business once the invoice is collected in full.

I

• Invoice to cash is the stage of the order to cash cycle from invoice issue to payment clearing, including reminders sent and reconciliation of the payment against the original invoice.

J

• Journal entry is the accounting record used to post a transaction, such as an invoice, payment, or write-off, into the general ledger.
  

K

• Key performance indicator (KPI) is a measurable figure used to track the health of the accounts receivable process. DSO, the collection effectiveness index, and the proportion of receivables over 90 days are the most commonly reported KPIs.

L

• Late payment is any payment received after the agreed payment terms have expired, the point at which a business typically escalates from a routine reminder to more structured follow-up within its receivables management process.

M

• Matching is the process of applying an incoming payment to the correct outstanding invoice, using a remittance reference, amount, or customer account number. Accurate matching keeps the accounts receivable aging report reliable.

N

• Net terms describes payment terms expressed as a number of days from the invoice date, such as net 30 or net 60, the most common format for B2B payment terms.

O

• Order to cash (O2C) describes the complete cycle from a customer placing an order through to the business receiving payment. A delay introduced at the order or fulfilment stage still shows up later as a longer DSO.

P

• Payment terms are the conditions agreed between a business and its customer for when payment is due. Actual payment behaviour, tracked through DSO and aging reports, frequently diverges from agreed terms.

Q

• Query, in an accounts receivable context, is a customer's request for clarification on an invoice, distinct from a formal dispute in that it does not necessarily pause payment.

R

• Receivables management is broadly synonymous with accounts receivable management, more commonly used at portfolio level. Receivables management services typically combine invoicing, structured follow-up and reporting through an external partner.

S

• Statement of account is a summary sent to a customer listing all outstanding invoices, payments and credit notes over a period, used to reconcile a customer's own records against the business's ledger.

T

• Receivables turnover ratio measures how many times a business collects its average accounts receivable balance within a given period, calculated as net credit sales divided by average accounts receivable.

U

• Unapplied cash is a payment received but not yet matched to a specific invoice, usually because a remittance reference was missing or incorrect, inflating the apparent aging of receivables until reconciled.

V

• Value added tax (VAT) is the consumption tax applied to most goods and services across the EU and included on the majority of B2B invoices. Correct VAT treatment on an invoice is a common source of the disputes and queries that delay payment.

W

• Write-off is the formal removal of a receivable from the accounts once it is confirmed as bad debt, distinct from the earlier doubtful accounts provision, which estimates the risk before any individual loss is confirmed.

X

• XML invoicing refers to invoices issued in the Extensible Markup Language format, the structured data syntax most commonly used to meet the EU's EN 16931 e-invoicing standard. As e-invoicing mandates expand across European markets, XML and other structured formats are replacing PDF invoices as the accepted standard for B2B transactions.

Y

• Year-end close is the process of finalising a business's accounts receivable position at the close of its financial year, including reconciling the aging report, confirming the doubtful accounts provision, and agreeing any final write-offs.

Z

• Zero balance describes an invoice or customer account paid in full and reconciled, with no outstanding amount remaining. A rising share of accounts sitting at zero balance within agreed payment terms is one of the clearest signs an accounts receivable process is working as intended.