Accounts receivable are amounts due to a firm for services or other items that customers have not yet paid.
Definition
Accounts receivable, often called receivables, are amounts recorded as owed to the firm by clients or other customers. They commonly arise after the firm sends an invoice for engineering services, though accounting policies may recognize certain amounts as due before invoicing. An aging schedule groups balances by how long they have remained unpaid, helping owners see collection patterns and follow up on overdue or disputed invoices. The recorded amount may include retainage or balances subject to client review, and it does not guarantee prompt payment or full collection. Firms may present receivables differently depending on their accounting basis and treatment of unbilled amounts. Accounts receivable are not cash, accounts payable, or the same as work in progress, which generally tracks effort or costs not yet billed. Owners often review receivables alongside billing cycle and days sales outstanding to understand the timing between performing work, invoicing, and collecting payment.
How owners use it
- Review aging categories to locate balances that are late, disputed, or awaiting client approval.
- Compare invoices issued with collections to understand payment timing.
- For example, $75,000 invoiced - $50,000 collected = $25,000 remaining receivable.
- Pair receivables with work in progress to see both billed and unbilled project amounts.
