Accounts receivable
What it means
Accounts receivable is money customers owe your business for work you've already done or goods you've already delivered, but haven't been paid for yet. On a balance sheet it counts as an asset.
In the Loan Ready calculator, accounts receivable shares a line with business cash. Add the money in the business's bank accounts to what customers owe you, and enter the total.
See also: Business cash, Accounts payable & short-term debt
Why lenders ask
Receivables turn into cash, usually within weeks. Lenders look at how much you're owed and how quickly customers pay, because slow payers squeeze the cash the business needs for its loan payments.
How lenders look at receivables
Lenders sort receivables by age: how long each invoice has been outstanding. Invoices from the last month or so are treated as nearly as good as cash. Ones that have been unpaid for several months are treated with more caution, because the longer an invoice sits, the less likely it is to be paid in full.
Receivables can also support borrowing. Many lenders set the limit on an operating line of credit partly by how much good-quality receivables the business has.
Accounts receivable vs. accounts payable
Receivables are money owed to you. Payables are money you owe to your suppliers. Lenders compare the two to see whether cash is coming in fast enough to pay the bills going out.
Good to know
Most bookkeeping software can produce an aged receivables report. Bringing one to a lender meeting answers a question you'll likely be asked.