Become an Accounts Receivable Expert with Thriday

February 20, 2024
minutes to read
Ben Winford
Table of Contents

If you want to learn about accounts receivable then you have come to the right place. This comprehensive blog covers accounts receivable and the game-changing potential of Thriday's AI-powered automation. In the fast-paced world of business, understanding and optimising your accounts receivable processes can make all the difference. Join us in this blog as we uncover the intricacies of accounts receivable and unveil the transformative power of Thriday.

Accounts Receivable Definition

Accounts receivable, often shortened to AR, represents the outstanding payments owed to a company by its clients or customers for goods or services rendered on credit. Think of accounts receivable as a financial promise - the amount your business is yet to collect from its clients.

Example of Accounts Receivable

To illustrate, let's consider a scenario: You own a thriving marketing agency and recently completed a digital marketing campaign for a client. The agreed-upon fee for your services is $20,000, with the client having a 60-day window for payment. During those 60 days, that $20,000 is recorded as your accounts receivable. You have 'earned' the money but have yet to receive it.

Accounts Receivable - Asset or Liability?

One critical aspect of accounts receivable is their classification on your balance sheet. They are undeniably assets, representing the potential cash inflow your business expects. More specifically, accounts receivable are considered current assets, which are anticipated to be converted into cash within one year.

Accounts Receivable - Debit or Credit Entry?

Accounting for accounts receivable involves a dual-entry system. When a sale is made on credit, an accounts receivable is established. This transaction is recorded as a debit to accounts receivable (an increase) and a credit to the revenue account (an increase). When the customer eventually pays, the accounts receivable balance decreases (credited), and the cash account increases (debited). 

Accounts Receivable vs. Payable

It's easy to blur the lines between accounts receivable and payable, but they are fundamentally distinct. While accounts receivable represent funds owed to your business, accounts payable signify the monies your business owes to suppliers or vendors for goods and services received on credit. 

Accounts Receivable Examples

Accounts receivable manifest in various forms, such as unpaid invoices, outstanding loans, pending rent payments, or any other unsettled sums owed to your business. Managing these receivables diligently is essential for maintaining a healthy cash flow.

Accounts Receivable Formula

To obtain the total value of accounts receivable at any given point, employ the following formula:

Accounts Receivable = Sum of Outstanding Invoices

This straightforward calculation provides you with an immediate snapshot of the funds owed to your business. 

How Thriday Streamlines Accounts Receivable

Now, let's dive into how Thriday's AI-driven automation can elevate your accounts receivable processes to new heights. Thriday's AI-powered solutions offer a multitude of advantages:

  • Instant Invoicing: Thriday can instantly generate and dispatch invoices to clients as soon as a transaction concludes, drastically reducing the time it takes to receive payment. 
  • Automated Reminders: Forget the tiresome task of chasing down overdue payments. Thriday sends automatic reminders to clients with pending invoices, facilitating prompt payments. 
  • Data Accuracy: Thriday's AI algorithms ensure impeccable accuracy in your financial records, mitigating the risk of errors and ensuring compliance with stringent accounting standards. 
  • Enhanced Cash Flow Management: With real-time reporting and insightful analytics, Thriday empowers you to gain invaluable insights into your cash flow, facilitating well-informed financial decisions. 
  • Customer Payment Insights: Thriday clearly displays pending payments, enabling you to identify potential late-paying clients and proactively address any issues. 

Statistics indicate that companies adopting automated accounts receivable processes can reduce their average payment collection time by an astounding 30%, lowering the risk of bad debts by 20%.

Key Takeaways

In summary, accounts receivable are an indispensable facet of your business's financial health, representing the monies owed to you by clients or customers. Gaining proficiency in the fundamentals of accounts receivable, from their function to their categorisation as assets, is paramount for sound financial management. 

With Thriday's AI-powered automated solutions, you can elevate your accounts receivable processes to new levels of efficiency. These advancements result in speedier payments, heightened accuracy, and a bolstered grip on your financial operations. Don't miss out on the opportunity to revolutionise your business. Incorporating Thriday into your accounts receivable management today is the key to staying ahead of the curve and unlocking the full potential of your financial resources.

DISCLAIMER: Team Thrive Pty Ltd ABN 15 637 676 496 (Thriday) is an authorised representative (No.1297601) of Regional Australia Bank ABN 21 087 650 360  AFSL 241167 (Regional Australia Bank).  Regional Australia Bank is the issuer of the transaction account and debit card available through Thriday. Any information provided by Thriday is general in nature and does not take into account your personal situation. You should consider whether Thriday is appropriate for you.

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