How accounts receivable works
When a business ships a product or finishes a job, it sends an invoice and records the amount as accounts receivable. The balance grows with each new invoice and shrinks every time a customer pays. Most businesses track it by customer and by invoice date so nothing slips through the cracks. Larger businesses often assign specific team members to specific customer accounts so relationships and payment history stay consistent over time.
Accounts receivable is reviewed regularly through an aging report, which groups open invoices by how long they have been outstanding. Invoices that pass 30, 60, or 90 days often need a reminder or a phone call. Keeping the balance current protects cash flow and lowers the risk of bad debt. Many businesses also set clear credit terms upfront, deciding how much credit a new customer can carry before requiring a deposit or prepayment.
Example
A landscaping company invoices a client $2,400 for a job completed on March 1, with payment due in 30 days. The $2,400 is recorded as accounts receivable on March 1. The client pays $1,000 on March 20 and the remaining $1,400 on April 5. Accounts receivable drops to $1,400 after the first payment and to $0 once the balance is paid in full.
Accounts receivable in QuickBooks Online vs Xero
In QuickBooks Online, an invoice automatically creates an accounts receivable entry, and recording a payment through Receive payment reduces the balance. Xero works the same way: invoices post to the receivable account, and incoming bank deposits are matched to them using Find & Match during Reconcile. Both tools offer a built-in aging report. Both platforms also let you set default payment terms per customer, which controls when an invoice is considered overdue.
Related terms
How LedgerBPO handles accounts receivable
Our accounts receivable team invoices customers on time, applies payments as they arrive, and follows up on late invoices using a set reminder schedule. A dedicated accountant works inside your existing software so nothing changes for your customers. You get a clear aging report and fewer overdue balances each month. We also flag customers who consistently pay late so you can adjust credit terms before the risk grows.