A Handy Guide to Accounts Receivable Terminology
When you're not completely familiar with a business, sometimes the terms thrown out in conversation can seem like a foreign language. Here's a quick reference guide to some of the terminology we use in the accounts receivable industry.
Invoice: An invoice is a bill sent by a service or product provider to the buyer documenting the details of the purchase and the buyer's payment obligations. An invoice usually includes:
- a reference number (for bookkeeping purposes)
- the date of purchase
- contact information of the buyer and seller
- descriptions of the item(s) or service(s) purchased
- the date payment is due (or the number of days the provider is allowing the buyer to pay)
- the amount due to be paid within the specified period of time.
Accounts receivable: When the invoice is created, it becomes an "account receivable." All outstanding (unpaid) invoices or other money owed to a company for goods and services they've already provided make up their accounts receivable. By providing buyers time to pay rather than demanding payment at the time of sale, a company essentially has "extended credit" to these customers for a designated time period.
Statement: Companies with accounts receivable often create statements listing all of the invoices or outstanding debts still owed by a certain customer for a specific period of time. Statements are typically issued on a regular basis (usually monthly).
B2B: This is short for "Business-to-Business," meaning a business that provides goods and services to other businesses rather than to consumers.
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