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Accounts receivable is a legally enforceable claim for payment from a business to its customer/clients for goods supplied and/or services rendered in execution of the customer's order. These are generally in the form of invoices raised by a business and delivered to the customer for payment within an agreed time frame. Accounts receivable is shown in a balance sheet as an asset. It is one of a series of accounting transactions dealing with the billing of a customer for goods and services that the customer has ordered. These may be distinguished from notes receivable, which are debts created through formal legal instruments called promissory notes.
More and more, accounts receivable processesrequire sophisticated processes and focus within business plans - particularly for small or medium sized enterprises as they require a steady cashflow to maintain operations. Having an understanding of what percentage of cash will be outstanding on a month to month basis is essential to stay afloat.
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