# Accounts receivable

> Invoices, terms, collections, aging, cash application and what to do with a bill nobody pays.

Source: https://lopifi.com/learn/ar
Part of: Lopifi — US GAAP books on autopilot, checked by a CPA (https://lopifi.com)

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**How should a startup invoice customers and get paid on time?** Invoices, terms, collections, aging, cash application and what to do with a bill nobody pays.

1. [Order to cash: from a yes to money in the bank](https://lopifi.com/md/learn/order-to-cash-process) — 8 min. What is the order-to-cash process for a startup? From a quote to cash in the bank, as one company runs it: which steps touch the books, and why an invoice, a payment and revenue are three different events.
2. [A correct invoice, and the tax on it](https://lopifi.com/md/learn/how-to-write-an-invoice) — 8 min. What should be on an invoice, and how is sales tax shown? Northwind's first invoices, field by field: what each one is for, where sales tax goes, and why a sent invoice is corrected with a credit note rather than edited.
3. [Payment terms, discounts and late fees](https://lopifi.com/md/learn/net-30-payment-terms-and-discounts) — 8 min. What do Net 30 and 2/10 net 30 mean, and should I offer an early-payment discount? How Net 30 sets a due date, what a 2/10 net 30 discount really costs, how to book it, and when a late fee is collectible.
4. [Invoice, revenue and cash: deposits and ASC 606](https://lopifi.com/md/learn/customer-deposits-and-revenue-recognition) — 10 min. Is a customer deposit revenue, and when do I recognize revenue under ASC 606? Northwind's customer deposit, worked from cash to delivery: why it's a liability first, when it becomes revenue, and the four ways billing and recognition can fall apart.
5. [Collections and the dunning cadence](https://lopifi.com/md/learn/how-to-collect-unpaid-invoices) — 8 min. How do I collect unpaid invoices without losing the customer? A dunning cadence dated from the due date, what to do with disputes and broken promises, and when an overdue account leaves your hands.
6. [Cash application: matching payments to invoices](https://lopifi.com/md/learn/cash-application-explained) — 9 min. How do I match customer payments to invoices, including short pays and Stripe payouts? Matching Northwind's receipts to its invoices: a short pay, a lump sum with no remittance, and a card payment that arrives net of the processor's fee.
7. [The AR aging report](https://lopifi.com/md/learn/ar-aging-report-dso-cei) — 8 min. How do I read an AR aging report and calculate DSO and CEI? Northwind's year-end aging, built by due date and tied to the ledger, and the two numbers read off it: DSO for the trend, CEI for the collections effort.
8. [Bad debt: the allowance, the write-off and the tax return](https://lopifi.com/md/learn/bad-debt-allowance-vs-direct-write-off) — 10 min. How do I account for a customer who won't pay: allowance or direct write-off? Northwind's allowance from its year-end aging, the write-off when a customer fails, why the tax return waits for the write-off, and how a credit note, a refund and a write-off differ.
9. [Receiving Form 1099-K: what it means](https://lopifi.com/md/learn/form-1099-k-explained) — 8 min. I got a Form 1099-K. What does it report, and why doesn't it match my revenue? What a card processor or payment app reports on Form 1099-K, the 2026 thresholds, why box 1a is gross, and how Northwind ties its form to the books.

## Terms this track teaches

- [Accounts receivable](https://lopifi.com/md/glossary/accounts-receivable): What customers owe us for invoices already issued
- [Invoice](https://lopifi.com/md/glossary/invoice): A claim on a customer
- [Control account](https://lopifi.com/md/glossary/control-account): A GL account whose balance is the total of a subledger — AR, AP, fixed assets — and is posted only from it
- [Subledger](https://lopifi.com/md/glossary/subledger): The detail, by customer, vendor or asset, whose total must equal its control account in the GL
- [Revenue recognition](https://lopifi.com/md/glossary/revenue-recognition): Deciding when, and how much, revenue is recorded — under US GAAP, when (or as) control of a promised good or service transfers to the customer, at the consideration the entity expects to be entitled to
- [Sales tax payable](https://lopifi.com/md/glossary/sales-tax-payable): Sales tax charged to customers and not yet remitted to the state — a liability from the moment it is collected, never revenue, when the entity has elected to exclude such taxes from the transaction price
- [Exemption certificate](https://lopifi.com/md/glossary/exemption-certificate): The document a buyer gives a seller to claim a sales tax exemption — resale, manufacturing, an exempt organization — which the seller keeps to prove why it did not collect. New Mexico's version is the nontaxable transaction certificate (NTTC)
- [Credit note](https://lopifi.com/md/glossary/credit-note): A reduction of what a customer owes
- [Evidence](https://lopifi.com/md/glossary/evidence): Documentation supporting a recorded amount
- [Payment terms](https://lopifi.com/md/glossary/payment-terms): The agreed timing of payment and any early-payment discount — Net 30, Net 30 EOM, 2/10 net 30, due on receipt; the due date that aging is measured from
- [Early-payment discount](https://lopifi.com/md/glossary/early-payment-discount): A reduction offered for paying before the net due date — 2/10 net 30 is 2% off if paid in 10 days, an annualized return of about 37%
- [Contra-revenue account](https://lopifi.com/md/glossary/contra-revenue-account): An account with a debit balance netted against gross revenue — returns, allowances, sales discounts, rebates — so net revenue is presented after them
- [Variable consideration](https://lopifi.com/md/glossary/variable-consideration): Any part of the price that can change — discounts, rebates, refunds, credits, usage, bonuses, penalties — estimated and included only to the extent a significant reversal is not probable
- [Transaction price](https://lopifi.com/md/glossary/transaction-price): The consideration an entity expects to be entitled to for the contract, including estimated variable consideration and excluding amounts collected for third parties such as sales tax
- [Deferred revenue](https://lopifi.com/md/glossary/deferred-revenue): Consideration received, or unconditionally due, before the goods or services are transferred — a liability until the performance obligation is satisfied. ASC 606 calls it a contract liability
- [Performance obligation](https://lopifi.com/md/glossary/performance-obligation): A promise in a contract to transfer a distinct good or service, or a series of substantially the same ones — the unit revenue is recognized by
- [ASC 606](https://lopifi.com/md/glossary/asc-606): Topic 606, Revenue from Contracts with Customers — five steps: identify the contract, identify the performance obligations, determine the transaction price, allocate it, recognize revenue as each obligation is satisfied
- [Unbilled receivable](https://lopifi.com/md/glossary/unbilled-receivable): Revenue recognized where the right to payment is unconditional but the invoice has not yet been issued — a receivable, not a contract asset
- [Contract asset](https://lopifi.com/md/glossary/contract-asset): Revenue recognized ahead of an unconditional right to payment — the right still depends on something other than the passage of time
- [Dunning](https://lopifi.com/md/glossary/dunning): The sequence of collection communications
- [Promise to pay](https://lopifi.com/md/glossary/promise-to-pay): A customer commitment to a date and amount
- [Statement of account](https://lopifi.com/md/glossary/statement-of-account): One customer's open invoices, payments and credits, with the balance due, sent to prompt payment and to surface disputes before they age
- [Aging](https://lopifi.com/md/glossary/aging): Grouping open receivables or payables into buckets by days past due date — current, 1–30, 31–60, 61–90, 90+
- [Application](https://lopifi.com/md/glossary/application): Assigning received cash to specific invoices
- [Unapplied cash](https://lopifi.com/md/glossary/unapplied-cash): Customer cash received but not yet assigned to an invoice. It reduces that customer's AR; only a net credit balance is reclassified to a liability at period end
- [Remittance advice](https://lopifi.com/md/glossary/remittance-advice): The payer's note of which invoices a payment covers and of any deduction taken — the first thing cash application reads
- [Short pay](https://lopifi.com/md/glossary/short-pay): A customer payment for less than the invoices it settles, the customer having deducted the difference — a dispute, a credit not yet recorded, or an amount to write off. It needs a reason and a disposition; it never just disappears
- [Payout](https://lopifi.com/md/glossary/payout): A payment processor's transfer to the merchant's bank: charges less refunds, chargebacks, fees and any reserve held. A net figure, booked gross through a clearing account
- [Clearing account](https://lopifi.com/md/glossary/clearing-account): An account that should net to zero once both sides of a flow have posted — payroll clearing, GR/IR, a payment processor clearing account; a residual balance is the exception
- [Chargeback](https://lopifi.com/md/glossary/chargeback): A card payment reversed by the cardholder's issuing bank on a cardholder claim — fraud, goods not received, not as described. The processor debits the merchant the amount plus a fee; the merchant may contest it with evidence (representment)
- [Processor reserve](https://lopifi.com/md/glossary/processor-reserve): Card settlements a payment processor withholds against future chargebacks and refunds — a rolling percentage held for a set number of days, a fixed amount, or an upfront hold. It is the merchant's receivable from the processor, not cash on hand
- [ACH](https://lopifi.com/md/glossary/ach): The Automated Clearing House network — the US batch system for electronic credits and debits under Nacha rules; same-day to two-day settlement, with limited return rights
- [DSO](https://lopifi.com/md/glossary/dso): DSO is a liquidity and working-capital metric, calculated as (Ending AR ÷ Credit sales for the period) × Days in the period.
- [CEI](https://lopifi.com/md/glossary/cei): CEI is a liquidity and working-capital metric, calculated as (Opening AR + Credit sales − Closing total AR) ÷ (Opening AR + Credit sales − Closing current AR).
- [Receivables turnover](https://lopifi.com/md/glossary/receivables-turnover): Receivables turnover is a liquidity and working-capital metric, calculated as Credit sales ÷ Average AR.
- [Allowance for credit losses](https://lopifi.com/md/glossary/allowance-for-credit-losses): The contra-asset holding the expected credit losses on receivables, so AR is presented at the amount expected to be collected
- [CECL](https://lopifi.com/md/glossary/cecl): Current expected credit losses — the ASC 326 model that books lifetime expected losses from day one using history, current conditions and reasonable forecasts. ASU 2025-05 adds a practical expedient for current AR and contract assets
- [Bad debt expense](https://lopifi.com/md/glossary/bad-debt-expense): The P&L charge that builds the allowance for credit losses — the provision, not the write-off
- [Write-off](https://lopifi.com/md/glossary/write-off): Removing an uncollectible receivable against the allowance for credit losses — under the allowance method it has no P&L effect; the expense was taken in the provision
- [Direct write-off method](https://lopifi.com/md/glossary/direct-write-off-method): Charging a receivable to bad debt expense only when it is judged uncollectible, with no allowance. Not GAAP where expected credit losses are material; the federal tax rule works the same way (specific charge-off)
- [Bad debt recovery](https://lopifi.com/md/glossary/bad-debt-recovery): Cash collected on a receivable already written off. Under GAAP it is recorded when received: reinstate the receivable against the allowance, then apply the cash. For tax, recovering an amount previously deducted is generally income
- [Refund](https://lopifi.com/md/glossary/refund): Returning cash already received
- [Specific charge-off method](https://lopifi.com/md/glossary/specific-charge-off-method): The federal income tax method for business bad debts: a deduction for a specific debt in the year it becomes wholly or partly worthless, never for an estimated reserve — and, for an accrual-method business, only for an amount already included in income
- [Temporary difference](https://lopifi.com/md/glossary/temporary-difference): A difference between an asset or liability's tax basis and its book carrying amount that will reverse in future years — the source of deferred taxes
- [Deferred tax asset](https://lopifi.com/md/glossary/deferred-tax-asset): Future tax savings from deductible temporary differences and carryforwards, measured at enacted rates
- [Form 1099-K](https://lopifi.com/md/glossary/form-1099-k): The information return from a payment settlement entity reporting a payee's gross payment card and third-party network receipts — card transactions at any amount; third-party network transactions only above $20,000 and 200 transactions, the threshold the OBBBA retroactively reinstated. Gross of refunds, chargebacks and fees, so it never ties to revenue
- [Backup withholding](https://lopifi.com/md/glossary/backup-withholding): Federal income tax a payer must withhold at 24% from reportable payments — contractor fees, interest, dividends, card settlements — when the payee has not given a correct TIN or the IRS has notified the payer to withhold. Deposited and reported on Form 945
- [Form W-9](https://lopifi.com/md/glossary/form-w-9): The IRS form a US payee gives a payer to certify its name, tax classification and taxpayer identification number — collected before the first payment, because it drives 1099 reporting and backup withholding

- **Previous track:** [Accounts payable](https://lopifi.com/md/learn/ap)
- **Next track:** [Compliance & tax](https://lopifi.com/md/learn/compliance)
- **The course:** https://lopifi.com/md/learn