Accounts Receivable (AR)
Definition
Money customers owe your business for goods or services you have already delivered. It is an asset on the balance sheet until the cash comes in.
Want a deeper explanation?
For a pure DTC brand, AR is small and mostly marketplace payouts in transit. Once you sell wholesale, it can become one of your largest assets and your biggest cash drain, because you have paid for the inventory long before the retailer pays you.
An AR aging report groups open invoices by days outstanding so you know who to chase. Watch for: retailer deductions and chargebacks short-paying invoices, which leave small balances open that are really lost revenue.
Example
You ship $40,000 of product to a retailer on Net 60 terms. That $40,000 is accounts receivable until the retailer pays.