Accounts receivable
Accounts Receivable (AR) is the FI sub-ledger for managing what customers owe the organisation, recording customer invoices, receipts, and dunning, and reconciling to the general ledger. It is the finance side of order-to-cash.
AR is the finance end of order-to-cash: SD billing posts the receivable, AR then collects it, and receipts post to bank accounting.
- AR records customer invoices (often from SD billing), applies incoming payments, manages overdue receivables through dunning, and…
- Customer invoices: from SD billing or direct FI.
- Incoming payments & clearing: matching receipts to invoices.
- Watch out: Unapplied/mis-applied cash, receipts not cleared to invoices.
What AR does
AR records customer invoices (often from SD billing), applies incoming payments, manages overdue receivables through dunning, and keeps the customer sub-ledger reconciled to the G/L. It ensures the organisation collects what it is owed and that receivables are accurate.
Key processes
- Customer invoices: from SD billing or direct FI.
- Incoming payments & clearing: matching receipts to invoices.
- Dunning: reminders for overdue amounts.
- Credit management links to reduce risk.
Integration
AR is the finance end of order-to-cash: SD billing posts the receivable, AR then collects it, and receipts post to bank accounting. It reconciles to the G/L and links to credit management to control customer risk. Clean customer master (BP) is essential.
Common pitfalls
- Unapplied/mis-applied cash, receipts not cleared to invoices.
- No dunning, overdue receivables ignored.
- Ignoring credit management, over-exposure to risky customers.