Editing Accounts receivable (section)

== Payment terms ==
An example of a common payment term is [[Net D|Net 30 days]], which means that payment is due at the end of 30 days from the date of invoice. The [[debtor]] is free to pay before the due date; businesses can offer a [[Discounts and allowances|discount]] for early payment. Other common payment terms include Net 45, Net 60, and 30 days end of month. The creditor may be able to charge late fees or interest if the amount is not paid by the due date. In practice, the terms are often shown as two fractions, with the discount and the discount period comprising the first fraction and the letter 'n' and the payment due period comprising the second fraction.

Booking a receivable is accomplished by a simple accounting transaction. However, the process of maintaining and collecting payments on the accounts receivable subsidiary account balances can be a full-time task. Depending on the industry in practice, accounts receivable payments can be received up to 10–15 days after the due date has been reached. These types of payment practices are sometimes developed by industry standards, corporate policy, or because of the financial condition of the client.

Since not all customer debts will be collected, businesses typically estimate the amount of and then record an [[allowance for bad debts|allowance for doubtful accounts]]<ref>{{Cite web|url=http://www.accountingtools.com/allowance-for-doubtful-account|title=Allowance for doubtful accounts definition|access-date=2010-11-07|archive-date=2010-12-03|archive-url=https://web.archive.org/web/20101203161908/http://www.accountingtools.com/allowance-for-doubtful-account|url-status=dead}}</ref> which appears on the balance sheet as a [[contra account]] that offsets total accounts receivable. When accounts receivable are not paid, some companies turn them over to third party [[Collection agency|collection agencies]] or [[Creditor's rights|collection attorneys]] who will attempt to recover the debt via negotiating payment plans, settlement offers, or pursuing other legal action.

Outstanding advances are part of accounts receivable if a company gets an order from its customers with payment terms agreed upon in advance. Since billing is done to claim the advances several times, this area of collectible is not reflected in accounts receivables. Ideally, since advance payment occurs within a mutually agreed-upon term, it is the responsibility of the accounts department to take out the statement showing advance collectible periodically and should be provided to sales & marketing for collection of advances. The payment of accounts receivable can be protected either by a [[letter of credit]] or by [[Trade Credit Insurance]].