“Is accounts receivable a current asset?” “Are accounts receivable a current asset?” “Accounts receivable is a current asset—right?”
These seemingly simple variations are among the most frequently asked questions by SaaS founders and growth-stage finance leads.
The short answer is yes—but the full answer has far-reaching implications for cash flow, valuation, reporting, and investor trust.
In this guide, we’ll dive into accounts receivable (AR) and why it matters for your SaaS business. You’ll get practical insights on managing it effectively, avoiding common mistakes, and understanding how it affects everything from day-to-day accounting to investor confidence—all aimed at helping you get the most value from your AR.
This is not just an accounting issue—it’s a strategic financial question that can influence growth, liquidity, and deal-making.
Table of Contents
What Are Accounts Receivable?
Accounts receivable (AR) represents money owed to your business by customers for products or services already delivered but not yet paid for.
This usually occurs when you invoice customers with net-30 or net-60 terms, since those payments take time to come in. It can also happen when a customer prepays for an annual plan, but the payment hasn’t cleared yet. And it’s especially common when you’re using accrual accounting (the GAAP standard) rather than cash accounting because revenue is recorded when earned, not when cash is received.
In essence, AR is revenue earned but not yet received in cash.
Is Accounts Receivable a Current Asset?
Yes—accounts receivable is a current asset.
A current asset is defined as any asset expected to be converted into cash or used within one year. Because AR represents cash your customers are contractually obligated to pay you within the near term (often 30 to 90 days), it qualifies as a current asset on your balance sheet.
This is true whether you phrase the question as:
- “Is accounts receivable a current asset?”
- “Accounts receivable is a current asset?”
- “Are accounts receivable a current asset?”
They all point to the same reality: AR is a short-term economic benefit and thus a current asset.
Why AR Matters in SaaS
In B2B SaaS, particularly with annual contracts and delayed payments, AR can be one of your largest current assets.
It matters because it directly affects your working capital, and poor AR management can quickly lead to cash gaps that strain the business. When AR runs high, it can signal weak collections or overly generous payment terms, which raises concerns for operators and investors alike. On the other hand, clean AR improves financial optics during due diligence to make your company look more disciplined and financially healthy.
In other words, while revenue may be growing, cash flow can suffer if AR grows unchecked.
How AR Affects Cash Flow and Liquidity
Revenue ≠ Cash.
If your SaaS business invoices $100,000 this month but collects only $30,000, you’ve booked revenue but only received part of the cash. The rest sits in accounts receivable.
This creates a timing gap that impacts your cash runway, which can delay hiring or investment if the money isn’t coming in as expected. It also means you’ll need tighter cash forecasting to stay ahead of potential shortfalls.
The higher your AR, the more cash you’re waiting on, which increases financial risk.
Examples of AR in Action
Example 1: Net-30 Invoicing
- You deliver service on January 1
- You invoice $10,000 with net-30 terms
- Customer pays February 1
- That $10,000 is recorded as AR in January and as cash in February
Example 2: Annual Prepay with Check
- You sign a $60,000 annual deal
- Customer mails a check, but it hasn’t arrived
- You’ve earned revenue, but until the cash clears, it’s AR
Example 3: Enterprise Procurement Delays
- Customer’s AP team pays in 60–90 days
- Meanwhile, you’re carrying AR on your books
How AR Appears on the Balance Sheet
On your balance sheet, AR shows up under Current Assets, typically as its own line item.
Example:
Assets
Current Assets
Cash: $150,000
Accounts Receivable: $120,000
Prepaid Expenses: $25,000
This figure rolls up into your working capital, which influences your liquidity ratios (like the current ratio and quick ratio).
Accounts Receivable vs. Deferred Revenue
This is where many SaaS leaders get tripped up.
| Metric | Accounts Receivable | Deferred Revenue |
| Timing | Service delivered, unpaid | Cash received, service not yet delivered |
| Balance Sheet Side | Asset | Liability |
| Impact | Positive short-term asset | Future obligation |
In simple terms:
- AR = You delivered but haven’t been paid
- Deferred revenue = You’ve been paid but haven’t delivered
Common Mistakes with AR in SaaS
- Not tracking AR aging: Leads to forgotten invoices or poor collections
- Using cash accounting: Obscures the true size of AR
- Overly generous terms: Net-90 or “pay when ready” policies slow cash
- Confusing AR with bookings: Bookings ≠ revenue ≠ cash
- Not tying AR to collections KPIs: No accountability for cash inflows
AR Metrics and Benchmarks to Track
- DSO (Days Sales Outstanding): Goal = under 45 days
- AR Aging Report: Tracks % of AR 0–30, 31–60, 61–90, 90+ days overdue
- AR as % of Revenue: Helps spot collection or churn issues
- Collections Rate: % of invoiced AR collected within term
- Write-offs: Monitor bad debt to spot risky customer profiles
Best Practices for Managing AR
To stay on top of AR, it helps to use invoicing automation through tools like Stripe, Chargebee, or QuickBooks, and to set clear payment terms in contracts—ideally net-30 or tighter. You can also follow up with reminders before invoices are due and offer ACH or auto-pay options to make payment easier.
It’s important to review your AR aging every month and even incentivize finance or RevOps to meet collection targets. And when invoices slip too far past due, don’t hesitate to escalate those accounts to CS or legal to keep things moving.
What AR Signals to Investors
Sophisticated investors and acquirers analyze AR closely. Why?
- Bloated AR = Poor cash control
- Long DSO = Low pricing power or weak sales enforcement
- High write-offs = Bad customer fit or collection process
Well-managed AR shows:
- Strong financial controls
- Predictable cash flow
- Credible forecasting
- Lower working capital needs
In M&A or diligence scenarios, clean AR can increase your valuation multiple by de-risking cash flow assumptions.
Final Thoughts
To answer the headline question clearly:
Yes, accounts receivable is a current asset.
But for SaaS founders and finance leaders, the more useful question is: > What is AR telling me about the health, discipline, and investability of my company?
Accounts receivable isn’t just accounting—it’s an operational lever. Managed well, it increases cash, signals maturity, and strengthens valuation. Managed poorly, it drains liquidity and undermines investor confidence.
Track it. Manage it. Understand it. Because every dollar sitting in AR is a dollar not available to fund your next phase of growth.
Additional Resources
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