Finance Operations Glossary
Plain-English definitions of the AR, collections, and order-to-cash terms that show up in every finance operations conversation.
Looking for a quick definition? The order-to-cash glossary covers more than a hundred terms in a sentence each.
Accounts receivable turnover ratio: definition and formula
The accounts receivable turnover ratio shows how many times a year a company collects its receivables. Here is the formula, a worked example, and what good looks like.
What is bad debt recovery? Definition and process
Bad debt recovery is collecting on an account you already wrote off as uncollectible. Here is how it works, how to account for it, and how to recover more.
What is working capital and how to calculate it
Working capital is current assets minus current liabilities, the cash a business has to run day to day. Here is the formula, a worked example, and how AR drives it.
What is a promise to pay in collections?
A promise to pay is a customer commitment to pay an overdue invoice by a set date. Here is how it works, how to track it, and how to handle broken promises.
What is a chargeback?
A chargeback is a forced reversal of a payment a customer or their bank claims was not owed. Here is how chargebacks work in B2B and how to dispute them.
Net 30 and other payment terms explained
Net 30 means payment is due 30 days after the invoice date. Here is what net 30 and other common payment terms mean, how to choose them, and how to make them stick.
What is deductions management in accounts receivable?
Deductions management is the process of handling, validating, and resolving customer short payments and chargebacks. Here are the types, the process, and how to recover invalid deductions.
Days sales outstanding (DSO)
Days sales outstanding measures the average time it takes to collect cash after a sale. Here is the formula, a worked example, and what counts as a good number.
Best possible DSO explained: formula and benchmark
Best possible DSO is the lowest DSO you could reach if every customer paid exactly on terms. Here is the formula, a worked example, and how to close the gap.
What is a credit memo? Definition and examples
A credit memo is a document a seller issues to reduce what a customer owes. Here is what it is, when to issue one, what to include, and how it gets accounted for.
What is the operating cycle in accounting?
The operating cycle is the time it takes to turn inventory into cash, from buying stock to collecting from customers. Here is the formula and how to shorten it.
What is a short payment and how to handle it
A short payment is cash below the invoice amount. Code the gap as a deduction, a discount, or an amount still to collect, then recover the remainder before it ages.
What is an AR aging report and how to read it
An accounts receivable aging report groups unpaid invoices by how long they are overdue. Here is how to read the buckets, why it matters, and how to act on it.
What is a payment plan in accounts receivable?
A payment plan lets a customer pay an overdue balance in scheduled installments. Here is when to offer one, how to structure it, and how to make sure it gets paid.
Days deductions outstanding (DDO): definition and formula
Days deductions outstanding measures how long open deductions sit before they are resolved. Here is the formula, a worked example, and how to bring the number down.
Collection effectiveness index (CEI): formula and how to use it
The collection effectiveness index measures how much of your available receivables you actually collected in a period. Here is the formula, a worked example, and what a good CEI looks like.
What is order to cash (O2C)? Process and steps
Order to cash is the full process from a customer order to collected payment. Here are the steps, the common bottlenecks, the KPIs to track, and where automation pulls cash forward.
What is dunning in accounts receivable?
Dunning is the process of sending escalating reminders to collect on overdue invoices. Here is how the process works, the stages it moves through, and best practices.
What is a dunning letter? Examples and templates
A dunning letter is a written notice that reminds a customer to pay an overdue invoice. Here is what to include, a stage-by-stage sequence, and ready-to-use examples.
Cash conversion cycle: what it is and how to calculate it
The cash conversion cycle measures how long cash is tied up in operations before it returns as collected revenue. Here is the formula, its three parts, and a worked example.
Bad debt expense: definition, formula, and examples
Bad debt expense is the cost of receivables a company no longer expects to collect. Here is how to calculate it, the journal entries, and how to keep it low.
Allowance for doubtful accounts: what it is and how to calculate it
The allowance for doubtful accounts is a reserve for receivables you expect not to collect. Here are the estimation methods, a journal entry example, and how to shrink it.
What is credit management in accounts receivable?
Credit management is deciding who to extend credit to, on what terms, and watching the risk over time. Here is the process, how to set limits, and how to do it well.
What is accounts receivable? Definition, examples, and process
Accounts receivable is the money customers owe a business for goods or services delivered on credit. Here is what it means, how the process works, and the metrics that track it.
What is autonomous finance? Definition and use cases
Autonomous finance is software that runs financial work end to end and owns the outcome, not just dashboards that surface it. Here is what it means and where it works today.
What is an invoice? Definition, types, and examples
An invoice is a document that requests payment for goods or services delivered. Here is what an invoice includes, the main types, and what happens after you send one.
What is accounts receivable aging and why it matters
Accounts receivable aging sorts unpaid invoices by how overdue they are. Here is how aging works, what each bucket signals, and how to act on it in real time.
Accounts receivable vs accounts payable: key differences
Accounts receivable is money customers owe you; accounts payable is money you owe suppliers. Here is how they differ and why AR is the side most teams under-automate.
Is accounts receivable an asset? Debit or credit explained
Yes, accounts receivable is a current asset and carries a debit balance. Here is why AR is an asset, how the journal entries work, and when it loses value.
What is remittance advice in accounts receivable?
Remittance advice is the note a customer sends to explain which invoices a payment covers. Here is what it includes, the formats it comes in, and why it matters for cash application.
What is the average collection period and how to calculate it
The average collection period is the average days it takes to collect on credit sales. Here is the formula, a worked example, and how to shorten it.
What is cash flow from operations and how AR fits in
Cash flow from operations is the cash a business generates from its core activities. Here is the formula, a worked example, and how receivables move the number.
What is a collection agency and how do they work?
A collection agency recovers overdue debts a business cannot collect itself. Here is how they work, what they cost, and how to keep fewer accounts from reaching them.
What is days payable outstanding (DPO)?
Days payable outstanding measures how long a company takes to pay its suppliers. Here is the formula, a worked example, and how DPO works with DSO in the cash cycle.
What is an account reconciliation in accounts receivable?
AR reconciliation confirms the receivables subledger ties to the general ledger. Here is why it matters, the step-by-step process, and how to keep it tied daily.