AR & collections glossary

2/10 net 30 is an early-payment discount notation meaning the buyer may deduct 2% from the invoice total if they pay within 10 days; otherwise, the full amount is due within 30 days.

Accord and satisfaction is a legal doctrine where a creditor accepts a lesser payment as full settlement of a disputed debt, extinguishing the right to collect the remaining balance.

Accounts payable is the total amount a business owes to its suppliers and vendors for goods or services that have been received but not yet paid for.

Accounts receivable is the total amount customers owe a business for goods or services already delivered but not yet paid for.

An AR aging report groups outstanding invoices by how long they have been past due — typically 0–30, 31–60, 61–90, and 90+ days — giving a snapshot of collection health and showing which invoices need immediate attention.

Accounts receivable insurance (also called trade credit insurance) is a policy that compensates a business if a customer fails to pay an invoice due to insolvency, protracted default, or political risk in cross-border transactions.

Accounts receivable outsourcing is the practice of delegating some or all of the invoicing, follow-up, and collections function to a third-party vendor instead of managing it internally.

Accounts receivable turnover is a financial ratio that measures how many times per year a business collects its average accounts receivable balance — a higher ratio indicates faster collection and better AR management.

Accrual accounting records revenue when it is earned and expenses when they are incurred, regardless of when cash changes hands — creating a gap between reported profit and actual cash position.

ACH is a US electronic payments network for bank-to-bank transfers, commonly used for direct deposit, bill pay, and recurring business payments.

An ACH return is a rejected automated clearing house transaction, returned to the originating bank because of insufficient funds, account errors, or stop-payment requests.

An advance payment is payment collected before work begins — typically a percentage of the total project cost paid at contract signing to secure the engagement and reduce collection risk.

An aged trial balance is a report listing all outstanding customer invoices grouped by how long they have been unpaid — current, 1–30 days, 31–60 days, 61–90 days, and 90+ days past due.

An aging bucket is a time band used to group outstanding invoices by how long they have been past due — typically current, 1–30, 31–60, 61–90, 91–120, and 120+ days.

The allowance for doubtful accounts is a contra-asset account on the balance sheet that reduces gross accounts receivable to the portion a business realistically expects to collect.

An AR aging report groups unpaid invoices by how overdue they are, typically in 30-day buckets, to show where collection risk sits.

AR automation uses software to handle routine accounts receivable tasks — invoice delivery, payment reminders, follow-up calls, and payment posting — without manual intervention for each invoice.

An accounts receivable clerk is a staff member responsible for sending invoices, tracking payments, following up on overdue accounts, and reconciling the AR ledger.

AR financing is a loan or line of credit secured by a business's unpaid invoices, without selling the invoices themselves.

AR turnover ratio is the number of times, on average, that a business collects its accounts receivable balance during a period.

ARR is the annualized value of a SaaS or subscription business's recurring revenue — calculated as MRR multiplied by 12, or by summing the annual value of all active subscriptions.

Assignment of benefits is a legal arrangement where a policyholder transfers their right to receive insurance claim payments directly to a third-party service provider, allowing the provider to bill and collect from the insurer without requiring the policyholder to act as intermediary.

The average collection period is the average number of days it takes a business to receive payment after issuing an invoice — the same underlying metric as DSO, typically used in accounting and credit analysis.

Bad debt is the portion of a business's receivables that is judged unlikely to be collected and is removed from AR as a loss.

Bad debt expense is the amount a business records on its income statement to reflect accounts receivable it does not expect to collect.

A bad debt write-off is the accounting entry that removes an uncollectible receivable from the balance sheet and recognizes the loss as a bad-debt expense.

Balance due is the remaining amount owed on an invoice or account after partial payments, credits, and adjustments have been applied — the exact figure a customer must pay to satisfy the obligation.

A bank levy is a court-authorized seizure of funds from a debtor's bank account to satisfy a judgment. The creditor serves a writ of execution on the bank, which freezes and turns over available funds up to the judgment amount.

A billing cycle is the regular interval at which a business generates and sends invoices to customers, such as monthly, biweekly, or upon project completion.

A billing statement is a periodic summary of all charges, payments, credits, and the current balance on an account — as opposed to an invoice, which is a request for payment for a specific transaction.

A business credit score is a numerical rating of a company's creditworthiness based on its payment history with vendors, public records, and financial data — used by suppliers and lenders to decide whether to extend credit.

A business line of credit is a revolving loan facility that allows a business to borrow up to a set limit, repay it, and borrow again — paying interest only on the outstanding balance. It is a general-purpose cash-flow tool, not specific to unpaid invoices.

Cash application is the process of matching incoming payments to the correct open invoices in the AR ledger, so the receivable is marked as paid and the cash is recorded accurately.

Cash basis accounting is a method where income is recorded when cash is received and expenses are recorded when cash is paid — rather than when invoices are issued or received.

The cash conversion cycle is the number of days a business takes to turn investments in inventory and operations back into cash from customers.

A cash discount is a small reduction in the invoice amount offered as an incentive for the customer to pay early — for example, 2% off if paid within 10 days on a Net 30 invoice.

Cash flow is the net movement of money into and out of a business over a given period, with positive cash flow meaning more comes in than goes out.

A cease and desist letter in a collections context is a written request from a debtor demanding that a third-party collector stop all contact — a right established under the FDCPA.

A charge-off is when a creditor writes a debt off its books as unlikely to be collected, though the debt itself usually still legally exists.

A chargeback is a transaction reversal initiated by a customer's bank or card issuer, returning the funds to the customer and reversing the original payment.

Churn rate is the percentage of customers or revenue a subscription business loses in a given period through cancellations or downgrades.

The CISG is a UN treaty that provides a uniform set of rules for contracts involving the international sale of goods between businesses in member countries. It applies automatically to qualifying contracts unless explicitly excluded.

Customer lifetime value is the total revenue a business expects to earn from a single customer relationship over its entire duration.

A collection call is a phone call made to a customer with an overdue invoice, with the goal of securing payment or a firm commitment to pay by a specific date.

Collection efficiency measures how effectively a business converts its accounts receivable into cash, usually expressed as the percentage of AR collected within the expected payment window.

Collection rate is the percentage of invoiced revenue that a business actually receives as cash, measured over a given period.

A collections agency is a third-party company hired to pursue payment on debts owed to another business.

A collections letter is a written notice to a customer about a past-due balance, typically escalating in tone across a sequence of letters.

A collections notice is a formal written communication informing a debtor that their account has been referred for collection and stating the options available to resolve the balance.

A collections scorecard is a set of KPIs used to measure the effectiveness of an AR or collections operation — typically DSO, collection rate, write-off rate, and days beyond terms.

A collections waterfall is a predefined sequence of escalating collection steps — from a soft reminder through to legal action — that an invoice moves through automatically when payment is not received at each stage.

Commercial collection is the process of recovering unpaid invoices or debts owed by businesses (B2B), as distinct from consumer debt collection (B2C), which involves individual debtors.

Commercial debt is money owed by one business to another for business-related goods or services, governed by general contract law rather than consumer-protection statutes like FDCPA.

Consumer debt is money owed by an individual for personal, family, or household purchases — separate from commercial debt, which is money owed by a business for business purchases.

A contingency fee is a payment model where the collector keeps a percentage of whatever they recover and charges nothing if they recover nothing.

Cost per dollar collected measures the total expense of recovering one dollar of overdue AR — including staff time, software, legal fees, and agency commissions — and is the primary efficiency metric for evaluating collection methods.

A credit application is a form a business collects from a new client before extending payment terms — gathering enough information to assess whether that client is a reliable credit risk.

A credit bureau is a company that collects, maintains, and sells credit history data on consumers or businesses to lenders, landlords, and creditors.

A credit check is a review of a customer's credit history, used to assess the risk of extending payment terms before doing the work.

A credit hold is a business decision to stop shipping goods or delivering services to a customer until outstanding invoices are paid or a payment arrangement is agreed.

A credit limit is the maximum outstanding balance a business will allow a customer to carry before requiring payment before extending further credit.

A credit memo is a document a seller issues to a buyer that reduces the amount owed on a previously issued invoice.

A credit note is a document issued to a customer that reduces the amount they owe — either against a specific invoice or as a credit on their account. Also called a credit memo in US accounting terminology.

A credit policy is a written set of rules defining who a business will extend credit to, on what terms, and how overdue balances will be handled.

A creditor is any person or business to whom money is owed for goods, services, or a loan that has not yet been fully repaid.

Creditworthiness is an assessment of how likely a customer is to pay on time and in full. It determines whether to extend terms, how much credit to offer, and what terms to require.

Cross-aging is a credit policy rule that places an entire customer account on hold if a specified percentage of their total balance is significantly past due — even if they are current on newer invoices.

A cure period is a defined window of time during which a party can fix a default, such as a missed payment, before the other party can terminate or escalate.

Days beyond terms is the average number of days that customers are paying late relative to the agreed invoice due date.

Days delinquent is the number of days a specific invoice has been past its due date — a per-invoice measurement of how long payment is overdue.

Days payable outstanding is the average number of days a business takes to pay its own suppliers after receiving their invoices.

Debt assignment is the transfer of a creditor's right to collect a debt from one party to another — typically from the original business to a collections agency or debt buyer.

A debt buyer is a company that purchases charged-off or severely delinquent receivables from original creditors at a steep discount — typically 1 to 15 cents on the dollar — and then collects the full amount for its own account.

Debt validation is a debtor's legal right — under the FDCPA — to request written verification of a debt from a third-party collector, who must pause collection activity until the verification is provided.

The debt-to-income ratio is the percentage of a person's or business's gross income that goes toward paying existing debt obligations each period.

A debtor is any person or business that owes money to another party for goods, services, or a loan that has not yet been fully repaid.

A debtor examination — also called a judgment debtor exam or supplemental proceedings — is a post-judgment court proceeding where a creditor can compel the debtor to appear under oath and answer questions about their assets, income, and bank accounts.

Deferred revenue is cash received from a customer for goods or services not yet delivered — recorded as a liability on the balance sheet until the obligation is fulfilled.

In accounts receivable, delinquency refers to an invoice or account that is past due — the customer has not paid by the agreed due date and is therefore in arrears.

A delinquent account is a customer account where one or more invoices are past due — meaning the payment deadline has passed and the balance has not been paid in full.

A demand letter is a formal written request for payment or action, typically signaling that litigation may follow if the issue is not resolved.

A disputed invoice is an invoice that the customer formally contests — claiming the amount is incorrect, the work was not completed, or the services did not meet the agreed standard — triggering a specific process to resolve the disagreement before payment.

A draw schedule is a payment timetable in a construction contract that links each payment request to specific project milestones, so funds are released incrementally as work progresses.

DSO is the average number of days it takes a business to collect payment after making a sale on credit.

Dunning is the process of systematically contacting customers to request payment on past-due invoices.

A dunning letter is a formal written notice sent to a customer requesting payment of an overdue invoice, typically as part of a graduated escalation sequence.

A duplicate invoice is the same charge billed twice — either by accident or as a fraud pattern — and resolving it requires identifying which invoice is genuine and voiding the other.

An early payment discount is a reduction in the invoice total offered to customers who pay before the standard due date, typically expressed as a percentage off if paid within a specified window.

The factoring advance rate is the percentage of an invoice's face value that a factoring company pays upfront when it purchases the invoice — typically between 70% and 95%.

A factoring rate is the percentage of an invoice's face value that a factoring company keeps as its fee in exchange for advancing cash on that invoice.

The FDCPA is a US federal law that restricts how third-party debt collectors may contact consumers about personal debts.

First-party collections is the process of a business following up on its own overdue invoices, in its own name, before handing any accounts to a third-party agency.

A fraudulent transfer (also called a fraudulent conveyance) is a transfer of assets by a debtor to another party with the intent to hinder, delay, or defraud creditors, or for less than fair market value when the debtor was insolvent.

A guarantor is a person or entity that agrees to be legally responsible for another party's debt if that party fails to pay — providing the creditor with a backup source of payment beyond the primary debtor.

Hard collections is the escalated phase of debt recovery that typically involves formal demand letters, legal notices, agency referral, or litigation after softer follow-up has failed.

A holdback is a percentage of payment withheld by the payer until certain conditions are met — typically project completion, inspection approval, or a warranty period. Similar to retainage in construction.

A holdback amount is a portion of a payment or contract value that is withheld by the payer until specific conditions are met — most common in construction (retainage), acquisitions, and factoring arrangements.

Interest accrual on a late invoice is the buildup of additional charges owed by a customer whose balance has not been paid by the due date — calculated as a percentage of the outstanding balance per day or month.

Invoice aging is the process of categorizing unpaid invoices by how many days past their due date they are, typically sorted into 30-day buckets to identify where collection risk is concentrated.

An invoice approval workflow is the internal process a company uses to verify, approve, and authorize payment of invoices — typically involving purchase order matching, budget approval, and sign-off by a manager or finance department before payment is released.

Invoice discounting is a financing arrangement where a business borrows against outstanding invoices while retaining control of its own collections — unlike factoring, where the lender takes over customer contact.

An invoice dispute is a customer's formal or informal objection to the amount, terms, or validity of an invoice, which pauses the standard payment obligation until the issue is resolved.

The invoice due date is the specific calendar date by which a client must pay in full. Payment received after this date is considered past due.

Invoice factoring is selling unpaid invoices to a third party at a discount in exchange for immediate cash.

Invoice financing is a form of asset-based lending where a business uses its outstanding invoices as collateral to borrow money — without selling the invoices to a third party.

Invoice presentment is the formal process of delivering an invoice to a customer in the format and through the channel that triggers the payment obligation — including the date, delivery method, and confirmation that the customer received it.

Invoice status describes the current lifecycle stage of an invoice — typically: draft, sent, viewed, partially paid, paid, overdue, disputed, or written off.

An invoice template is a reusable document structure that captures the standard information required for a billable transaction — including the seller's details, buyer's details, itemized services, payment terms, and payment instructions.

A joint check agreement is a written arrangement in which a project owner or general contractor agrees to issue checks jointly payable to both the GC and a specific subcontractor or supplier, ensuring the lower-tier party receives the funds directly.

A judgment lien is a lien placed on a debtor's property arising from a court judgment, giving the creditor a legal claim against that property until the debt is satisfied.

A late payment fee is a charge added to an invoice when the customer pays after the agreed due date, as compensation for the delay and to encourage prompt payment.

A lien waiver is a document in which a contractor, subcontractor, or supplier gives up the right to file a mechanic's lien on a property, typically in exchange for payment.

A lockbox is a bank-operated mailing address that receives customer payments and deposits them directly into a business's account.

A mechanic's lien is a legal claim recorded against real property to secure payment for labor or materials supplied to that property by a contractor, subcontractor, or supplier.

A mobilization fee is a payment made to a contractor at the start of a project to cover the upfront costs of getting to the job site — equipment transport, temporary facilities, crew staging, and similar setup costs.

MRR is the total predictable recurring revenue a SaaS or subscription business expects to receive each month from active subscriptions.

Net 30 means the full invoice amount is due 30 calendar days after the invoice date.

Net 60 means the full invoice amount is due 60 calendar days after the invoice date.

Net 90 means the full invoice amount is due 90 calendar days after the invoice date.

Net payment terms specify the number of days after the invoice date by which the full amount must be paid, with net 30 being the most common standard in North American business.

Net profit margin is the percentage of revenue that remains as profit after all expenses are deducted — it measures profitability, not liquidity, and does not tell you whether the business has cash on hand.

Net terms specify how many days a buyer has to pay an invoice in full, with net 30, net 60, and net 90 being the most common standards in North American business.

Net terms acceleration is a contract clause that makes the entire remaining balance of an account immediately due if a customer misses a payment or otherwise defaults.

Non-recourse factoring is an invoice factoring arrangement where the factoring company absorbs the loss if the customer fails to pay due to insolvency — the business does not have to buy the invoice back.

A notice of default is a formal written document informing a party that they have failed to meet an obligation under a contract — and that consequences will follow if the failure is not corrected.

NRR measures the percentage of recurring revenue retained from an existing customer cohort over a period, including expansion from upgrades and minus contraction from downgrades and churn.

NSF stands for non-sufficient funds. An NSF check is a check that bounced because the customer's bank account did not have enough money to cover the payment.

An NSF (non-sufficient funds) fee is a charge applied when a check or ACH payment fails because the payer's account did not have enough money to cover the amount.

Operating cash flow is the cash generated by a business's core operations in a period — after paying operating expenses but before investing or financing activities — and is directly reduced by slow-paying accounts receivable.

Order-to-cash is the end-to-end business process that starts when a customer places an order and ends when payment is received and recorded in the accounting system.

Outstanding balance is the total amount a customer currently owes across all open invoices — the sum of all unpaid invoice amounts, minus any credits, and including any accrued interest or fees.

An overdue invoice is one that has passed its payment due date without being settled — and the right response depends on how many days have elapsed and what contact has already been attempted.

A partial payment is a payment that covers only a portion of an outstanding invoice balance, leaving a remaining amount still due.

A past-due invoice is any invoice that has gone unpaid after the due date stated in the original agreement.

A pay-when-paid clause is a contract provision that conditions a general contractor's obligation to pay a subcontractor on first receiving payment from the project owner.

Paydex is Dun & Bradstreet's dollar-weighted business credit score, ranging from 1 to 100, that measures how promptly a business pays its creditors — a score of 80 means bills are paid on time; 100 means they're paid early.

Payment allocation is the process of assigning an incoming payment to specific open invoices — determining which invoices a payment reduces or closes when a customer sends money that does not exactly match a single invoice amount.

A payment default occurs when a debtor fails to make a required payment by the agreed date — either on an invoice, a payment plan installment, or a promissory note.

A payment gateway is the technology that authorizes and processes electronic payment transactions between a customer and a business.

Payment in full means the complete amount of an outstanding balance has been received — leaving no remaining obligation on that invoice or account.

A payment link is a short URL that takes a customer directly to a hosted payment page where they can pay an invoice with a card, ACH, or other method in one or two clicks.

A payment plan is a written agreement that lets a customer pay an overdue balance in scheduled installments instead of all at once.

A payment portal is an online interface that lets customers view their outstanding invoices and make payments directly, without calling or mailing a check.

A payment processor is a company that handles the actual movement of money between a customer's account and a merchant's account, including authorization, settlement, and risk management.

A payment reminder is a notification sent to a customer before or after their invoice is due, prompting them to pay or to flag any problem with the invoice.

Payment terms are the conditions agreed between a buyer and seller that specify when payment is due, how it should be made, and what discounts or penalties apply.

Payment velocity is the speed at which a customer pays invoices — measured as the average number of days from invoice date to payment receipt — and is one of the strongest leading indicators of future collection risk.

A personal guarantee is a written promise by an individual — usually a business owner — to pay a business debt out of their own personal assets if the business entity fails to pay.

Pre-legal collection is the final stage of internal or agency-led AR follow-up before a creditor turns an account over to an attorney to begin formal legal proceedings.

A preliminary notice (also called a notice to owner, prelim, or 20-day notice) is a written document that a subcontractor, supplier, or lower-tier contractor must serve on the property owner and general contractor within a defined window — usually 20 days of first furnishing labor or materials — to preserve the right to file a mechanics lien.

Progress billing is a construction invoicing method where a contractor bills for work completed in phases or percentages rather than invoicing the full contract price at completion.

A promise to pay is a commitment — verbal or written — from a debtor to pay a specific amount by a specific date, recorded during a collection contact.

A promissory note is a signed written promise by one party to pay a specific sum of money to another party by a defined date or on demand.

Prompt pay laws are state statutes that require insurance companies to acknowledge, investigate, and pay clean claims within defined time limits — typically 15–45 days — with interest or penalties for late payment.

A proof of claim is a formal document filed by a creditor with a bankruptcy court stating the amount owed and the basis for the debt. Filing before the claims bar date is required to participate in any distribution from the bankruptcy estate.

Proof of debt is the documentation a creditor provides to establish that a debt is owed, such as signed contracts, invoices, delivery confirmations, and payment history.

Proof of delivery is documentation that confirms work, goods, or services were delivered to the customer — the foundation of any enforceable invoice and the primary defense against a 'never received it' dispute.

A purchase order is a formal document issued by a buyer authorizing a specific purchase at an agreed price; it serves as the buyer's internal control and is often required by corporate accounts payable departments before an invoice can be processed.

Receivables turnover ratio measures how many times per year a business collects its average accounts receivable balance. A higher number means faster collection; a lower number means money sits in AR longer.

Recourse factoring is an invoice factoring arrangement where the business that sold the invoice must buy it back if the customer fails to pay — the credit risk stays with the business, not the factor.

Remittance advice is a document a customer sends alongside or after a payment that identifies which invoices the payment covers and in what amounts.

Retainage is a percentage of each progress payment, typically five to ten percent, that a project owner withholds from a contractor until the project reaches substantial completion.

Retainage release is the process of paying out previously withheld retainage funds to a contractor or subcontractor after a specified milestone — typically substantial completion or final completion.

A retainer agreement is a contract where a client pays a fixed recurring fee — typically monthly — in exchange for ongoing access to services, with the fee earned at the start of each billing period rather than upon delivery of specific deliverables.

The right of offset allows a party that owes money to another to reduce that amount by what the other party owes back — applying one debt against another rather than making separate payments.

A right to cure is a borrower's or party's statutory or contractual right to fix a default, usually by bringing payments current, before the other side can enforce a remedy.

A settlement offer is a proposal to resolve an outstanding balance by accepting a reduced amount as full and final payment — closing the debt for less than the full invoice total.

Skip tracing is the process of locating a debtor who has moved, changed phone numbers, or otherwise become unreachable — used when standard collection contact attempts have failed.

Small claims court is a simplified civil court for resolving disputes over smaller dollar amounts quickly and without an attorney — commonly used by businesses to collect unpaid invoices.

Soft collections is early AR follow-up — calls and reminders before formal escalation. Syntharra automates it with AI calls on day 3, when recovery odds are highest.

A soft credit inquiry is a credit check that does not affect the subject's credit score — used by businesses to evaluate a customer's creditworthiness before extending net terms or credit limits without the customer's knowledge or formal consent.

A stale check is a business or personal check that has not been deposited or cashed within the time period specified by state law or the bank's policy — usually six months — and may be refused by the bank.

A debt's statute of limitations is the legal time limit, set by state law, during which a creditor can sue to collect on an unpaid debt.

The statutory interest rate is the interest rate set by state law that applies to unpaid commercial debts when no contractual rate has been specified — typically ranging from 5% to 18% per annum depending on the state.

Substantial completion is the point at which a construction project is complete enough for the owner to use it for its intended purpose, even if minor punch-list work remains.

The TCPA is a US federal law that limits automated phone calls, prerecorded messages, and certain text messages to consumers.

Third-party collections is the use of an outside agency or law firm to collect debts on behalf of the original creditor, typically after in-house efforts have been exhausted.

Trade credit is credit extended by one business to another as part of a commercial transaction — allowing the buyer to receive goods or services now and pay later, without involving a bank or lender.

The UCC is a harmonized set of US state laws governing commercial transactions, including sales of goods and secured lending.

Unapplied cash is payment received from a customer that has not yet been matched to a specific invoice or invoices in the AR ledger.

Unbilled revenue is revenue that has been earned — the work has been done or the service delivered — but for which an invoice has not yet been sent to the client.

A voluntary surrender is when a debtor willingly returns collateral, such as a vehicle, to the lender rather than being forced through repossession.

Wage garnishment is a court-ordered process in which a portion of a debtor's earnings is withheld by their employer and paid directly to the creditor to satisfy a debt.

Working capital is current assets minus current liabilities — the net liquid resources a business has available to fund day-to-day operations. In practice, for service businesses, it is mostly driven by how quickly invoices get paid.

A writ of execution is a court order that authorizes a law enforcement officer — typically a sheriff or marshal — to seize and sell a debtor's assets to satisfy a civil money judgment. Not legal advice.

A write-off is the accounting action of removing an uncollectible invoice from accounts receivable and recognizing it as a loss.

Write-off rate is the percentage of accounts receivable that a business ultimately deems uncollectable and removes from its books.