Receivables terminology, defined.
The terms that come up most often around B2B collections. Each with a plain-English definition and why it matters in practice.
Accounts receivable (AR)
Accounts receivable (AR) is the outstanding invoices a business is owed by customers, typically tracked as an asset on the balance sheet.
DSO (days sales outstanding)
DSO (days sales outstanding) is the average number of days it takes a business to collect cash after a sale. Lower is better.
Cash application
Cash application is the process of matching incoming payments to the correct customer invoices and posting them in the ledger.
Dunning
Dunning is the structured sequence of reminders a business sends to collect an overdue invoice, escalating in tone and channel as the debt ages.
Tokenisation
Tokenisation replaces sensitive payment details, such as a card number, with a meaningless substitute value called a token, which can be stored and reused without exposing the original data.
Lockbox
A lockbox is a bank-operated postal address where customer payments are sent, opened, deposited and reported by the bank on the business's behalf.
ACH / Bacs / SEPA
ACH, Bacs and SEPA are the domestic bank transfer schemes of the United States, the United Kingdom and the euro area: batch-based rails used to move money between bank accounts at far lower cost than cards.
Open item
Open-item accounting tracks each invoice individually until it is settled, rather than tracking only a running customer balance.
Promise to pay (PTP)
A promise to pay (PTP) is a commitment from a customer to settle a specific invoice or balance by a stated date, recorded so it can be tracked and followed up.
Unapplied cash
Unapplied cash is money a business has received but has not yet matched to specific customer invoices, so it sits in the ledger without reducing any receivable.
Collections Effectiveness Index (CEI)
The Collections Effectiveness Index (CEI) is a percentage measuring how much of the receivables available to collect in a period a business actually collected. 100% means everything collectable was collected.
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